A Healthy Educated Labor Force Is The Key To Economic Prosperity.

Posted on | September 2, 2024 | Comments Off on A Healthy Educated Labor Force Is The Key To Economic Prosperity.

Mike Magee

Another Labor Day has come and gone. But support for the Labor Movement, and the focus on housing, health services, and economic mobility are front and center for the Harris-Walz ticket as Tuesday, November 5th approaches.

As Dora Costa PhD, Professor of Economics at UCLA puts it:

“Health improvements were not a precondition for modern economic growth. The gains to health are largest when the economy has moved from ‘brawn’ to ‘brains’ because this is when the wage returns to education are high, leading the healthy to obtain more education. More education may improve use of health knowledge, producing a virtuous cycle.”

Information technology is clearly making its mark as well. As one report put it, “Recent advances in artificial intelligence and robotics have generated a robust debate about the future of work. An analogous debate occurred in the late nineteenth century when mechanization first transformed manufacturing.”

The National Bureau of Economic Research (NBER) recently stated, “The story of nineteenth century development in the United States is one of dynamic tension between extensive growth as the country was settled by more people, bringing more land and resources into production, and the intensive growth from enhancing the productivity of specific locations.”

At the turn of the 20th century, industrialization and urbanization were mutually reinforcing trends. The first industrial revolution was “predominantly rural” with 83% of the 1800 labor force involved with agriculture, producing goods for personal, and at times local market consumption. The few products that were exported far and wide at the time – cotton and tobacco – relied on slave labor to be profitable.

The U.S. population was scarcely 5 million in 1800, occupying 860,000 square miles – that’s roughly 6 humans per square mile. Concentrations of humans were few and far between in this vast new world. In 1800, only 33 communities had populations of 2,500 or more individuals, representing 6% of our total population at the time. Transportation into and out of these centers mainly utilized waterways including the Eastern seaboard and internal waterways as much as possible. This was in recognition that roads were primitive and shipping goods by horse and wagon was slow (a horse could generally travel 25 miles a day), and expensive (wagon shipment in 1816 added several days and cost 70 cents per ton mile.)

At least as important was the creation of a national rail network that had begun in 1840. This transformed market networks, increasing both supply and demand. The presence of rail transport decreased the cost of shipping by 80% seemingly overnight, and incentivized urbanization.

But by 1900, the U.S. labor force was only 40% agricultural. Four in 10 Americans now lived in cities with 2,500 or more inhabitants, and 25% of Americans lived in the growing nation’s 100 largest cities. The rivers and streams drove water wheels and later turbine engines. But this dependency lessened with the invention of the steam engine. Coal and wood powered burners could then create steam (multiplying the power of water several times) to drive engines. The choices for population centers now had widened.

Within a short period of time, self-reliant home manufacturing couldn’t compete with urban “machine labor.” Those machines were now powered not by waterpower but “inanimate power” (steam and eventually electricity). Mechanized factories were filled with newly arrived immigrants and freed slaves engaged in the “Great Migration” northward. As numbers of factory workforce grew, so did specialization of tasks and occupation titles. The net effect was quicker production (7 times quicker than none-machine labor).

Even before the information revolution, the internet, telemedicine, and pandemic driven nesting, all of these 20th century trends had begun to flatten. The linkages between transportation, urbanization, and market supply were being delinked. Why?

According to the experts, “Over the twentieth century new forces emerged that decoupled manufacturing and cities. The spread of automobiles, trucks, and good roads, the adoption of electrical power, and the mechanization of farming are thought to have encouraged the decentralization of manufacturing activity.”

What can we learn from all this in 2024?

First, innovation and technology stoke change, and nothing is permanent.

Second, markets shape human preferences, and vice versa.

Third, in the end, equal access to education and health services is critical to long term economic prosperity. When it comes to the human species, a healthy well-educated workforce fuels innovation, growth, and opportunity for all. Happy Labor Day!