The interplay among wages, technology, and globalization: The labour market and inequality, 1620-2020

Abstract

For the past four centuries, technical change and the labour market have evolved together through a feed back process. Four phases in that history are distinguished here: the preindustrial revolution (1620-1770), the industrial revolution (1770-1867), the age of industry (1867-1973), and the service revolution (1973-present). The focus is on the leading economy of each period–Great Britain in the first two and the USA in the last two. In all periods, output per worker has increased. In the first and the third, the average wage rose and wages tended to converge; in the second and fourth, the average wage was constant and wage and overall inequality increased. The feedback between wages and technology are discussed, and the causes of this periodization are explored. The roles of globalization and changes in the institutions responsible for technical change are discussed. The menu of policy choices to deal with the present labour market and inequality issues are considered in light of the history.