Rush hour at Grand Central Station. Image: Nicolai Berntsen, Unsplash.
The coronavirus pandemic has brought a huge demand-and-supply shock to the global economy. But while businesses face the kind of uncertainty that hasn’t been seen since the industrial revolution, there may be things we can learn from pre-industrial business and employers that will help lead us out of the difficult times we find ourselves in.
Aside from the periods of war and the oil crises, from the late-19th century onwards developed economies experienced a huge decline in output volatility, especially between the early 1980s and 2007. Supply and demand of goods and services became more certain and continuous, and fluctuated less. In effect, there was a rise in certainty.
This continuity of supply and demand, experienced as predominance of just-in-time supply chains and a global market for sourcing intermediate goods, supported investment and stable economic growth. Alongside this growth came high employment (albeit with lower than expected wage growth). The pandemic has undermined those trends, but, from a historical perspective, uncertainty of supply and demand is nothing new. Such volatility was a key characteristic of all pre-modern economies before industrialisation. In those economies, the labour market was vastly different from the one we have known in recent decades.
From a historical perspective, uncertainty of supply and demand is nothing new. Such volatility was a key characteristic of all pre-modern economies before industrialisation.
It is only since the industrial revolution, or the mass mechanisation of production, that the continuous production of anything has been possible. Before the mid-19th century, goods were produced in batch or custom orders in small workshops, or through a network of outworkers. It’s possible to conceive the pre-industrial economy as entirely project based.
In a world where seasonality, blockades, severe weather, famine, plague and poor credit or financial crises hindered production and often stopped work, it made no sense to pay people for time that might not be productively used. Pre-industrial employers used more varied contracts than today, where a small number of covetable annual contracts paid a reliable but very low wage, and work by the day was paid at a premium but was volatile, seasonal and insecure.
So, the current concept of a ‘job’ is a relatively new phenomenon. What we call a job today was not the way most people were employed. The majority of pre-industrial workers were not paid for their time – but for what they produced.
Piecework, taskwork or payment for output is a system of wage formation as old as the hills, and its purpose is to protect employers from the costs of labour in uncertain conditions. It also allows employers to minimise the costs of supervision, because it is not the labour input that is being exchanged or that needs to be checked or supervised, but the output. Hence, before the industrial revolution, the ‘workplace’ was not what it is today, with managers, supervisors and hours of business. Such a system gave workers autonomy, but they took on their own costs of supply chains and finance – and when worked stopped, wages stopped.
A basket maker's wage book from the late 18th century
With such a way of managing production, there is no job security. Essentially, it’s not a job, but a stream of goods that is being contracted for, just as today’s drivers and delivery riders are not paid per hour but earn per journey, or garment workers per unit made. Even though in the 21st century there has already been a huge shift to self-employment, gig-wage formation, zero-hours contracts and what have been called non-traditional jobs, we have not seen the variety (often casual or implicit) of work contracts and wage formation that characterised 18th-century Britain, where men and women worked for payment by piece, by task, by tide (on the river), or paid to attain a position where they could charge commission or levy fines. It is only when work moved to factories and employers needed to match workers’ effort and labour input to the pace of machines that piece and other work bargains formed implicit, more stable, timed contracts that paved the way to the relative stability of hourly wages.
Therefore, when we contemplate changes to the labour market post Covid-19, it is not just unemployment and lower incomes we should worry about, but fundamental changes in contracts and security of income. If employers cannot supervise effort and participation at a workplace, then they can either start to monitor work remotely in ways that many might find intrusive and authoritarian, or they can relax their supervision and monitoring, and only pay for output that they deem acceptable. We could see a return to variable contracts, incentivising workers with different forms of variable payment.
2020 has brought a demand-and-supply slump of unprecedented proportions to the world, and has created a huge shock for employers and workers. In the UK, the government furlough scheme has meant that ‘Closed for business’ has not resulted in mass layoffs – yet. But, as social distancing and working from home take their toll on service industries for an unspecified length of time, the forecast is for mass redundancies.
However, a long-term view suggests the pandemic conditions are likely to shape work in more profound ways than the unemployment rate, and not just because lots of people are working from home. As we contemplate the ‘new normal’ – with continued home working for many and the apparent ‘end of the office’ – history cautions that the stability of year-round, permanent jobs and workplaces was not normal at all until fairly recently.
Associate Professor in Economics and Finance of the Built Environment, The Bartlett School of Construction and Project Management