From 1880 to 1920, agriculture added 2.1 million additional workers (mostly before 1900), but the growth rate of agriculture was only one-tenth (0.1) of the total growth rate of the national workforce. In 1920, only one in four American workers was engaged in agriculture, and the U.S. economy was increasingly focused on urban factories and offices rather than farms. Although many immigrants were attracted to the agricultural frontier in the 18th and 19th centuries, at the time of mass immigration from 1880 to 1920, only one in five farmers was an immigrant or the child of an immigrant. Although the demand for industrial goods gradually increased throughout the country, the initial demand came from the urban population. Unlike peasant families, who were largely self-sufficient in food and made most of their clothes, urban families had to buy everything at the market. The large and growing urban population, fueled mainly by immigration in the second half of the 19th century and the first two decades of the 20th century, created a huge demand for increased output from the emerging industrial sector. Carter and Sutch (1999:330-331) argue that economies of scale in demand and output also stimulate inventive step and the diffusion of technological knowledge and innovation. In his analysis of long fluctuations or Kuznets cycles, Easterlin (1968) found that immigration (and population growth) and subsequent family formation stimulated economic growth through increasing demand for housing, urban development, and other amenities. This association was strongest, Easterlin noted, in the century before World War II. In the aftermath of the Second World War, the federal government assumed greater responsibility for maintaining aggregate demand, regardless of population dynamics. In their study of the impact of immigration on U.S. industrialization and native workers, Hatton and Williamson (1998: Chapter 8) asked whether immigrants accelerate industrialization by addressing labor shortages by entering high-paying, high-growth occupations more quickly than native workers (Hatton and Williamson 1998: 161-164).
Based on their findings that immigrants from 1890 to 1900 were more likely to be in lower-skilled occupations and slower-growing occupations, Hatton and Williamson conclude that immigration did not contribute to economic development and rapid industrialization. However, other analysts report that immigrants were no less skilled than native-born workers (Schachter 1972). The real issue, in our view, is not the skill level of immigrants, but their role in meeting labour demand in manufacturing and other key sectors of the emerging industrial economy. The focus of the Industrial Revolution can best be measured by changes between industrial sectors – particularly the growth of the manufacturing sector. Carter and Sutch (1999: 323) examine the historical evidence of the debate over immigration and the dilution of capital at the turn of the 20th century, emphasizing the claim that immigrants increased the return on capital (and thus capitalists) but damaged the economic wealth of native-born workers. They conclude that the separation between capital and labor was not as clear as many assume. A significant portion of American workers owned capital through home ownership and as farm and small business operators. About half of U.S.
households in 1905 may have been considered equity investors because they owned insurance policies that were self-funded pension plans (Ranson and Sutch, 1987, cited in Carter and Sutch, 1999: 323). In this study, we measure the contribution of immigrants and their descendants to the growth and industrial transformation of the American workforce in the era of mass immigration from 1880 to 1920. The size and selectivity of the immigrant community, as well as their disproportionate stay in the big cities, meant that they were the mainstay of American industrial workers. Immigrants and their children accounted for more than half of manufacturing workers in 1920, and if you include the third generation (the grandchildren of immigrants), more than two-thirds of manufacturing workers were younger immigrants. While higher wages and better working conditions might have encouraged more Indigenous workers to join the industrial economy, the scale and pace of the American Industrial Revolution may well have slowed. The closing of the door to mass immigration in the 1920s led to an increase in the recruitment of indigenous workers, particularly from the south, to northern industrial cities in the mid-20th century.