Corporate profits

A first episode of how corporate profits have shaped labor markets


Caribbean plantation owners, facing an end to slavery, adopted legal barriers to employment elsewhere

Informed workers in today’s economy know that their employer can actively lobby the government to limit employee rights. Companies seek to limit union organizing and collective bargaining powers in order to keep wages low; relax safety and environmental regulations partly intended to protect workers; and enforce non-compete provisions that can reduce industry wages and restrict workers’ opportunities.

Geographic mobility and a robust and competitive labor market somewhat limit the power of companies in this area. But suppose, as a worker, you are stuck on an island and a small group of employers have near-total control over the job market.

This is the situation studied in a National Bureau of Economic Research working paper by Christian Dippel of UCLA Anderson, Avner Greif of Stanford, and Dan Trefler of the University of Toronto. Former slave owners in the British West Indies traded their whips and chains for forms of “legal coercion” to keep workers on their plantations long after slavery was abolished in 1838 (a quarter of a century before the American abolition).

More subtly, in today’s economy, wages in some areas and for some skills are growing more slowly because mergers and other factors have given some employers a sort of monopoly power in the supply of labor. -working, a phenomenon known as monopsony. A nurse, for example, in the only hospital in a rural county is a captive of that employer and is probably paid less than a nurse in a competitive job market. The former slave owners used a set of laws to achieve monopsony power.

The 14 Caribbean islands studied in 1838 accounted for 17 percent of world sugar production. Sugar was a labor-intensive crop, and the combined population of the islands was around 750,000, of which about 10 percent were white. Sugar prices were high, so plantation owners had plentiful cash to use to influence labor laws and a huge incentive to maintain the status quo.

Yet, as expected, “when emancipation finally came on August 1, 1838, the former slaves immediately fled the plantations,” the authors write. Half had disappeared by the fall. In the spring, however, for lack of work elsewhere, many returned to work on the plantations – and wages rose sharply.

It seemed that a functioning labor market, of sorts, was developing. But in 1848, the authors report, wages dropped considerably. What happened? For many workers, due to laws enacted at the behest of employers, one of the most likely alternatives to low-paid plantation work was prison.

Planters, who dominated island legislatures and had close ties to local law enforcement, wielded power based on five main factors, the researchers said: 1) laws restricting workers’ access to jobs. affordable land with clear legal title; 2) taxes that penalized small farmers; 3) severe penalties for squatters on abandoned estates or Queen’s lands; 4) selective taxation of imports to the detriment of peasant crops; and 5) harsh treatment of people who have violated employment contracts, missed their jobs or been convicted of trespassing or squatting.

The authors estimated that at least two-thirds of the incarcerations on the islands were the result of legal coercion from workers. Imprisonment at the request of plantation owners was so widespread that the authors use incarceration as a measure of labor market control on the islands.

The islands included in this study were Antigua, Barbados, Guyana, Saint Kitts, Nevis, Saint Lucia, Trinidad, Tobago, Jamaica, Virgin Islands, Grenada, Dominica, Saint Vincent and Montserrat. Although they varied in size and population, their economic makeup was similar, based primarily on an agrarian economy dominated by sugar cane production. They also had comparable legal and institutional frameworks put in place by the British and controlled by white plantation owners.

Researchers studied wages, labor laws and the sugar market over a 76-year period, from 1838 to 1913. It appears that the collapse in sugar prices and the decline of the sugar industry on the islands have ultimately undermined the influence of plantation owners. Slowly, the former slaves and their offspring turned to subsistence farming and other work.

In 1913, the islands accounted for only 1% of world sugar production. Sugar beet production elsewhere has boosted global sugar supplies. And sugar prices were only a quarter of what they were in 1838. On the islands, as plantation owners lost their grip on the labor market, wages rose and incarceration rates rose. decreased.

As the land lost sugar production, it became available for plowing by former slaves and their offspring. The agriculture of the islands is diversifying. In Jamaica, with a population of about 380,000 in 1838, peasants left the plantations en masse and either bought small freehold estates or squatted. The number of freehold properties, barely 2,114 in 1838, rapidly increased to 19,397 in 1845, 50,000 in 1860 and 111,957 in 1890.

This growth created its own obstacle to coercive employment: peasants in 1890 produced 39 percent of the islands exported crops, up from 10.4 percent in 1850. They grew cocoa, bananas and other crops. And so they have become an economic and political force.

Over time, the island economies have taken divergent paths, which the authors attribute, in part, to the varying ability of plantation owners to maintain a low-cost pool of labor. Their results are corroborated by other studies, which have shown that ‘Caribbean labor drift’ was lowest in Antigua, St. Kitts and Barbados, the three islands where the plantation survived the longest.

According to the analysis of Dippel, Greif and Trefler, in Granada, where the export share of plantation crops had fallen to about a quarter by 1913, over the 76 years wages rose by 38 percent more than in Barbados, where the plantation system continued to dominate the economy.