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Week9 Memo

The memo discusses the U.S. labor market in the manufacturing sector from the late 19th to early 20th century, focusing on the works of Jacoby (1983) and Naidu and Yuchtman (2015). Jacoby emphasizes the shift towards centralized personnel management to reduce inefficiencies, while Naidu and Yuchtman highlight the escalating conflicts between employers and workers over wages and labor conditions. The author argues that these two perspectives are interconnected, with government intervention facilitating the adoption of personnel management practices as a response to labor conflicts.

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10 views2 pages

Week9 Memo

The memo discusses the U.S. labor market in the manufacturing sector from the late 19th to early 20th century, focusing on the works of Jacoby (1983) and Naidu and Yuchtman (2015). Jacoby emphasizes the shift towards centralized personnel management to reduce inefficiencies, while Naidu and Yuchtman highlight the escalating conflicts between employers and workers over wages and labor conditions. The author argues that these two perspectives are interconnected, with government intervention facilitating the adoption of personnel management practices as a response to labor conflicts.

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sjmin711
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Econ 210A, Week 9 Memo

Seongjoo Min
Both Jacoby (1983) and Naidu and Yuchtman (2015) depict the U.S. labor market
associated with the manufacturing sector and its institutional aspects between late 19 th century
and early 20th century. They focus on distinct institutional developments throughout the period:
the former focuses on centralized personnel management and internal labor market, and the latter
focuses on the conflict between employers and workers over their shares of rents.
What is described in Jacoby (1983) is the effort on reducing costs associated with
decentralized system of employment, where foreman had control over hiring workers, wages,
and allocation of workers. This system was inefficient because of large administrative costs, loss
of efficiency arising from recurring labor unrest and erratic working habits, and high turnover
rates. Reforms aimed at establishing specialized personnel management at firms arose; however,
it was not adopted by many firms until 1920 as production managers saw little benefit due to
abundance of cheap labor. However, experience through the 1920-1922 depression and the Great
Depression, government policy favoring centralized and standardized employment procedures,
and growing strength of union led to widespread adaptation of the labor market reform.
In contrast, Naidu and Yuchtman (2015) depicts the conflict of employers and workers
over rents in the late 19th century. Workers engaged in strikes in order to increase their share of
the pie; employers responded by hiring replacement workers or using coercive methods to make
them to return to work. In the late 19th century, a larger frequency of strikes, more violent strikes,
and more deaths from labor conflicts are observed. A surge in the number of injunctions is also
observed, where these were in favor of the employers as the judicial system sided with the
employers. The main theme here is intensifying conflict between employers and workers, and the
rise of union in the 19th century.
My view is that these two papers discuss two distinct aspects of the U.S. labor market in
the era, and they could be reconciled. First of all, I observe that Jacoby (1983) is focused on
1880 – 1945, with a larger emphasis on early 20th century. In contrast, Naidu and Yuchtman
(2015) focuses mostly on the late 19th century, with little emphasis on early 20th century.
Moreover, Jacoby (1983) does not consider the incentives of workers. Instead, the reform
described here is on firm structure, in particular enhancing the relationship between employers
and workers in order to reduce firms’ costs. That is, these papers portray different pictures on
different aspects of the labor market and for a slightly different timeline.
I argue that the adoption of the reform described in Jacoby (1983) is closely related with
the employer-worker conflict depicted in Naidu and Yuchtman (2015). The battle between
employers and workers is costly for both parties, as well as for the U.S. as a whole. It would be
natural to conceive that the U.S. government sought arbitration. The evidence that many elected
government officials, as presented by Naidu and Yuchtman (2015), is supportive of this claim.
That arbitration came in the form of a larger government intervention in the labor market,
mandating centralized and standardized employment practices for firms around 1915, leading to
a larger adoption of the personnel management system. The statement that one of the functions
of the personnel management system was to create a more enduring employment relationship
(Jacoby, 1983) provides more support on my claim on government arbitration. Moreover, that
the personnel management system reduced appeals to unionism as it pre-empted certain reforms
is further supportive of this claim. Another supportive factor is that as the frequency of strikes
and unionism declined in the 1920s, firms began to abandon the personnel management system
or alter it to a less liberal version (Jacoby, 1983). My assertion here is that the wider adoption of
the personnel management system in the early 1920s was a consequence of the conflict between
employers and workers and that the labor markets described by the two papers are supportive of
each other.

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