Joshua L. Rosenbloom, Looking for Work, Searching for Workers: American Labor Markets during Industrialization. New York: Cambridge University Press, 2002. xvi + 208 pp. $55 (hardback), ISBN: 0-521-80780-8; $20 (paperback), ISBN: 0-521-00287-7.
Reviewed for EH.NET by Warren C. Whatley, Department of Economics, University of Michigan.
Joshua Rosenbloom tackles a large subject in a small book (181 pages) -- "the development of American labor market institutions during the late nineteenth in early twentieth centuries, focusing in particular on the ways in which they facilitated the matching of job seekers and employers across space" (p. xiii). The book is intended for economists and historians. For economists, it demonstrates the interplay of economic and historical forces in explaining the development of institutions. For historians it demonstrates how markets shape the context of social history.
The book has seven chapters. Chapter 1 establishes the importance of geographic mobility and poses two questions: What institutions promoted this mobility? And how did these institutions influence the course of economic development? Chapters 2 and 3 address the first question. Chapters 4 through 6 examine the second one.
Chapters 2 and 3 argue that the primary institutions that facilitated spatial mobility were informal networks of friends and family. This now seems a well-established fact. In the 1880s, thirty to forty percent of German immigrants traveled on fares prepaid by someone already in the United States. In 1889, sixty percent of immigrants reported that their travel had been arranged by friends or relatives already in the country. The stock of previous migrants of a nationality residing in a state had a positive and statistically significant effect on the proportion of similar new arrivals destined for the state. Informal networks were very efficient in moving workers, but they linked specific sending and receiving regions, and thus perpetuated the influence of the historical events surrounding the networks' origins. After a particular pattern of migration became established (something Rosenbloom never really discusses) it became self-perpetuating, at the neglect of other potential sources of labor supply (for example, the U.S. South).
How these networks came into being is left a mystery. Rosenbloom argues that employers' recruiting activities got things going, either directly or through the services provided by public or private employment agencies, but he never really tells us how. Nor does he provide historical examples or case studies. Somehow, employers found a way to coordinate the resources necessary to initiate a flow of labor across the Atlantic when no single employer had the incentive or the resources to do so. The political economy of these initiatives remains to be written.
Once established, employers encouraged the informal channels and reduced their reliance on formal recruitment activities. Informal networks offered immigrants an interim place to stay, information about the labor market and the probability of finding a job, help with transportation and settling into a new environment, etc. -- all at little direct cost to the employer. Employers' recruiting activities were confined primarily to areas where informal channels had not yet been established. Employers also operated in temporary and seasonal labor markets, in isolated towns, and where demand outstripped supply temporarily. Over the course of the century, employers adapted to changing patterns of immigration, but in each case their initial efforts were soon superseded by the operation of informal channels of recruitment.
In chapter 3, Rosenbloom offers an explanation for the limited role of formal labor market intermediaries. Drawing on a wide array of sources, Rosenbloom shows quite convincingly that the successful intermediaries mimicked the informal networks, and survived primarily where informal connections were not viable. In explaining the absence of formal intermediaries, Rosenbloom emphasizes the problem of information asymmetry. Workers had little reason to trust information received from these intermediaries. Word of mouth from friends and relatives was much more reliable.
Here I wish Rosenbloom had gone further. The economic cost of a poor reputation would help reduce the flow of bad information. Perhaps, instead, labor market intermediaries found it costly to acquire and convey the kind of information that employers and employees considered most valuable. Rosenbloom mentions the importance of long-term employment as something desirable on both sides of the labor market. If so, much of what attached a worker to a job might have been experiential in nature -- the work environment, notions of fairness, the pace of work, promotion probabilities, etc. These features of the job are conveyed most accurately and reliably by people with experience in the workplace. Similarly, a firm may value worker characteristics that are unobservable to employment agencies but quite observable to family and friends. Add to this the potential cost to a kin of a referral's poor performance and it is easy to see why informal networks were the employers' preference.
Chapter 4 considers the interaction between external recruitment activities and the internal allocation of labor, especially how employers filled positions requiring specialized skills. In Rosenbloom's words: "Evidence on employment trends and the evolution of skill premia indicate that at the aggregate level the supply of skilled workers was less elastic than that of unskilled workers. In part, this inelasticity may reflect the weakness of American apprenticeship, but it also reflects the greater reluctance of skilled European workers to emigrate to the United States. Responding to the high and rising costs of recruiting traditional categories of skilled labor, employers turned to technological solutions -- reorganizing work processes by introducing specialized capital equipment and an increased division of labor. These changes did not so much eliminate the need for skilled workers as alter the types of skill required and increase the importance of on the job training in employer-specific skills. These changes created incentives to increase the duration of worker-employer attachment, a fact reflected in the emergence of a substantial minority of workers with long job tenures. But so long as unskilled immigrant labor was plentiful employers shied away from adopting internal promotion and long-term jobs. Not until the end of mass migration after World War I did employers begin to invest significantly in the development of so-called internal labor markets" (p. 12).
Rosenbloom presents impressive evidence showing that skill premia and skilled wages tended to be higher in the United States than in Europe, and higher in the southern United States than in the north. We are not told, however, why skilled workers were more difficult to reallocate across space. Perhaps regional technology sets were different, but probably not that different. Is it an income effect? A permanent income consideration? What? We need to know why informal networks were less efficient among skilled workers before we can assess the impact of American labor market institutions on the evolution of American skills and technology.
Chapter 5 uses data on wages and earnings to trace changes in the geographic scope of labor markets across much of the nineteenth and early twentieth centuries. An integrated labor market in the North East and the Midwest moved huge numbers of workers in the decades immediately following the Civil War, but this labor market did not extend to the West or to the South. Chapter 6 considers the impact of market expansion on labor relations through an examination of variations in employers' use of strikebreakers in late nineteenth century labor conflicts. Rosenbloom rejects a popularly held view among labor historians that worker and community solidarity were stronger in smaller places, thus making it easier to prevent strikebreaking. Instead, he finds that the use of strikebreakers did not vary appreciably by region or city size. He does, however, find that the source of strikebreakers varied systematically with location, with employers in small communities located outside the North East most likely to use outside strikebreakers.
Overall, the book yields three important insights. (1) Employers were instrumental in initiating migration flows that were later perpetuated by friends and families. (2) Historical forces were important in shaping the patterns of labor market integration that emerged in the course of the nineteenth century. Patterns of labor market recruitment that emerged during the first half of the nineteenth century, when slavery separated southern from northern labor markets, were perpetuated and reinforced by the reliance on kin and friendship-based networks of labor market information. And (3) late nineteenth century labor market institutions proved more effective at integrating markets for less skilled workers than for more skilled workers. This difference may have encouraged American employers to reorganize production process.
Warren Whatley's current research is on the trans-Atlantic slave trade, 1440-1850, with particular emphasis on the determinants of supply to the new world. Other research interests include worker mobility and racial discrimination in twentieth-century America, the economics of the Jim Crow South, and inner-city economic development.
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