WAR AND PESTILENCE AS LABOR MARKET SHOCKS: U.S. MANUFACTURING WAGE GROWTH 1914–1919

there is not a single expert machinist in the labor market today. If such a one exists he will be able to command his own wages... The Arkansas Gazette (October 22, 1918).1 I. INTRODUCTION The possibility of a worldwide influenza pandemic in the near future is of growing concern for many countries around the globe. The World Bank estimates that a global influenza pandemic would cost the world economy $800 kill tens of millions of people. (2) Researchers at the U.S. Centers for Disease Control and Prevention calculate that deaths in the United States could reach 207,000 and the initial cost to the economy could approach $166 billion, or roughly 1.5% of GDP. (3) The U.S. Department of Health and Human Services paints a more dire picture--up to 1.9 million dead in the United States and initial economic costs near $200 billion. (4) While researchers and public officials can only speculate on the likelihood of a global influenza pandemic, many of the worst-case scenario predictions for a current pandemic are based on the global influenza pandemic of 1918. This global pandemic (often termed the "Spanish Flu") killed 675,000 people in the United States (nearly 0.8% of the 1910 population) and nearly 40 million people worldwide. (5) Only the Black Death of 13481351 is estimated to have killed more people (roughly 60 million) over a similar time period. (6) The global magnitude and spread of the 1918 influenza pandemic was exacerbated by World War I, which itself is estimated to have killed roughly 10 million civilians and 9 million troops (Nicolson 1980). Not only did the mass movement of troops from around the world lead to the spread of the disease, tens of thousands of Allied and Central Power troops died as a result of the influenza rather than combat] Although combat deaths in World War I did increase the mortality rates for participating countries, civilian mortality rates from the 1918 influenza were typically much higher. For the United States, estimates of combat-related troop mortalities are about one-tenth that of civilian mortalities from the 1918 influenza. Given the magnitudes and the concurrence of both the 1918 influenza pandemic and World War I, one would expect volumes of research on the economic effects of each event. Although there does exist a significant literature on the economic consequences of World War I (Rockoff 2004), the scope of published research on the economic effects of the 1918 influenza pandemic is scant.8 Most research that has been done has focused on the health and economic outcomes of decedents of pandemic survivors (Almond 2006; Keyfits and Flieger 1968) and mortality differences across socioeconomic classes (Mamelund 2006; Noymer and Garenne 2000). This paper contributes to the literature on the economic effects of the 1918 influenza pandemic and World War I by exploring the influence of mortalities from these concurrent events on the growth of manufacturing wages in U.S. states and cities over the period 1914-1919. (9) The general conceptual foundation for the paper is that, ceteris paribus, both of these events resulted in a large number of deaths, which constituted a significant negative shock to manufacturing labor supply, and thereby would have increased wages in the manufacturing sector immediately following both events. A similar conceptual framework has been used in studies that explored the economic effects of the Black Death (Campbell 1997; Karakacili 2004) and the effects of immigration on labor markets (Borjas 1987; Card 1990; Greenwood and McDowell 1986). The analysis presented here is the first to separate the potential manufacturing labor market effects of World War I and the 1918 influenza. This is an interesting exercise, given that mortalities from the 1918 influenza were nearly ten times greater than World War I combat mortalities, but World War I combat mortalities were more likely men aged roughly 18-44, prime ages for manufacturing workers. …