BEES’ KNEES AND WAGES

To bee or not to bee, is that the question? 

Mea culpa. I’ve been in a rut (though not of the elk-ian sort); I spend too much time reading about and reacting to tweets from the child-like creature professing to be our national leader. So I’m taking a vacation by giving up reading news about our president’s tantrums for the summer starting today on our 241st birthday. 4 No Trump is now for me more than a bridge bid. I’m following Gideon Litchfield’s apt suggestion to ignore this man-child’s paroxysms. According to Litchfield, a normal US president is like a creature in the middle of a lake, his every move creating far-reaching ripples that people pay attention to. Our current leader is like a rock in a stream; he creates turbulence and is to be avoided, but everything flows on around him.

Instead, I’ll focus on something apart from the hugely disturbing, corrosive and sad politics of our president.

Say for example, how long have workers’ wages been the bee’s knees?

It’s not a question that’s occupied my or likely your forebrain that much. But it does have implications beyond the biological superfamily Apoidea, where bees reside. To be clear, bees indeed have segmented legs that include knee joints. Praise bee. The idiomatic phrase “the bee’s knees” became popular in the 1920s and refers to something being of high quality or excellence.

Not just the bee’s knees are excellent. There are close to 20,000 known species of bees that are found on every continent except Antarctica, in every habitat on our planet that contains insect-pollinated flowering plants. Many bee species are eusocial, living in cooperative, communal groups (e.g., hives) headed by a female queen bee. Bees pollinate more plant species than any other pollinating animal, including ants, butterflies, bats and hummingbirds.

It is estimated that about one-third of the human food supply depends on pollination, most of which is accomplished by bees. And unlike any other pollinator, bees (specifically the most well-known type, the European Honeybee) produce wondrous honey as well as beeswax and royal jelly. Royal jelly isn’t served on Prince Charles’ UK muffins in the morning; it’s a honeybee secretion used in the nutrition of larvae, as well as adult queens.

In 2013 more than 2.6 million bee hives produced about 149 million pounds of honey in the US according to the National Honey Board. What state produces the most honey? Although it’s unlikely, if you picked North Dakota you’d earn a B++. Bee statisticians estimate that in order to produce 1 pound of honey, 2 million flowers must be visited, which takes a hive 55,000 miles of flying. That’s a lot of flying without any frequent-flyer miles. An average worker bee makes only about 1/12 teaspoon of honey in its lifetime. Thanks guys.

Bees have been making honey for well over 100 million years. Humans have enjoyed a long, positive relationship with honeybees; except when we misbehave and get stung. Depictions of humans collecting honey from wild bees date to 15,000 years ago; efforts to domesticate them are shown in Egyptian art more than 4 millennia ago. Jars of honey were found in the tomb of Tutankhamun. The Greeks treasured honey; Virgil and Pliny wrote about beekeeping 2,000 years ago.  

Onward to wages. Economists generally define wages as the regular payment provided at a fixed rate to labor for services undertaken. For employers it is the cost of using labor, as opposed to using the other two factors of production, land and capital. Wages are determined by several factors, principally the demand and supply of labor as well as labor productivity - the output produced per person-hour worked. Sounds fairly simple, but it usually it isn’t.

One continuing issue regarding wages is how has the premium paid for higher-skilled, more-productive laborers compared with lower-skilled workers over time. This concern has risen in importance as uneasiness about technological displacement of middle-skilled workers has grown and the wages provided to lower-skilled workers and others have stagnated. I wrote about the controversy surrounding how the rise of artificial intelligence (AI) may affect workers’ jobs when I examined robots, blacksmiths and the future.

The seminal efforts of Professor Gregory Clark at UC/Davis offer an intriguing perspective on the premium paid to higher vs lower-skilled workers. I have found Prof. Clark’s deep excursions into quantitative economic history fascinating. His captivating book, A Farewell to Alms, offers insights based on the extensive empirical data he’s collected about the world’s economic history including why the great “divergence” of the Industrial Revolution happened first in England and not, for example, China.

Prof. Clark has recently assembled an impressive dataset of wages in England from the end of the 12th century through current time. With almost 800 years of English data (!), he compared skilled-worker craftsmen’s wages with that of common laborers from the middle ages through the Industrial Revolution and beyond. What his data show is that except for two periods of significant change, the recent rise in the wage premium for skilled and college-educated workers is historically unusual, as shown in the chart below from The Economist.

Sources: The Economist and Prof. Gregory Clark

The chart shows two large changes in the skilled-worker wage premium. The first dramatic decline happened in the 14th century, when average life expectancy at birth was about 31 years. [Interestingly, this short expected lifespan basically was unchanged since Classical Greece – the 4th and 5th centuries BC, when it was ~28 years – and that of 17th century England at 35 years.] With such a short lifespan and when interest rates were high a worker’s taking on an apprenticeship (often 7 years long) to become a skilled craftsman had a high opportunity cost. Fewer men became craftsmen and the craftsman-to-common-laborer wage premium grew until the early 1300s. Thus, from the mid-1200s through the beginning of the 14th century craftsmen’s wages were indeed the bees’ knees. It wasn’t to last.

The bubonic plague (Black Death) cast its very dark penumbra on England and the rest of Europe, starting in the mid-14th century and continuing sporadically through the mid-17th. After 1348-49 when the plague first struck England, its population dropped by one-third precipitating reductions in interest rates and significantly adding to the already outsized challenges of living. Apprenticeships became more alluring both financially and because there were far fewer skilled workers. From the chart, the increased supply of skilled labor relative to common laborers soon reduced the wage premium ratio and kept it around 1.50 until the late 1600s.

The second big change happened during the 18th and 19th centuries. The craftsman/laborer wage premium rose at the beginning of the 18th century and stayed high until the beginnings of the Industrial Revolution in the mid-1700s. Skilled workers’ wages were the bees’ knees then. However, the Industrial Revolution was a game-changer for virtually everyone in England, and soon thereafter the rest of Europe, America and the world. For the first time in history structural technological change created widespread job displacement and opportunities.

In a real sense the Industrial Revolution was realized by the coincident mechanization of agriculture. The Agricultural Revolution allowed land-owners to reduce their field labor and still increase output via improved labor productivity. The enormous increases in agricultural labor productivity were realized by adopting a series of new technologies that coincided with the Industrial Revolution including the cotton gin, iron/steel plows and mechanical reapers. By the 1990s, farm labor and land productivity had increased 100-fold in 150 years.

The decline in the craftsmen/laborer wage premium started in England as the newly-mechanized textile industry hired unskilled laborers – most often from farms – to replace artisan craftsmen in new factories. Industrial machines could be operated by workers with far less training than craftsmen. Average daily income in 1861 England was 14 pence for 10 hours of work or about $336 in today’s dollars. The modernization and automation of British industry steadily became more widespread in the 1800s. The skilled-worker wage premium dropped, as shown in the chart, and didn’t start to recover until the mid-20th century.

Most recently, wage premiums during the past 40-50 years have been directed to college graduates, as I’ve discussed before. As the number of college degree-holders continues to climb, it’s unclear how long this premium will last. The multi-century historical wage data discussed above show that wage premiums awarded to more skilled labor eventually subside. Even the bees’ knees ultimately crumple.