Economic development with high wages: An historical perspective

Abstract

Evidence is presented in this paper which challenges the general applicability of the hypothesis that low wages are necessary or, in the very least, conducive to higher rates of manufacturing employment growth. An analysis of the Canadian censuses and other material for Quebec and Ontario for the period 1870–1910 shows that Ontario's manufacturing sector grew at a faster pace than Quebec's despite the higher labor income in Ontario. The more productive labor inputs in Ontario more than compensated for the possible supply-side constraints which its relatively high-priced labor might have caused. I also find that the most immediate economic cause for Quebec's lag in per capita manufacturing output growth was its relatively slow rate of manufacturing employment growth.