An Economics Nobel Rooted in the Middle West

An Economics Nobel Rooted in the Middle West Louis D. Johnston1 (bio) In 1860, female workers made up 13 percent of the American paid labor force and earned about half of their male counterparts' average hourly wage. By 1940, the share of women in the labor force had doubled and their wages were roughly 70 percent of male wages on an hourly basis. Today, women make up 46 percent of the labor force and their hourly wage is 89 percent of men's wages.2 What factors facilitated these changes? Claudia Goldin has spent much of her academic career assembling data on the role of women in the labor market from a variety of historical sources, analyzing the information to tease out the causes, effects, and trends, and writing articles and books that tell the stories that have enlightened all of us who study the American economy. Economic historians were thrilled when the Royal Swedish Academy of Sciences recognized Goldin's contributions by awarding her the 2023 Nobel Prize in Economics (officially, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel).3 An underappreciated aspect of Goldin's work emerges when we realize that the most important forces that drove increases in female employment and wages in the United States were rooted in the Midwest. Applying an economic lens to history Goldin is a leading practitioner of cliometrics, "the application of quantitative and theoretical techniques to the study of historical phenomena."4 She earned her PhD at the University of Chicago in 1972 under the direction of Robert Fogel, who shared the 1993 Economics Nobel with Douglass North for revitalizing economic history through the creation of cliometrics.5 [End Page 294] The specific techniques Goldin applied to the study of women's employment and earnings were the concepts of labor supply and labor demand which determine the level of wages and employment at a point in time. The key to applying these tools to historical phenomena is to identify the forces that cause labor supply and labor demand to change over time, and to quantify the effects of these factors so that we can ask how important a particular cause is relative to another. Goldin's analysis identified increases in both the demand for female labor and the supply of female labor, and these shifts led to greater female labor force participation and a reduction in the male-female wage gap. The most important forces that increased the demand for and supply of female labor sprang from the evolution of the Midwestern economy and the education systems of the prairie states. Increasing the demand for female labor: the Second Industrial Revolution The first Industrial Revolution of the nineteenth century was based on steam power, textile and clothing production, and iron goods produced primarily in Connecticut, Massachusetts, New York, and Pennsylvania. By contrast, the second Industrial Revolution of the late nineteenth and early twentieth centuries took place primarily in the Midwest.6 Michigan, Ohio, Indiana, and Illinois became centers of steel production, automaking, electrical machinery manufacturing, chemical processing, and rubber production, while cities and towns in Wisconsin, Iowa, Minnesota, the Dakotas, and Nebraska focused on farm machinery, processed-food products (including meat and dairy), and a variety of consumer goods including electrical appliances. Two important characteristics of this revolution affected the demand for female workers. First, the new technologies—internal combustion engines, electric generators, and electric motors that powered this revolution—modified assembly lines and other production processes to emphasize brains and dexterity more than brawn, and so opened more opportunities for female employees.7 Second, as Alfred Chandler wrote, In many sectors of the economy the visible hand of management replaced what Adam Smith referred to as the invisible hand of market forces. The market remained the generator of demand for goods and services, but modern business enterprise took over the functions of [End Page 295] coordinating flows of goods through existing processes of production and distribution, and of allocating funds and personnel for future production and distribution.8 Goldin, along with other scholars, documented how this managerial revolution increased the demand for clerks, bookkeepers, typists, and a variety of service personnel.9 The majority of...