Boyer George R. An Economic History of the English Poor Law, 1750-1850
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An Economic Model of the
English Poor
Law 117
year after year
to the
same districts, where they become known;
and the
English farmer
not
infrequently engages during
the
current harvest
the
labourers who
are to
come
... to
assist
him in
getting
in
his crops
in the
next" (quoted
in
Redford 1964: 147-8).
But it is not
clear
how
farmers
enforced such agreements.
The
effect
of
weather
on the
timing
of
peak
labor demand posed special problems.
The key to
success
of
the migrant
labor system
was
that
the
timing
of the
harvest varied across areas,
but
the usual harvest pattern could
be
disrupted
by the
weather. According
to Collins (1976:
42),
"shortages
of
migrant labour were most
apt to
develop
at
harvest time when, following
a
spell
of
hot,
dry
weather,
the
corn matured simultaneously over whole large areas, thereby interrupt-
ing
the
smooth flow
of
labour between
the
earlier
and
later ripening
districts." From
1790 to 1814, "dry
(quick-ripening) summers" caused
harvest labor shortages
in 14
years. Quick-ripening harvests also
oc-
curred
in 1819, 1822, and 1825
(Collins
1976: 42).
Farmers anxious
to
reduce this uncertainty would have retained under contract
a
resident
labor force larger than that necessary
to
meet labor requirements
on the
farm
for all
seasons except harvest.
39
Finally,
one can
speculate
as to the
effect
of
changes
in the
supply
and
demand
of
migrant labor
on the use of
outdoor
relief.
England experi-
enced
a
scarcity
of
harvest labor during
the
period 1790-1815, caused
in
part
by a
decline
in the
number
of
Scottish
and
Irish harvesters (Collins
1969a:
67;
Redford
1964: 142).
Farmers might have responded
to the
decline
in
migrant labor
by
making labor-tying agreements
(in the
form
of implicit contracts with unemployment insurance provisions) with resi-
dent laborers. Also,
the
widespread adoption
of the
four-course system
in
the
eighteenth century reduced
the
potential benefit
of
migrant labor
by making March
a
period
of
peak labor demand.
The
increased
use of
resident labor increased
the
demand
for
implicit contracts containing
seasonal layoffs
and
poor
relief.
Changes
in the
supply
and
demand
of
migrant labor therefore reinforced
the
effect
of
declines
in
cottage indus-
try
and
land allotments
on the
demand
for
outdoor
relief. On the
other
hand,
the
"vast influx"
of
Irish harvesters into
the
southeast
in the
late
1820s reduced
the
need
for
outdoor
relief, at
least
in
areas where
the
three-course system remained.
39
The number
of
"extra" workers under contract
was
determined
by the
probability
of a
labor shortage occurring
at
harvest times
the
expected cost
to the
farmer
of a
labor
shortage,
and by the
cost
to the
farmer
of
maintaining resident workers under contract.
118
An
Economic History of the
English Poor
Law
6. Conclusion
This chapter offers
an
explanation
of the
economic role played
by out-
door relief
in
early-nineteenth-century agricultural parishes.
I
have used
a tool
of
modern labor economics, implicit contracts theory,
to
demon-
strate that
the
adoption
of
outdoor relief was
a
rational (that
is,
profit-
maximizing) response
by
grain-producing farmers
to the
economic envi-
ronment they faced.
The
model provides
an
economic explanation
for
the regional nature
of
outdoor
relief:
Contracts containing seasonal
lay-
offs
and
outdoor relief were cost-minimizing only
in
areas where
the
demand
for
labor varied significantly over
the
crop cycle.
In
areas where
seasonality
was not
pronounced, such
as the
pasture-farming west
of
England, full-employment contracts were cost-minimizing.
I
am not
claiming that
the
system
of
outdoor relief was efficient from
society's standpoint. There were social costs associated with
the use of
outdoor
relief. The
payment
of
outdoor relief
to
unemployed laborers
might have reduced migration from agriculture
to
labor-scarce industrial
areas.
(An
analysis
of the
effect
of
outdoor relief
on
rural-urban migra-
tion
is
given
in
Chapter
6.)
Moreover,
the
system
of
outdoor relief
reduced agricultural output
in
slack seasons. Because unemployed work-
ers were partly supported
by
non-labor-hiring taxpayers, farmers' cost-
minimizing strategy
in
slack seasons involved laying
off
workers whose
marginal product
of
labor
was
positive.
