Slave Labor Can Cost More Than Free Labor

As I noted recently, I've been reading Lebergott on Manpower and Economic Growth, and he pointed out something that at first glance appears unlikely, slave labor can cost more than free labor. This seems odd. After all, slaves do what they are told, or else. Why should they cost more for a job than someone who freely contracts with you?

The reason is rather interesting. Slaves had collective bargaining. We tend to think of slaves as being tied to a particular plantation and not as part of a market economy. Sure, slaves could be bought and sold, but the real money was in hiring them out. Slaves cost money, and money meant an opportunity cost. If you had fields of cotton, it might make sense to have your slaves cultivate it, but it might make more sense to hire them out to a brickyard. This was intensified when cotton cultivation started moving west to Louisiana and Texas where productivity per acre and per slave was much higher than in Georgia or South Carolina. It even made sense to hire out your slaves to someone in another state, even if it meant having your own fields lie fallow.

Consider how this works. Someone runs a plantation or a sawmill or whatever and needs labor. They can put a sign to hire free workers and negotiate with each worker separately. If one worker is too greedy, they can just hire another. Free men, in some ways, are even cheaper than slaves. Getting fed is that worker's problem, not his ex-employer's. Alternatively, and especially if they need a lot of workers, they might negotiate with a slave owner and hire an entire team, complete with an HR department with its whips and manacles. Of course, there are fewer teams of slave to hire than individual free men, so their seller has more market power. They have to take the whole team or leave it. While using slaves might be simpler, they might wind up paying more per hour of labor than if they had built a team of free men.

This sounds rather fantastic, but Lebergott has the numbers to back it up.

In a way it makes sense. An individual worker is at a disadvantage when hired by a large enterprise. One way of fighting the capitalist collective is to form a workers' collective, and negotiating a contract on an enterprise by enterprise basis, or even better, on an industry wide basis. These workers' collectives are sometimes called unions and sometimes called contractors or subcontractors.

The difference between a union and a contractor who provides a class of laborer for an enterprise is who gets to eat the surplus cost produced by the collective bargaining. Union dues tend to be rather modest when compared with salaries. Contractors tend to take a big chunk off the top, and while some of it goes towards benefits, a lot of it goes for executive salaries, return on investment and so on. While companies tend to resist unions, they have no problem with contractors, at least not on a philosophical basis.

There was nothing in this system for the slaves. They weren't paid. They just worked.