Human Capital in History

The American Record

Leah Platt Boustan, Carola Frydman, Robert A. Margo, Leah Platt Boustan, Carola Frydman, Robert A. Margo

• Publisher: University of Chicago Press
• Year: 2014
• Print ISBN: 9780226163895
• eBook ISBN: 9780226163925
• Topic: Business
• Subtopic: Business General
• Index: Business

America's expansion to one of the richest nations in the world was partly due to a steady increase in labor productivity, which in turn depends upon the invention and deployment of new technologies and on investments in both human and physical capital. The accumulation of human capital—the knowledge and skill of workers—has featured prominently in American economic leadership over the past two centuries.
           
Human Capital in History brings together contributions from leading researchers in economic history, labor economics, the economics of education, and related fields. Building on Claudia Goldin's landmark research on the labor history of the United States, the authors consider the roles of education and technology in contributing to American economic growth and well-being, the experience of women in the workforce, and how trends in marriage and family affected broader economic outcomes. The volume provides important new insights on the forces that affect the accumulation of human capital.

1

Technical Change and the Relative Demand for Skilled Labor

The United States in Historical Perspective

Lawrence F. Katz and Robert A. Margo*

1.1 Introduction

Skill-biased technical change has been a pervasive feature of the twentieth-century American economy (Goldin and Katz 2008). At the ground level, technical change is frequently embodied in new capital goods, whose price relative to output or labor becomes cheaper over time. As the relative price of capital declines, more capital per worker is used, and capital “deepening” occurs. In the twentieth century, physical capital and skill have been shown to be relative complements so that capital deepening has increased the demand for skilled relative to unskilled labor (Griliches 1969). Technology-skill complementarity has also been widespread over the past century with new technologies from those associated with the electricity revolution in the early twentieth century to the computer revolution in the late twentieth century being relative complements with human capital (Goldin and Katz 1998; Autor, Katz, and Krueger 1998). Goldin and Katz (2008, 297, table 8.1), using educational attainment as a proxy for skill, show the growth in the demand for skilled labor greatly outpaced that for unskilled labor in every decade of the twentieth century, with the possible exception of the 1940s.¹

The apparent pervasiveness of complementarities between capital and skilled labor in the twentieth century has naturally led economists and economic historians to ask whether such complementarity has been an inherent feature of technical change since the onset of modern economic growth in the United States, or whether it is a more recent phenomenon. Drawing almost entirely on evidence from manufacturing, the conventional wisdom is that technical change was predominantly “de-skilling” in the nineteenth century—capital and unskilled labor substituted for skilled labor with mechanization (Brown and Phillips 1986; Atack, Bateman, and Margo 2004).² In manufacturing, de-skilling occurred as the factory system began to displace the artisanal shop as the United States began to industrialize in the 1820s, and it picked up pace as production increasingly mechanized with the adoption of steam power after 1850 (Goldin and Sokoloff 1982; Atack, Bateman, and Margo 2008). However, beginning in the late nineteenth century and continuing into the early twentieth century the familiar modern pattern of capital-skill complementarity emerged. This emergence, according to Goldin and Katz (1998), can be traced to the diffusion of electricity as a source of inanimate power and with the technological shift from traditional factories to continuous-process and batch production methods in many manufacturing industries. The conventional wisdom, in other words, suggests a discontinuity between the nineteenth and twentieth century in the impact of capital deepening on the relative demand for skilled labor.

In this chapter we revisit the issue of the historical evolution of capital-skill complementarity and with it, shifts over time in the relative demand for skilled labor. Our chapter makes three points. First, although de-skilling in the conventional sense did occur overall in nineteenth-century manufacturing, a more nuanced picture is that the occupation distribution “hollowed out.” By hollowing out we mean the share of middle-skill jobs—artisans—declined while the shares of high-skill—white-collar, so-called nonproduction workers and low-skill operatives and laborers—increased. Second, unlike the pattern observed in manufacturing, de-skilling did not occur in the aggregate economy; rather, the aggregate shares of low-skill jobs decreased, middle-skill jobs remained steady, and high-skill jobs expanded from 1850 to the early twentieth century. It is incorrect, in other words, to infer the pattern of occupational change in the economy at large from that occurring in manufacturing. The pattern of monotonic skill upgrading in the aggregate economy continued through much of the twentieth century until the recent period of hollowing out and “polarization” of labor demand since...

Table of contents

• Cover
• Copyright
• Title Page
• Series Page
• National Bureau of Economic Research
• Relation of the Directors to the Work and Publications of the National Bureau of Economic Research
• Dedication
• Contents
• Acknowledgments
• Introduction
• 1. Technical Change and the Relative Demand for Skilled Labor: The United States in Historical Perspective
• 2. Explaining Trends in High School Graduation: The Changing Elementary and Secondary Education Policy Landscape and Income Inequality over the Last Half Century
• 3. The Role of Immigrant Children in Their Parents’ Assimilation in the United States, 1850–2010
• 4. Health, Education, and Income in the United States, 1820–2000
• 5. The Female Labor Force and Long-Run Development: The American Experience in Comparative Perspective
• 6. The Origin and Persistence of Black-White Differences in Women’s Labor Force Participation
• 7. Cohabitation and the Uneven Retreat from Marriage in the United States, 1950–2010
• 8. Is There a Case for a “Second Demographic Transition”?: Three Distinctive Features of the Post-1960 US Fertility Decline
• 9. A Pollution Theory of Discrimination: Male and Female Differences in Occupations and Earnings
• 10. The Supply of Gender Stereotypes and Discriminatory Beliefs
• 11. Claudia Goldin
• Notes
• Contributors
• Author Index
• Subject Index