The
larger
the
contribution
of
taxpayers
who did not
hire labor
to the
poor rate,
the
larger
the
optimal
number
of
layoffs,
and
therefore
the
larger
the
reduction
in
slack-season
output.
In
this regard
the
system
of
outdoor relief
was
similar
to the
current unemployment insurance system
in the
United States,
in
which
the "subsidy element" created
by
firms' incomplete experience rating
imposes
"an
efficiency loss
by
distorting
the
behavior
of
firms
to lay off
too many workers when demand falls rather than cutting prices
or
build-
ing inventories" (Feldstein
1978:
844-5). However, from
the
view
of
politically dominant labor-hiring farmers,
it was
efficient because
it rep-
resented
the
lowest-cost method
for
securing
an
adequate peak-season
labor force.
Although
the
analysis
has
focused
on the
response
of
rural English
parishes
to the
breakdown
of
their preindustrial economy,
it has
broader
implications.
A. K. Sen
(1977:
56) has
suggested that
one of
the stylized
facts
of
economic development
is the
existence
of "an
intermediate
phase
of
development
in
which
the
dependence
[of
rural laborers]
on the
An Economic Model of the
English
Poor Law 119
market increases sharply (given the breakdown of the traditional peas-
ant economy) and in which guaranteed entitlements in the form of social
security benefits have yet to emerge." The method for analyzing the
English Poor Law developed here could also be applied to the study of
rural labor contracts in other countries during their period of industrial-
ization. I suspect that the result of such research will be to confirm the
hypothesis that many of the apparent imperfections in rural labor mar-
kets are in fact rational "institutional response[s] to the presence of
seasonal peaks of labour requirements" (Bardhan 1977: 1108).
Appendix
The farmer's problem can be written as follows
Max EX
t
7r
t
(x
t
)
C,N
subject to
ES
t
V
t
(x
t
) >V*, N < 1, n
t
(x
t
) < N
V
t
The variables are defined in Table 3.A1. To characterize equilibrium
contracts, form the Lagrangian
L = EX
t
{f[nKxMx
t
), *J ~ n
t
(x
t
)c
t
(x
t
) - [N - n
t
(x
t
)][d
t
(x
t
) - s]
+ AN-%(x
t
)U[c
t
(x
t
), l~h
t
(x
t
)] + \N~i[N - n£x
t
)]U[d
t
(x
t
),
1] + y(l - N) + 0
t
(x
t
)[N - *,(*,)] ~ AV*}
where A, y, and 6 are the Lagrangian multipliers corresponding to the
three constraints. The first order conditions are as follows: in each sea-
son r, for each value of x, the contract satisfies
L
nix)
=
fi[n
t
(x
t
)h
t
(x
t
), x
t
]h
t
(x
t
) - c
t
(x
t
) + d
t
(x
t
) - s +
\N-i{U[c
t
(x
t
),
1 - *,(*,)] " U[d
t
(x
t
), 1]} - 0, = 0 (1.1)
L
hix)
=fi[n
t
(x
t
)h
t
(x
t
),x
t
]n
t
(x
t
) - \N-%(x
t
)U
2
[c
t
(x
t
),
1 - h
t
(x
t
)] = 0 (1.2)
L
c(x)
= -n
t
(x
t
) + XN-inMUM*,), 1 " Mx,)] = 0 (1.3)
L
d{x)
= ~[N - n
t
(x,)] + \N-*[N - n
t
{x)}U\d
t
{x), 1] = 0 (1.4)
L
N
= EX
t
{-d
t
(x
t
) + s -\N->n
t
(x
t
)U[c
t
(x
t
), 1 -
h
t
(x,)]
+
\N-%(x
t
)U[d
t
(x
t
),
1] +
6
t
(x
t
)
- y} = 0 (1.5)
120 An Economic History of
the
English Poor Law
and the equality
EX
t
V
t
= V*, plus the conditions n
t
(x
t
) < N, n
t
(x
t
) < N=>
0
t
(x
t
)
= 0 and N < 1, N < 1=> y = 0.
Combining first order conditions (1.3) and (1.4) yields the efficient
risk-sharing conditions
t/,[c,(*,),
1 - h,(x,)] = U,[d,(x), 1] = N/X
V
x, (2)
which equate workers' marginal utility of consumption across seasons,
across realizations of the productivity shock within each season, and
across employment status. Combining (2) with (1.2) yields the condition
determining hours per worker
f
l
[n
t
(x)h{x),x]
=
t
x
t
(x)
Vf (3)
where fju
t
(x
t
)
==
U
2
[c
t
(x
t
),
1 -
h
t
{x)]IU\c
t
(x),
1 -
h
t
(x
t
)]
is the
marginal
rate of substitution for employed workers.
