Monday, September 2, 2013

Ben Franklin on Labor Economics (or how to create an underclass)

The easiest way to create a dependent class is to price them out of the real estate markets.
In countries fully settled…those who cannot get land must labor for others that have it; when laborers are plenty, their wages will be low; by low wages a family is supported with difficulty; this difficulty deters many from marriage, who therefore long continue servants and single....
In the United States The Land Ordinance of 1785 set the cost of land purchased from the government at $1.00 per acre in sections of 640 acres.

This price was raised to $2.00/acre in 1800 but purchase was paid for in four equal annual payments.
In 1820 the price of Federal lands was reduced to $1.25 per acre with payment in cash.
An alternate conveyance in the 1862 Homestead Act maintained the $1.25 price.

Compare  the wages various craftsmen could command:

In 1785 a journeyman carpenter in New York City was paid  $1.12 ½ per day.
Here is the average hourly wage for various years, note the post Civil War inflation in the 1870 numbers and the decreases of the latter 1800's deflation:
  • Occupation   1860    1870     1880      1890
  • blacksmith    0.178    0.304   0.259     0.271
  • carpenter      0.182   0.410    0.276     0.322
  • machinist      0.158   0.260    0.227     0.243
  • laborers         0.098   0.156    0.135     0.151
As 60 hour weeks were typical, here is the average weekly wage:
  • Occupation   1860,  1870,  1880,  1890
  • blacksmith,   10.68, 18.24  15.54  16.26
  • carpenter,     10.92   24.60  16.56  19.32
  • machinist,       9.48  15.60  13.62  14.58
  • laborers,         5.88,   9.36    8.10    9.06
Wages and Earnings in the United States, 1860-1890

The point of all this is that in relatively short order a working person could earn enough to purchase a smallholding, that 1785 carpenter is earning almost 1 acre per day.

Even if the cost of non-Federal land was 10x the above a working person could still actually contemplate becoming a land owner. No more.
It's probably worth repeating:
4.  In Countries full settled, the Case must be nearly the same; all Lands being occupied and improved to the Heighth; those who cannot get Land, must Labour for others that have it; when Labourers are plenty, their Wages Will be low; by low Wages a Family is supported with Difficulty; this Difficulty deters many from Marriage, who therefore long continue Servants and single.  Only as the Cities take Supplies of People from the Country, and thereby make a little more Room in the Country; Marriage is a little more incourag'd there, and the Births exceed the Deaths....
-Benjamin Franklin, “ObservationsConcerning the Increase of Mankind, Peopling of Countries, etc.” (1751).