What conclusions for the role of population in economic development can we draw from the British industrialisation experience

The British Industrial Revolution began (approximately) in the mid 18th century, coinciding with a period of increased population growth. The extent to which this coincidence was significant, and the question of cause and effect between the two is debatable, and during the course of this piece I aim to discuss both the effects of a greatly increased population on the economy, and the ‘chicken and egg’ scenario it represents. Prior to the 18th century, population growth was fairly unremarkable, averaging roughly 0. 5% per year.

From 1751 onwards, however, Britain saw a relative ‘explosion’ in population, with constant population growth rates of over 1% throughout the 19th century. To give an idea of the numbers involved, the population rose from 8. 6 million in 1801 to 21. 5 million just 70 years later. At this time, the economic effects of population growth were quite pronounced. For example, the first half of the 18th century saw a relatively slow growth in population (< 0. 6%) and this led to an increase in the real wage. In the second half, however, the growth rate increased, and was accompanied by a fall in the real wage rate.

Aside from the effects of a decreased/increased supply of labour on the wage rate, an increased population also meant greater demand for food and other necessities. As expenditure on food consumed a large share of the poor’s income, this increase caused a decrease in real wages, whilst a decrease was matched by an increase in real wages. To obtain an idea of whether population growth was a cause or effect of the industrial revolution, it might be wise to consider the possible causes of the increase experienced in the mid 18th century which would last for much of the 19th.

The usual causes of a population change are migration, fertility and mortality. As there was net emigration in Britain for this period, migration can be ruled out. Also, whilst mortality did fall throughout this period, it was only by a relatively marginal amount when compared to the increase in fertility, which rose primarily as a result of progressively younger marriages up until the mid-19th century. That younger marriage ages were the cause of the increase in fertility seems verified by the accompaniment of a falling fertility rate when the average marrying age began to rise again in the mid 19th century.

The most likely cause of this increase in fertility seems to be a combination of changes in agricultural work practices, where employers began to discriminate against women, and in the provisions of the Poor Law, which began to make payments based on the number of dependents and possibly on a preferential basis to married men. The effect of these changes was to make marriage a more attractive prospect to women, as it increased financial security and certainty when marrying at a young age. Wrigley and Schofield believe that this overcame the usual ‘preventative check’ which helped keep fertility slightly lower.

It would seem then that the case for the industrial revolution causing the faster population growth is uncertain at best. It does, however, seem entirely plausible that the population growth provided the stimulus needed for the Industrial Revolution. Perhaps the most obvious economic benefit of population growth is the increased labour force it represents, leading to increased output. However, it is unclear whether British industry, such as it was, took advantage of the increased labour force to expand.

Even by 1831, only 10% of adult males were employed in manufactures, the rest continued to work in the traditional areas of agriculture, crafts and trade. Keynes theorised that an increase in population growth may encourage increased economic growth beyond the effects of an increased labour force, believing that the increased demand represented by a larger population creates greater security and stability for investors, and so encourages greater levels of investment – perhaps a prerequisite for a large scale industrial revolution.

However, the demand for industrial goods depends partially on the numbers of consumers, the bulk of whom in this period would have been the poor. During the 18th century, as I have mentioned, an increase in population growth rates saw a fall in real wages because of the rising price of food. If this relationship holds, it would seem unlikely that demand for industrial goods would increase during times of fast population growth. It seems especially unlikely if we consider the demographic of the population at this time – in 1826 around 39. 6% of the population was under the age of 15.

That’s 39. 6% of the population with low to no productivity who consume more agricultural goods than industrial. One possibility remains for Keynes’ theory, however. Whilst times of high population growth did see a rise in the price of agricultural goods, this meant that in relative terms industrial goods became cheaper, and it is possible that a certain amount of substitution occurred, perhaps to the level of subsistence. However, Mokyr has estimated that population growth accounted for just 10% of the increase in demand for the first half of the 19th century – a marginal effect at best.

Indeed, some historians have argued that rapid population growth may have acted as a hindrance to the revolution by depressing real wages, and that a cheap labour source, far from being beneficial, delayed the adoption of labour saving machinery and methods – reducing productivity. The 19th century did see a gradual rise in real wage rates – expenditure on food as a proportion of total income fell from 69% in 1788 to 61% in 1858, and this fall was accompanied by a slight increase (3%) in expenditure on clothing.

So there is some basis for claiming that the population created demand for manufactures, though it seems rather marginal. Returning to Keynes’ idea of economic certainty generated by a large populace – if this does not seem borne out in the industrial sector, it does seem to have occurred in agriculture. Food, unlike manufactures, is a necessity, and so agricultural employers and merchants were assured of an increased demand, allowing them to invest in increasing productivity, which in turn allowed them to reduce the number of employees they retained.

In fact, the share of workers in agriculture was to fall from 74% to 45%, releasing a large fraction of the workforce for employment in higher pay sectors of the economy, increasing overall income and so stimulating demand for industrial goods. Again, as mentioned earlier, this effect seems to have been small at best. In conclusion then, the role of population in economic development, based on the industrialisation of Britain, is debatable. It would seem that in order not to hinder economic progress, growth rates would need to be around 0. 6% or less, or else risk depressing real wages.

Whilst the larger population did increase both supply and demand, the effect of the increased supply was arguably to retard productivity growth in the industrial sector, whilst the increased demand seems to have had, at best, a marginal impact on economic growth. The main positive effect, perhaps, of such rapid population growth was the structural change it engendered in the economy, increasing agricultural productivity to the extent that a large proportion of labour was released for eventual employment in the industrial sector – creating, but not releasing, the potential for rapid economic growth once industrialisation began.