A general-purpose technology lifts output per worker, but the gains go first to profits and to the owners of the new capital. Workers' pay catches up only after a lag, and in the Industrial Revolution that lag lasted half a century. The postwar decades are the one period in the record where productivity and median pay rose together from the start.
Between roughly 1780 and 1840 output per worker in Britain rose by close to half while real wages barely moved, a gap the economic historian Robert Allen named 'Engels' pause' after the conditions Friedrich Engels described in Manchester in 1844.
What happened next: Real wages began to rise with productivity only after about 1840 and the gap closed over the following decades. The pause produced the Factory Acts, trade unions and, eventually, mass schooling.pay lagged 50 years
Factory electrification and mass production drove a productivity surge in the 1920s United States. Profits and asset prices rose faster than wages, and income inequality peaked in 1929.
What happened next: Broad sharing of the gains came only after the Depression and the Second World War, with the wage compression of the 1940s.pay lagged 20 years
From 1948 to 1973 US productivity roughly doubled, and median hourly compensation rose almost in step with it.
What happened next: The gains were shared within the decade they were earned. Economists still debate why: strong unions, tight labour markets and the technologies of the period all played a part.gains shared
US productivity growth accelerated from 1995 to about 2004 as computing and the internet spread through business. Median compensation grew far more slowly, the gap Erik Brynjolfsson and Andrew McAfee called the 'great decoupling'.
What happened next: The productivity gains showed up in profits, in the pay of the highest earners and in cheaper goods, while median pay stagnated for most of the following two decades.pay lagged 20 years
Share of the 4 cases above that resolved this way. Small samples: treat as a prior, not a forecast.
Microsoft is offering buyouts to 60,000 staff and the youngest workers in AI-exposed jobs are falling behind. History's three great labour transitions say what usually follows, and where the unknowns hide.
