The interior of a working 18th century textile mill in England by the cartoonist, William Hogarth. (Image credit: istockphoto)
Throughout early Industrial Britain, workers in manufacturing industries could protect their salaries by signing long-term contracts with their employers.
While these contracts provided a form of insurance for wage levels, employee breach of these contracts resulted in harsh consequences: imprisonment, forced labour and even whipping.
For 500 years, until it was finally repealed in 1875, a so-called Master and Servant law gave employers the ability to take legal measures against employees for breach of contract across all of colonial Britain.
Labour practices have evolved substantially since this time, yet a mystery remained: what triggered the fall of this long-standing feudal institution leading to the labour market we know today?
A new paper co-written by Global Scholar Suresh Naidu (Columbia University) and published in the influential journal American Economic Review examines this area of economic history which to date has received little scholarly attention.
“In economics, free and forced labour is seen as a dichotomy,” says Dr. Naidu. “Most people think of coerced labour as something that happened in agriculture, with slavery or serfdom, but our research shows that some degree of coercion was happening in industrial sectors as well.”
The team studied detailed nineteenth-century English judicial records to analyze the effect that contracting had on labour economics in early Industrial Britain. They found that given the widespread use of criminal prosecution by employers as a means of punishment, employers executed the right to legally bind workers even well into modern times.
The team found evidence that employers used penal sanctions rather than paying higher wages in response to rising demand for labour. When the market for textile, iron or coal workers was tight, for example, workers would have better options to find higher-paying jobs. But because there was a cost to replace a worker who left, employers had a clear economic incentive to prosecute workers.
Thanks to the legalization of trade unions and public pressure on politicians, the Master and Servant law was eventually repealed in 1875 in England. Its abolition resulted in an increase in wages since employers had to now offer better incentives to retain workers. But the law did not fully disappear worldwide until much later.
“The Master and Servant law spread throughout the world via the British Empire,” says Dr. Naidu. “It was used in the Caribbean after slavery, in India in the tea plantations, in Newfoundland in the fisheries, and was used against black labour in South Africa as late as the 1970s. In lots of ways, labour unions were very important to instigating legal reforms that created more free labour markets. While many economists see unions as obstacles to competition in the labour market, our analysis, as well as many other cases, suggests that the political voice that unions provided was important for removing feudal restrictions from labor markets.”
Dr. Naidu’s work has real implications for understanding today’s labour market as well.
“Coercive labour arrangements still persist in certain parts of the world, and our research can help to understand how they work, and the political circumstances that explain why they stick around. For example, in many countries, including Canada, immigrant workers who do not have the right to vote are often given visas for particular employers. While these jobs often pay quite well relative to home country wages, they also restrict labor market competition for these workers.”
This work was funded by Harvard Weatherhead Center for International Affairs and CIFAR.