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Poverty and the Labor Market: Today and Yesterday

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World Bank estimates put absolute poverty in Asia and Africa at 50–60% of the population in 1980 and at negligible levels in the developed world. This review investigates whether Asia was always so poor, as well as the history of poverty in today's rich countries. Poverty measurement methodologies are reviewed, and it is argued that a basic needs approach is the best way to tackle poverty measurement in the past. This approach is related to recent advances in the measurement of historical real wages. Estimates of poverty rates in England between 1290 and 1867 are presented, as are estimates for preindustrial India. About one-quarter of the English population was in extreme poverty in the late Middle Ages, and the proportion had fallen below 10% by 1688. About one-quarter of the people in northern India lived in extreme poverty in the early nineteenth century, and the proportion was likely lower in 1600. The very high poverty rates in India in 1980 were a development of the colonial era. Expected final online publication date for the Annual Review of Economics, Volume 12 is August 3, 2020. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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... The World Bank's approach to measuring poverty is limited, however, in that it does not tell us whether people have access to the context-specific forms of provisioning that are necessary to meet basic needs in a given country 65 . What ultimately matters is people's income vis-à-vis the costs of satisfying basic needs, and these costs vary substantially across countries and over time due to local factors such as climate, price controls and levels of public provisioning (see Allen 66 for a review). There are alternative approaches to measuring poverty, which define the costs of country-specific baskets of essential goods and services 67,68 , but no suitable data were available for our time-series analysis. ...
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Price and wage data from Roman Egypt in the first three centuries CE indicate levels of real income for unskilled workers that are comparable to those implied by price and wage data in Diocletian's price edict of 301 CE and to those documented in different parts of Europe and Asia in the eighteenth or early nineteenth centuries. In all these cases, consumption was largely limited to goods that were essential for survival and living standards were very low. A survey of daily wages expressed in terms of wheat in different Afroeurasian societies from 1800 BCE to 1300 CE yields similar results: with only few exceptions, real incomes of unskilled laborers tended to be very low.
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Recent studies on African economic history have emphasized the structural impediments to African growth, such as adverse geographical conditions and extractive colonial institutions. The evidence is mainly drawn from cross-country regressions on late 20th century income levels, assuming persistent effects of historical causes over time. But to which extent has African poverty been a persistent phenomenon? Our study sheds light on this question by providing new evidence on long-term African growth-trajectories. We show that slave trade regressions are not robust for pre-1970s GDP per capita levels, or for pre-1973 and post-1995 growth rates. We calculate urban unskilled real wages of African workers in nine British African countries 1880-1965, adopting Allen’s (2009) subsistence basket methodology. We find that real wages were above subsistence level, rose significantly over time and were, in major parts of British Africa, considerably higher than real wages in Asian cities up to, at least the 1930s. We explain the intra-African variation in real wage levels by varying colonial institutions concerning land alienation, taxation and immigration.
Article
The article forms three series for English farm workers from 1209–1869: nominal day wages, the implied marginal product of a day of farm labour, and the purchasing power of a day’s wage in terms of farm workers’ consumption. These series suggest that labour productivity in English agriculture was already high in the middle ages. Furthermore, they fit well with one method of estimating medieval population that suggests a peak English population c.1300 of nearly 6 million. Lastly, they imply that both agricultural technology and the general efficiency of the economy were static from 1250 till 1600. Economic changes were in these years entirely a product of demographic shifts. From 1600 to 1800, technological advance in agriculture provided an alternative source of dynamism in the English economy.
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This article develops data on the history of wages and prices in Beijing, Canton, and Suzhou/Shanghai in China from the eighteenth century to the twentieth, and compares them with leading cities in Europe, Japan, and India in terms of nominal wages, the cost of living, and the standard of living. In the eighteenth century, the real income of building workers in Asia was similar to that of workers in the backward parts of Europe but far behind that in the leading economies in north-western Europe. Real wages stagnated in China in the eighteenth and early nineteenth centuries and rose slowly in the late nineteenth and early twentieth, with little cumulative change for 200 years. The income disparities of the early twentieth century were due to long-run stagnation in China combined with industrialization in Japan and Europe.
Article
It is argued that the study of the development of the living standard of large segments of the European population between 1500 and 1800 should make use of the available evidence on prices and wages. On the basis of wage data for about twenty European cities and regions, the geographical patterns in silver and grain wages and their development over time are studied. This leads to the conclusion that there is no clear relationship between economic development (measured for example by the urbanisation ratio) and changes in the standard of living in Europe in this period. This also has implications for the hypothesis that an ‘industrious revolution’ occurred in Western Europe during this period. Alternative explanations for the fact that the per capita consumption of certain market goods increased in this period (such as changes in relative prices and an increase in labour effort as a result of falling real wages) are suggested.
Article
Despite unanimity of opinion, there are signs that Indian labourers may not have been that poor after all. These include the paradoxes pointed out by Chaudhuri: 'in spite of the alleged depth of the weavers' poverty, they were able to place themselves in a strong bargaining position'; furthermore, 'the universal poverty of the weavers, repeated with such persistence throughout the seventeenth and eighteenth centuries, becomes difficult to explain in view of their equally well-recorded spatial and occupational mobility'. How are these paradoxes to be resolved? My research on weavers in South India indicates that these paradoxes are illusory and disappear when the presumption of poverty is abandoned. Labourers in South India were not poverty-stricken. Indeed, there is compelling evidence that South Indian labourers had higher earnings than their British counterparts in the eighteenth century and lived lives of greater financial security. The importance of this goes well beyond the intrinsic interest of debates on relative standards of living for, as I shall argue later, the conditions which led to this also produced the first industrial revolution.
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I use building workers' wages for 12092004 and the skill premium to consider the causes and consequences of the Industrial Revolution. Real wages were trendless before 1800, as would be predicted for the Malthusian era. Comparing wages with population, however, suggests that the break from the technological stagnation of the Malthusian era came around 1640, long before the classic Industrial Revolution, and even before the arrival of modern democracy in 1689. Building wages also conflict with human capital interpretations of the Industrial Revolution, as modeled by Gary Becker, Kevin Murphy, and Robert Tamura; Oded Galor and David Weil; and Robert Lucas. Human capital accumulation began when the rewards for skills were unchanged and when fertility was increasing.
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A poverty line helps focus the attention of governments and civil society on the living conditions of the poor. In practice, there is typically not one monetary poverty line but many, reflecting the fact that poverty lines serve two distinct role. One role is to determine what the minimum level of living is before a person is no longer deemed to be "poor". The other role is to make interpersonal comparisons.