The blue line in the FRED graph above shows the real hourly wage in the United Kingdom from the middle of the 13th century onward. It is constructed from weekly earnings data divided by weekly hours worked to obtain hourly wages. Hourly wages are then divided by the consumer price index to adjust for inflation.
This line tells the story of how economic growth emerged in the United Kingdom and, by extension, in Europe. From the middle of the 13th century until the middle of the 19th century, there was no growth in real wages. Then, modern growth started and real wages increased exponentially.
The red line (right axis) shows the population of the United Kingdom, and the green line shows the population of England. (Note the drop in population in 1350 due to the Black Death). The data for the red line start only in the 18th century. Given its similarity with the data for England, though, it is reasonable to assume that the pattern of population growth for the United Kingdom prior to the 18th century is similar to that of England.
The story of population growth is similar to that of economic growth: There was very little increase in population size until the onset of the 18th century. Then the population accelerated noticeably.
There is one important difference between population and economic growth, however: their timing. It is clear from the figure that the acceleration in population predates economic growth. Demographers have debated for a long time the causes of the modern rise in population, and economists have debated the causes of modern growth. How are the two linked, if at all? One theory is that as countries get richer the abundance of food and medical care permits longer life expectancy and therefore larger population. Such a (Malthusian) theory, intuitive as it maybe, cannot explain the timing discrepancy on this figure. An older FRED Blog post addresses a similar puzzle.
How this graph was created: Search for and select “Average Weekly Earnings Per Person in the United Kingdom.” From the “Edit Graph” panel, add “Consumer Price Index in the United Kingdom” and “Average Weekly Hours Worked in the United Kingdom.” In the formula box, enter (a/b)/c. From the “Add Line” tab, search for and select “Population in the United Kingdom.” Repeat with “Population in England.” In the “Format” tab, assign lines 2 and 3 to the right axis.
Suggested by Guillaume Vandenbroucke.