The conditions under which layoffs occur are obtained from first order
condition (1.1). The farmer will lay off workers during season t if, for
some n
t
(x
t
) < N
fAn
t
(x
t
)h
t
(x
t
), x
t
]h
t
(x
t
) < c
t
(x
t
) - d
t
(x
t
) + s - z
t
(x
t
) (4)
where
z
t
(x
t
)
-
{£/[c,(*,),
1 -
h
t
(x
t
)]
-
U[d
t
{x^
\]}IU
x
[c
t
{x^
1
-
*,(*,)],
the
marginal benefit of being employed rather than unemployed. Equation
(4) says that the farmer should lay off workers if the output from the
marginal worker, given x
n
is less than the cost of employing him (c, - d,
+ s) minus the amount the worker would be willing to pay not to be laid
off, z
r
Finally, the number of workers under contract, N (N < 1), is obtained
from condition (1.5), which can be rewritten as
t
{f\n
t
{x)h
t
{x), x
t
]h
t
(x
t
) - c
t
(x
t
)
+ [1 - n
t
(x
t
)/N]z
t
(x
t
)} -y = 0 (5)
When Af < 1, y = 0 and (5) determines the number of workers under
contract by equating the average output from an employed worker to
the average cost, which is his consumption net of the amount he is
willing to pay not to be laid off times the probability of
layoff.
An Economic Model of the
English
Poor Law 121
Table 3.A1.
Definition
of
variables
C = the implicit contract offered to workers
N = the number of workers offered an implicit contract
E = the expectation operator
7T,
= farmer's profit in season t
x
t
= seasonal factor, a stochastic productivity shock
V
t
= worker's expected utility in season t
V* = worker's reservation level of expected utility
n
t
= number of workers employed in season t
h
t
= hours per worker in season t
c
t
= worker's consumption (income) when employed in season t
d
t
= worker's consumption (income) when unemployed
5 = the poor relief subsidy, the contribution of non-labor-hiring taxpay-
ers to the poor rate
/[•] = production function in agriculture
U[-] = worker's utility function
THE OLD POOR LAW AND THE
AGRICULTURAL LABOR MARKET
IN SOUTHERN ENGLAND: AN
EMPIRICAL ANALYSIS
From the passage of Gilbert's Act in 1782 to the adoption of the Poor
Law Amendment Act in 1834, real per capita relief expenditures in-
creased at a rate of nearly 1% per annum. Several explanations have
been offered for the rapid increase in expenditures: the disincentive
effects of generous relief benefits, laborers' loss of land through enclo-
sures and engrossment, the decline of employment opportunities for
women and children in cottage industry, a reduction in wage rates for
agricultural laborers.
To date, however, none of these explanations has been tested empiri-
cally. In view of the general paucity of time-series data, this is perhaps
not surprising. But there is a gold mine of cross-sectional parish-level
information concerning the administration of poor
relief,
and agricul-
tural labor markets in general, that to this date has been underutilized.
I refer to the Rural Queries, the questionnaire mailed to rural parishes
throughout England in 1832 by the Royal Poor Law Commission, and
answered by approximately 1,100 parishes. Throughout this period,
the level of per capita relief expenditures differed significantly across
counties, and across parishes within counties. Presumably, the same
explanations given for the long-term increase in relief expenditures can
be used to account for cross-parish variations in expenditures. By com-
bining information from the Rural Queries with occupational data
from the 1831 census, it is possible to test most of the hypotheses that
have been put forth to explain variations in relief expenditures across
parishes.
1
'To date, the only attempt to determine the causes of cross-sectional variations in per
capita relief expenditures during this period has been by G. S. L. Tucker
(1975).
Tucker's
analysis is at the county level of aggregation, whereas poor relief
was
administered by the
parish. Because relief administration and economic conditions were not uniform across
parishes within a particular county, his analysis has serious shortcomings. Moreover,
Tucker did not make use of the Rural Queries and thus was unable to test several
122
The Old Poor Law and the
Agricultural
Labor Market 123
This chapter provides one such test. Data from a sample of southern
parishes that responded to the Rural Queries are used to estimate a
three-equation model to explain cross-parish variations in per capita
relief expenditures, agricultural laborers' annual wage income, and the
rate of unemployment. The results are used to evaluate existing explana-
tions for the long-term increase in relief expenditures.
1.
