The legend of the free labour market

In a piece on the death of liberalism last week, Ed West wrote:

English liberalism….grew out of parliamentary tradition [and] a free market in land and labour…

I wouldn’t normally take issue with a tangential line in an article which was mostly about something else but this idea that there was once a time when this country had free and unregulated markets is a persistent one. I’ll leave someone else to deal with land, if they feel inclined, but when it comes to labour, state intervention in the market is nothing new.

Almost as soon as the feudal laws tying people to the land started breaking down governments began to legislate. The Statute of Labourers in 1351 is usually regarded as the first labour legislation in English Law. It was enacted during the labour shortage after the Black Death and its purpose was to stop workers moving from their home villages to look for work to hold down the price of labour. Economic conditions made it almost impossible to enforce but it set the tone for subsequent labour legislation and common law which, by and large, worked in favour of employers for the next 500 years.

Simon Deakin explains the development of the employment relationship since the middle ages:

[N]ot only is the contract of employment a more recent innovation than many have thought, but….its essential features owe as much to legislation as they do to the common law of contract. The widely-held belief that there was a coherent account of the employment relationship in private law prior to the growth of the social legislation of the welfare state is false, the result of viewing case-law of the eighteenth and nineteenth century through the lens of a later period.

From the standpoint of the 21st century, we look back at the history of work and see it in our own terms. But, although the feudal system disappeared relatively early in English history, the idea that workers were tied to a particular place and a particular lord was a long time dying. Where we think of employers and employees, our forebears thought of masters and servants. Nowadays, we use the word servant to refer to household staff but, until recently, it was a general term for a worker. It was still in common use in the late 19th century. The trade union in the famous Taff Vale case of 1901 was the Amalgamated Society of Railway Servants, which, nowadays, strikes us as a slightly odd name for a union,

From the 16th century until 1875, employment was government my Master and Servant laws dating from the Elizabethan Statute of Artificers but reinforced during the eighteenth and nineteenth centuries by further legislation. As Deakin notes, the original laws contained some degree of protection for workers but this was eroded by the subsequent legislation which, at the same time, increased the penalties for servants.

The important thing to understand about master and servant law, though, is that workers were subject to criminal sanctions for breaches of their contracts while masters were only subject to the civil law. You don’t need to think about that for too long to see the lop sidedness of it. Workers of limited means had to pursue employers through the courts, while employers had the entire law enforcement apparatus of the state at their disposal. As if that wasn’t enough, as Paul Johnson notes:

A master sued by a worker could be a witness in his own defence, but until 1867 a worker prosecuted by an employer could not give any evidence on his own behalf.

Hardly free and equal parties to a contract then. The deck was very much stacked against the employee.

The penalties for breach of contract were harsh. Imprisonment with hard labour, fines and even, on occasion, beatings. Criminal prosecutions under master and servant laws were common, says Johnson, averaging about 10,000 a year in the mid-nineteenth century. These were concentrated among the working classes in the industrial districts, so:

The annual chance of a working-class household suffering criminal prosecution for breach of labour contract lay between 1 in 150 and 1 in 200 – a sufficiently high rate for knowledge of the risk to be well known within working class communities.

Suresh Naidu and Noam Yuchtman studied the master and servant prosecutions during the nineteenth century and found that most were brought for absconding.

The typical goal of a prosecution was to use the threat of incarceration and hard labor to prevent workers from leaving an employer, and to pursue and punish those who were not deterred.

The threat of prosecution was credible; not only were prosecutions common but they were also largely successful.

The use of the word absconding for what we would now describe simply as leaving your employer before your contract is up reflects the attitudes of the time. It shows that the masters, supported by the law, considered their workers to be tied to their boss and to their workplace.

Masters were therefore using the criminal law to reduce wage competition by preventing workers from leaving their employment to look for work elsewhere.

[T]he widespread use of criminal prosecutions suggests that, indeed, employers valued the ability to legally bind workers even in a modern, industrial economy.

The harshest of punishments were only carried out in a minority of cases. Usually workers were ordered back to their masters or were forced to pay compensation for the masters’ losses. After the law was reformed in 1867, fines became more common although, as Naidu and Yuchtman point out, as most of these workers were poor, the effect of a fine may simply have meant that they later ended up in prison for being unable to pay it. Nevertheless, the last two decades of master and servant law seem to have been a little less brutal.

Fines replaced beatings and imprisonment. The late Victorian period was so much more humane!

When criminal prosecution for breach of contract was abolished in 1875, wages rose. They rose fastest in the areas where there had previously been the most prosecutions. There can be little doubt that the law had done exactly what the masters intended it to do; intimidate workers to the point where they were too scared to leave their employers and find better paid jobs.

Until 1875, then, the imbalance of power between workers and their employers wasn’t just economic; it was legal too. That balance only began to shift towards the end of the 19th century, at first with health and safety laws and later with trade union and employment protection. For most of the period since the middle ages, though, labour law was firmly on the side of the employer.

Those who complain about employment law often say that the government has no business meddling in the labour market. In fact, governments have been meddling in labour markets for almost as long as they have existed.

As Deakin says

One of the most powerful ‘creation myths’ attending current debates is the claim that the social legislation of the welfare state was imposed upon a pre-existing order of private law whose coherence and functioning was thereby undermined.

Close analysis shows that there was no period of laissez faire, during which the labour market was governed by the general precepts of private law.

The myth that there was a time before The Fall, when the state didn’t meddle in the affairs of free men, is persistent, especially on the libertarian right. When it comes to labour law, though, it is just that, a myth. State intervention in the labour market is nothing new. The only aspect that is relatively new is its intervention on behalf of employees.

The pre-20th century labour market was not without its red tape, it’s just that the red tape was used to bind the servants, not the masters.

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