Technological change was unskilled-labor-biased during the early industrial revolution, but is skill-biased today. This implies a rich set of non-monotonic macroeconomic dynamics which are not embedded in extant unified growth models. We present historical evidence and develop a model which can endogenously account for these facts, where factor bias reflects profit-maximizing decisions by innovators. In a setup with directed technological change, and fixed as well as variable costs of education, initial endowments dictate that the early industrial revolution be unskilled-labor-biased. Increasing basic knowledge then causes a growth takeoff, an income-led demand for fewer but more educated children, and a transition to skill-biased technological change in the long run.
However, Young may have misunderstood Roosevelt's perspective on labor issues. As Roosevelt wrote to one of his most trusted advisors, Harvard Law School Professor Felix Frankfurter, in August 1934, his long-term goal was to salvage the National Industrial Recovery Act's provisions for "(1) minimum wage, (2) maximum hours, (3) collective bargaining and (4) child labor," which would require legislation that could pass muster with a Supreme Court dominated by eight former corporate lawyers (four ultraconservatives, two moderate conservatives who provided the swing votes, and two liberals); Frankfurter then passed this information along to Justice Louis Brandeis, one of the two liberals, in a handwritten note (Davis 1986, p. 517).
On May 20, the lawyers at the National Labor Relations Board wrote to Wagner that they thought it was imperative that the bill go to the White House "this week" because of "the imminence of a decision in the Schechter case, which will in all probability be adverse to the government" (Levy 1935). In other words, the lawyers at the National Labor Relations Board expected the NRA to be declared unconstitutional, which would eliminate the foundation for labor relations in section 7(a). With further urging from Wagner, Roosevelt finally made a public statement in favor of the act on May 24, three days before the Supreme Court issued its unanimous negative verdict. Many people -- including most business leaders, labor leaders, liberals, and consumer advocates -- rejoiced for their own separate reasons when the NRA was declared unconstitutional, just 23 months after it was launched. However, it did acclimate business and organized labor to the idea of minimum wages, maximum hours, and the abolition of child labor, all of which were included in the Fair Labor Standards Act of 1938. Moreover, the industries that most needed government regulation to deal with their problems were able to restore it very quickly. For example, the Bituminous Coal Conservation Act of 1935 and the Bituminous Coal Act of 1937 authorized a National Bituminous Coal Commission to set minimum coal prices and provide a safeguard for labor standards. The Connally Hot Oil Act of 1935 saved the oil industry from itself by prohibiting the shipment of oil in excess of quotas set by individual states (states in which the industry dominated quota setting).