Explanations for the Long-Term Increase and Regional
Variations in Relief Expenditures
Most contemporary critics of the Old Poor Law concluded that the rapid
increase in per capita relief expenditures during the first third of the
nineteenth century was caused almost entirely by the widespread adop-
tion of outdoor relief during the subsistence crises of 1795 and 1800. For
example, Malthus (1798: 83-7) maintained that the Poor Law dimin-
ished workers' "incentive to sobriety and industry" and thus "create the
poor which they maintain," and Ricardo
(1821:
106) wrote that "whilst
the present laws are in force, it is quite in the natural order of things that
the fund for the maintenance of the poor should progressively increase
till it has absorbed all the net revenue of the country." The 1834 Poor
Law Report (Royal Commission 1834: 233-7, 68-70, 59) concluded that
outdoor relief created voluntary unemployment, and enabled labor-
hiring farmers to substitute relief payments for wages as compensation
for their workers. Because of their focus on the disincentive effects of
outdoor
relief,
neither the Poor Law commissioners nor the other con-
temporary critics of the administration of relief were able to explain the
regional variations in per capita relief expenditures. The commissioners
concluded simply that "the abuses of the Poor Laws" were generally
confined to the south of England.
Frederic Eden (1797) and David Davies (1795) found evidence that
the increase in relief expenditures was caused, at least in part, by
changes in the economic environment during the second half of the
prominent hypotheses concerning the causes of cross-sectional variations in relief expendi-
tures.
He regressed average annual per capita relief expenditures in 1817-21 on the
nominal weekly wage of agricultural laborers in 1824, the share of families "chiefly
employed in agriculture" in 1821, the percentage of land enclosed by Act of Parliament
from 1761 to 1820, the "fertility ratio" in 1821, and the share of the population aged 60
and over in 1821. He used annual relief expenditure data collected by Parliament, wage
data from Bowley (1898), and enclosure data from Gonner (1912). All other data were
obtained from the 1821 census.
124 An Economic History of the English Poor Law
eighteenth century, in particular, the decline in employment for women
and children (due mainly to the collapse of cottage industry in the
south), and the loss of cottage land through enclosures and engross-
ments. Both Eden and Davies presented evidence of a negative correla-
tion between earnings in cottage industry and poor relief expenditures
(Davies 1795: 84-6; Eden 1797: II, 2, 471, 687; III, 796). They also
believed that granting allotments of land to poor laborers would signifi-
cantly reduce their dependence on poor relief (Davies 1795:
102-3;
Eden 1797: I, xx). Many others shared this
belief.
The most vocal advo-
cate of allotments was Arthur Young, who maintained that "the posses-
sion of a cottage and about an acre of land, ... if they do not keep the
proprietor in every case from the parish, yet [they] very materially lessen
the burden [of poor relief] in all"
(1801:
509).
Karl Polanyi (1944) maintained that the adoption of outdoor relief
was a response by rural parishes to the increased demand for labor in
urban areas. Polanyi saw outdoor relief as part of a relatively inexpen-
sive method for farmers to secure "an adequate reserve of labor" for
peak seasons, because it enabled them to pass some of their labor costs
on to the "rural middle class" (1944: 297-8). However, Polanyi ignored
the evidence of regional variations in relief expenditures, maintaining
that outdoor relief "became the law of the land over most of the country-
side"
(1944: 78).
Mark Blaug (1963: 161-2) maintained that rural parishes adopted
outdoor relief in order to supplement wage rates that were precariously
close to the subsistence level. Blaug provided an explanation for re-
gional variations in per capita relief expenditures. Relief expenditures
were relatively high in the south and east, first, because seasonality in
the demand for agricultural labor was especially pronounced in grain
production, and the southeast was the major grain-producing region of
Britain. Second, fixed-income annual labor contracts were common in
the north, whereas in the south labor was hired by the week or even by
the day. Third, southern rural areas suffered from "disguised unemploy-
ment" caused by the decline of cottage industry after 1800 and the
"relative immobility of rural labor" (1963: 170-2).
Anne Digby (1975; 1978) expanded on Blaug's contention that relief
expenditures were positively correlated with the extent of seasonality in
labor demand. She found that labor-hiring farmers dominated parish
government in rural Norfolk, and that they responded to the seasonal
nature of grain production by "exploiting their position as poor law
The Old
Poor
Law and
the Agricultural
Labor Market 125
administrators to pursue a policy with an economical alteration of poor
relief and independent income for the labourer" (1978: 105).
