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  • Writer's pictureAlain Lord Mounir

Institutionalization of labor markets

“Thanks to the Industrial Revolution, new technologies in cotton textiles, iron and steel, and transportation delivered steadily rising levels of labor productivity for the first time in history…

…First in Britain in the mid-eighteenth century, and then in Western Europe and North America, men and women flocked from the countryside to towns to satisfy factories’ growing demand for labor. But, for decades, workers gained few of the benefits of rising productivity. They worked long hours in stifling conditions, lived in overcrowded and unsanitary housing, and experienced little growth in earnings. Some indicators, such as workers’ average height, suggest that standards of living may have even declined for a while. Eventually, capitalism transformed itself and its gains began to be shared more widely… partly because wages naturally began to rise as the surplus of rural workers dried up. But, equally important, workers organized themselves to defend their interests. Fearing revolution, the industrialists compromised. Civil and political rights were extended to the working class…

The post-industrial economy opened up a new chasm in the labor market, between those with stable, high-paid, and fulfilling services jobs and those with fleeting, low-paid, and unsatisfying jobs. Two factors determined the share… the education and skill level of the workforce, and the degree of institutionalization of labor markets in services… There is both good and bad news for the future of work in developing countries. Thanks to social policy and labor rights, workers can become full stakeholders in the economy much earlier in the process of development. At the same time, the traditional engine of economic development "industrialization" is likely to operate at much lower capacity. The resulting combination of high public expectations and low income-producing capacity will be a major challenge for developing economies everywhere.


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