Early 20th Century Industrialization: Equitable Income Growth Through Manufacturing Productivity Improvement

The rapid industrialization occurring from the late 19^th century into the early 20^th century provides the opportunity to delve into the impacts it brought for American life. The goal of this paper is to assess how changes in labor productivity from the rise of industrialization impacted total, personal, and corporate income per capita at the state level. To test this relationship, we use data from the Statistics of Income Report and the Statistical Abstract of the United States in order to collect information for the necessary regressions to conduct this study. Using several different channels in order to hypothesize potential outcomes, we highlight the uncertainty brought forward with potential theories providing an explanation for both positive and negative relationships between labor productivity and income per capita. Carrying out our regressions, our results indicate a statistically significant and positive relationship between labor productivity and total, personal, and corporate income per capita. Personal income per capita led with the highest coefficient, potentially demonstrating that workers benefited the most from the increase in labor productivity. This finding allows for discussion into equitable income growth, where the growth in income from the rise of manufacturing productivity happens to benefit the workers more than large capital owners such as corporations.