In Chapter 1,1 argued that the major function of outdoor relief
was
to
provide unemployment benefits for seasonally unemployed agricultural
laborers. The decline of cottage industry, and the loss of land from
enclosures and engrossment, magnified the problem of seasonality in
grain-producing areas. To maintain their laborers' income at its previous
level, farmers anxious to secure an adequate peak-season labor force
either had to raise agricultural wage rates or agree to grant poor relief to
workers not needed during the winter months.
The model developed in Chapter 3 showed that contracts containing
outdoor relief and layoffs dominated alternative contracts in areas
where the demand for labor fluctuated sharply over the crop cycle, while
yearlong wage contracts were dominant in areas where the demand for
labor remained fairly steady throughout the year. One should find, there-
fore,
that per capita relief expenditures were higher in grain-producing
areas than in pasture-farming areas. Moreover, the value of the compen-
sation package, in terms of utility, that labor-hiring farmers had to offer
in order to retain their workers was found to be negatively related to the
cost of migrating from the parish to an urban industrial area. Assuming
that cost of migration can be proxied by distance, wage rates or relief
expenditures should have been lower the farther a parish was from an
urban labor market.
Employment opportunities for women and children in cottage indus-
try or allotments of land reduced the value of the compensation package
farmers had to offer their workers. In response to these other income
sources, poor relief expenditures might have declined, as Davies, Eden,
and Young maintained. It is also possible, however, that labor-hiring
farmers responded to such advantages by cutting wage rates for adult
male agricultural laborers rather than by reducing relief expenditures.
The small size of rural parishes suggests that it was not difficult for
farmers to agree to do so.
2
2
For the sample of southern agricultural parishes used in the empirical analysis here, the
average number of labor-hiring farmers per parish was 16 in 1831. Because part of the
poor rate was paid by taxpayers who did not hire labor, it was in every labor-hiring
farmer's interest to respond to other income sources by reducing wages rather than relief
expenditures. Of course, non-labor-hiring taxpayers had an incentive to reduce relief
expenditures, so the extent to which farmers were able to reduce wages depended on
their political power in the parish. The regression results in Tables 4.5 and 4.6 show that
the existence of other income sources reduced both wages and relief expenditures. Note
that I am assuming that workers made decisions concerning migration based on their total
126 An Economic History of
the
English Poor Law
Of course, the extent to which farmers were able to respond to the
existence of allotments or cottage industry by cutting wages rather than
relief expenditures depended on the extent of their political power.
Because this varied across parishes, there is no reason to believe that all
parishes reacted in the same way to, say, the existence of cottage indus-
try. Rather, I predict that labor-hiring farmers were more likely to re-
duce wage rates the more dominant they were in parish politics.
This summary of the literature on the economic role of poor relief has
revealed several testable hypotheses concerning the causes of the rapid
increase in relief expenditures from 1780 to 1834, and of regional varia-
tions in relief expenditures. The lack of time-series data makes it impossi-
ble to test directly the hypotheses concerning the long-term increase in
relief expenditures. Most of the hypotheses can be tested indirectly,
however, by a cross-sectional regression to explain variations in relief
expenditures across parishes. For instance, if the long-term rise in per
capita relief expenditures was indeed related to the decline in employ-
ment opportunities for women and children in cottage industry, it should
be the case that at any point in time parishes with employment opportu-
nities in cottage industry had lower per capita relief expenditures than
parishes without cottage industry, other things equal.
There are possible problems with using cross-sectional data to infer
time-series explanations. Such a procedure
is
valid only if the same model
is correct for both the time series and the cross section; that is, the same
variables that explain cross-sectional differences in relief expenditures
also explain differences in relief expenditures over time. In my opinion,
this condition is met here. Historians and contemporary observers hy-
pothesized that the long-term increase in relief expenditures was caused
by a decline in agricultural wage rates, laborers' loss of
land,
the decline in
cottage industry, increased specialization in grain production, increased
local political power of labor-hiring farmers, or increased generosity of
outdoor
relief.
Differences in relief expenditures across parishes should
be explained by precisely the same variables.
A more specific problem concerns inferences drawn from the coeffi-
cients of dummy (yes/no) variables, several of which are included in the
cross-sectional analysis. Because dummy variables measure the occur-
compensation package rather than simply
on
their wage income
in
agriculture.
In
other
words,
I
claim
it was not
necessary
to pay
workers their marginal product
in
wages.
It
follows that
a
worker receiving poor relief should
be
indifferent between
a
reduction
in
wage income
or in
relief benefits
in
response
to an
increase
in his
wife's earnings
in
cottage industry,
or in the
size
of
his allotment.