Members of the Service Employees International Union Local 721 hold placards during a rally outside Riverside University Health System Medical Center in Moreno Valley in late January. The Board of Supervisors on Tuesday, April 2, voted 4-1 to approve a four-year contract with SEIU. (File photo by Watchara Phomicinda, The Press-Enterprise/SCNG)
When we think of markets, we usually think of commerce: buying and selling goods and services, international trade, investment, supply and demand. Markets are the backbone of our economy. There is a market for almost everything: food, medicine, toys, movies and entertainment, weapons, drugs, stocks, and more. But there is one market that surpasses them all in importance, without which no other market can exist, and that is the labor market.
Labor is essential to commerce. Without people producing goods and services, commerce would cease to exist. Businesses rely on labor to function and create demand similar to tangible goods and services. In other words, the labor market is the foundation on which all other markets depend.
In a time when everyone feels the need to have an opinion on almost everything, many people consider themselves “financial experts.” But when everyone has an opinion on a complex issue, most of those opinions are definitely wrong. Economics is a case in point, full of false consensus. With that in mind, let's debunk some common myths about the history of the American labor market from the Industrial Revolution to the present day.
Ideology must be set aside when considering the history of the American labor market. Certain truths can be inconvenient if they conflict with deeply held beliefs. Economics and politics are deeply intertwined, so objectively stating the facts may lead to ridicule depending on the company you work for. Modern Western society collectively holds many doctrines and assumptions that are demonstrably false.
One issue at issue is the Industrial Revolution and the Gilded Age, which are often criticized for their relationship to climate change, income inequality, exploitation, and corruption due to the so-called excesses of capitalism. Another common thread is that the workforce suffered greatly from the Industrial Revolution, and it was only with the rise of trade unions that labor markets diversified, living standards improved, and labor markets flourished. However, as Nobel Prize-winning economist F.A. Hayek argued in his 1954 book, none of these claims are true. capitalism and historians.
Hayek set the record straight about the influence of so-called “robber barons” on the American labor market during the Gilded Age. Many modern historians believe that wealthy industrialists exploited the poor through industrial centralization, and that urban workers worked in multimillion-dollar enterprises aimed at exploiting their labor. (a common false claim in many modern textbooks). They also claim that these companies forced rural residents to migrate to crowded, polluted cities in search of work, further worsening their lives. However, Hayek revealed that this is far from the truth. Industrial consolidation has indeed led to a boom in the labor market and increased productivity, but there is no correlation between this and corporate exploitation.
The Industrial Revolution did not result in “capitalist oppression” making the poor poorer and the rich richer. In fact, wealth creation was the result of a symbiotic relationship between emerging industrial labor markets and innovative businessmen. Although industrialists became richer at a faster rate than the average worker, unskilled workers also experienced large increases in wealth due to the industrial economy.
The mass exodus of poor rural farmers to urban industrial centers was voluntary. Life in the countryside was more difficult and dangerous than city life. Growth in the labor market in major cities attracted people from rural areas as the demand for unskilled labor increased. These workers were often taken care of by the companies that employed them.
New technological advances have increased consumer demand and mass production. This motivated the capitalist class to hire new workers on a large scale. Working for these companies provided economic security beyond what the rural poor had access to. In this way, the increased demand for labor freed them from the hardships of rural life. Simply put, the reality is that it was the leaders of industry and the common bourgeoisie who were responsible for laying the foundations for today's diverse job market.
While labor unions are active, minor The influence of private industry far exceeds that of the labor movement in its role in improving working conditions and workers' welfare. Early unions were generally hostile to the growth of industrial labor markets, discriminated on the basis of race and religion in particular, and erected barriers to entry to protect their own interests. Trade unions were essentially reactionary, a reaction to the progress of the industrial age. For example, organized labor largely opposed technological innovations that ultimately benefited both worker safety and economic productivity. The policies they promoted lowered real wages for union members. They initially opposed concepts such as the five-day work week and company benefits, wanting to not only limit the supply of labor but also control the conditions themselves.
Workplace conditions and benefits were improved before trade unions actively supported them. Labor laws passed by Congress in the first half of the 20th century had little impact because many private companies already prohibited exploitative practices. Businesses recognized that treating their employees well would lead to increased productivity and economic growth. As a result, employment rates rose and Americans' net worth increased. For example, Henry Ford began reducing work hours, doubling wages, and providing various benefits to his employees nearly a decade before Congress passed such legislation.
F.A. Hayek and his fellow Austrian economists present a more accurate picture of the impact of the Industrial Revolution and the individuals, movements, ideas, and innovations that arose from it. Their valuable insights provide a much more accurate understanding in contrast to most mainstream modern and contemporary economic historians.
Jacob Swartz is a writer and independent content creator based in the Washington, DC area. In addition to his involvement with the Mises Institute, he runs “The Politicrat” YouTube channel, where he conducts interviews and produces long-form video content. This commentary was written and published for the Mises Institute.
