Short Essay about The Standard of Living

'Male real earnings increased so much during the industrial revolution that claims about declining or static standards of living for the working class can be dismissed.' Discuss.The standard of living of the working class is not only dependent on male real earnings, but also on unemployment, female and child real earnings, environmental conditions (working conditions, housing conditions, sanitary conditions) and institutional conditions (freedom, political rights, civil rights).

Economic history has followed the path of development economics and tried to integrate these factors to get a more accurate picture of how living standards changed in the past.The discussion of how the standard of living for the working classes changed during the industrial revolution period from 1750 to 1850 has received new influence from work done by Floud using heights of army recruits during that period as indicator of health status and from work done by Lindert and Williamson (1983) giving new data for male nominal earnings, including rent in the cost of living index and adjusting for the weight of the different items in the index.Lindert's and Williamson's findings support Flinn's conclusion that "there are relatively few indications of significant change in levels of real wages either way before 1810-14."1 But they reject Flinn's view of all real wage improvements being concentrated "into a period of only a dozen years of deflation beginning around 1813."2 Their analysis indicates almost a doubling of real wages between 1820 and 1850 and they conclude "that the average worker was much better off in any decade from the 1830s on than in any decade before 1820."3Crafts and Mills in their 1994 article support the general view of trend growth rates for real wages being zero for the period 1750-1813, and rising afterwards, but they reject Lindert's and Williamson's estimation of 1.

9 % growth per year for the period 1820-1850 and instead support a lower trend growth rate for the post Napoleanic Wars period of 1.2 %.The overall picture of male real earnings is therefore one of stagnation for the first 70 years of the industrial revolution and of increase by between 1.2 and 1.9 % per year over the following 30 years.

To account for the possible negative influences of unemployment on workers' living standards, Lindert (1994) calculates the unemployment rate that would have been needed to eliminate any gains in real wages to be more than 34 % "if, contrary to fact, we believed unemployment were zero in 1819."4 That was not the case and Lindert concludes: "There must have been a substantial rise in the real earnings of working men between 1820 and 1850, even allowing for unemployment."5Lindert and Williamson also rule out the possibilities that the real wage gains for male workers were achieved at the expense of women and children and that it is due only to wage rate differentials between occupations and regions. Instead they argue that "virtually all of the apparent wage gains were gains within occupations, not wage gifts due to changing occupational weights .

. [and] that regional migration contributed very little to the real wage gains for the average English worker after the 1780s. ..

It was real wage gains within regions that mattered most."6The analysis of environmental and institutional conditions consists of measuring single variables like income, life expectancy, infant mortality, freedom of the press, etc. and then combining these variables to attain broader measures of the living-standard, like the human development index (HDI) or the Dasgupta and Weale index (DWI).A further important variable for measuring the living standards of workers during the industrial revolution is height. "The advantage of heights is that it is sensitive to elements of living standards which are not captured by GDP or real wages. In particular, both work effort and the disease environment are likely to be reflected in height.

In the context of the British industrial revolution this will tend to capture the impact of urbanisation which was abnormally great by continental European standards."7 Floud argues that "the fall in the height of British men in the mid-19th century was a sign that the initial, enriching impact of the industrial revolution had given way to the Dickensian miseries of urban life."8 This view is supported by Johnson and Nicholas for "the lower half of the manual labouring male and female English population."9Broader indicators of human living standards are, as stated above, the HDI and the DW index. If data is available these indices are usually better to compare living standards, either cross-regional or between times, because they take more variables into account and therefore offer a fuller picture of reality. But problems arise because of weighting the different components, because of measuring difficulties of certain characteristics like human rights and because of data limitations.

Crafts (1997) estimates the HDI, DW index, an income distribution adjusted HDI and a gender related development index (GDI) for six years during the industrial revolution period and additionally compares the data for 1860 with Britain's international peers. All four indicators improve for Britain over the industrial revolution period. "The HDI offers a fairly optimistic assessment of aggregate trends in well-being during the industrial revolution. Its upward movement reflects improvements in literacy, schooling, and life expectancy which on balance augment the rise in incomes.

"10 The income distribution adjusted HDI level is "well below that of HDI"11 and also rises more slowly over the period, so that for 1850 the difference between the two indices is higher than it is for 1760, indicating an increase in inequality over the period that acted as a drag on rising living standards.In assessing the estimates Crafts mentions two important points. First, the pessimist view of the overall quality of life declining during the industrial revolution period is not supported by this data, although he admits that different weighting and the data could lead to different results. And second, heights moving "with some but not all the non-income components of the 'quality of life' and [giving] signals different from either the HDI or the DW index [.

.] confirm both that information on heights is likely to be one of a number of valuable diagnostics that movements in real wages or real GDP per head may not correlate well with changes in well-being, and also that heights are better not used as an index of overall welfare."12To get around the problems of estimating an index of the standard of living, and bearing in mind the fact that average workers' income increased after 1820, but some of the non-income measures of the standard of living like heights, life expectancy and infant mortality decreased in the 1820-1850 period, Lindert and Williamson come up with a simple and very effective way of comparing influence of the two opposing effects. "In judging the importance of these quality of life factors, we must avoid imposing twentieth-century values on early nineteenth-century workers.

[..] The workers of that era must themselves be allowed to reveal how much a "good" quality of life was worth to them."13 They calculate that to induce rural labour to migrate to modern industry in the second quarter of the nineteenth century a maximum wage premium of 65 % had to be paid to "compensate workers for a lower quality of life, and [..

] to compensate workers for the higher urban cost of living. [..] This fractional shift is only 14.89 % from 1781 to 1851, making the disamenities and living-cost increases for the average worker only .

1489 x .65 = 9.7 %. [.

.] event this is a generous overestimate."14 And they conclude that "the value implicitly put on these human costs by the marginal workers, who actually moved into the urban-industrial centres, was not large enough to cancel even a tenth of blue collar workers' real wage gains.Nor should this surprise us. The development process inevitably finds workers and policymakers more intent on basic purchasing power in the hungry early phases of development, as the history of environmental quality in Manchester, Pittsburgh, Manila, and Sao Paulo clearly shows."15To sum up, living standards increased during the industrial revolution period.

"The great majority of these human gains came after 1820. Pessimists must retreat to the pre-1820 era"16, where average workers' earnings did not increase. Broader measures of the living standard support this view in general, although they even out the increases of living standards during the two periods. The adoption of broader indicators of the standard of living is useful, but the problems concerned with measurement remains and must be stated.

A more objective way of accounting for the changing standard of living is probably Lindert's and Williamson's method of revealed preference estimation making use of opportunity cost analysis.