Abstract
Inter-continental trade brought a novel form of organizing business to early modern Europe: the multinational firm. Headquartered in Europe and operating in Asia, the success of the East India Companies depended largely on the management of overseas outposts and their corresponding labor force. Using a dataset of 115 individuals hired in Europe to work in Asia, I present the internal structure of the careers and wages of civil servants in the Dutch East India Company in the eighteenth century. There were stable career paths, fast tracks in promotions, and sizable returns to tenure. Despite the 300-year-old evidence, the VOC conforms rather well with present personnel practices and theories of internal labor markets.
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Notes
The Dutch compensation structure has been linked to higher employee effort relative to Portugal’s empire (Rei 2011).
The term servant does not denote the holder of a servile occupation (e.g., house servants), and it is often used in the context of merchant empires (Banerjee 1972; Lequin 1982; Gaastra 2003). Early modern merchant companies were government-chartered organizations in the age of mercantilism. Their trade goals often led these companies to wage war on foreign nations. Referring to the people who served these organizations as employees would be an understatement.
Portugal’s dynastic crisis in 1580 resulted in the union with Spain. Consequently, Portugal became an enemy of the United Provinces of Northern Netherlands, which declared independence from Spain in 1581.
The granting of such wide privileges was by no means typical of the VOC. All European merchant companies operating in Asia at the time conducted trade, administered justice and had their own armies, becoming therefore states within a state.
For a detailed summary of the VOC’s shipping, see Gaastra (2007, p. 115).
See "Appendix" for a calculation of the premium of overseas jobs relative to Amsterdam’s skilled and unskilled labor.
Location and monthly wage are not available for all years, but just recorded when a servant moved branches or got promoted. I assume each servant remained in the same location and occupation (with corresponding monthly wage) in intermediate years.
The distinction between the last two categories is minimal and mainly related to company’s records: some workers are registered as arriving back in the Netherlands after serving in the East, while others are just recorded as having departed from the East on company’s return ships. In either case, these workers concluded their time of service in the VOC and returned to Europe.
Of the 370 soldiers arrived in Batavia in 1775, only 20 % survived the first 2 years (Gaastra 2003: 82).
For a description of the deadly conditions in Batavia in the eighteenth century, see Blussé (1986).
Information on marital status is rather imprecise: there were 54 servants with known marital status, 47 married and 7 unmarried.
There is one servant with unknown place of birth.
In this sample, both ship surgeons transferred to the civil sector, which was not a general tendency. For a study on the careers of the VOC’s ships surgeons, see Bruijn (2009).
Bruijn (2011) studies the careers of VOC commanders in the eighteenth century, highlighting the maritime sector’s hierarchy. Almost all started in lowly occupations such as ship’s boy or sailor.
The exceptions are two demotions down to level 3 from level 4, which I analyze in the next section.
Transitions are not necessarily promotions since entries at the various levels are included.
Cross products are never significant, so they are not included in the table.
For a model on the connection of monitoring to the different incentive structures of merchant empires, see Rei (2013).
Signs and significance remain unchanged for wage and above wage income, but magnitudes differ a little.
Cross products in Table 9 involve entry sector, the only variable significant by itself that yield some significant cross products. Insignificant variables Entry Age and/or Dutch were dropped in specifications (6) to (8) for the inclusion of more observations.
For this reason, I clustered the errors at the individual level in the multiple fixed effects specifications (columns 4–6).
Certainly, there are dangerous places in the world today where people are sent to work, such as Afghanistan, Congo, Syria, or Sudan, to mention a few. The paramilitary units Americans use to fight wars have some well-paid fighters, who probably have higher career returns than in current data as well. It is however unlikely that these are the typical firms included in personnel economics studies.
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I thank Jeremy Atack and Richard Unger for detailed suggestions on earlier drafts. I also thank Giacomo Ponzetto, Mauricio Drelichman, seminar participants at UBC, and two anonymous referees.
Appendix
Appendix
1.1 A1. Occupations by sector and level
1.2 A2. Premium of overseas jobs in the VOC
Nobody leaves to the Indies but to make a fortune
Jacob Haafner, 1806 (in Lequin 1982)
I briefly calculate the premium of VOC overseas wages when compared to wages earned at the same time in Amsterdam. In his 2001 study, Robert Allen provides series of wages, in grams of silver per day, for skilled and unskilled labor in several European cities from the 1300s to Word War I. Amsterdam wages did not vary much from 1669 to 1799: while craftsman slightly lost purchasing power (daily wages in silver g went from 12.09221 to 11.834715), whereas laborers clearly gained (8.279 silver g per day g in 1669 to 9.2256 g in 1799). I averaged the values across skill. O’Rourke and Williamson (2009) provide the ratio of grams of silver per guilder for the relevant years (9.8 g per guilder in 1669 and 9.61 in 1799). Amsterdam wages can therefore be converted in guilders, which are now comparable to VOC wages measured in florins. I further assume for the Amsterdam worker the same career duration of the average VOC servant in the sample (22 years) and 30 working days a month. Table 12 shows the results.
An Amsterdam craftsman (skilled labor) who worked for 22 years would have earned 9,762.98 guilders. This is an exaggerated estimate, since part of the worker’s career would have been spent acquiring a skill. The average wage earnings in the Bengal sample are 14,770.63 guilders or 51 % higher than those of the Amsterdam skilled worker.
Wages, however, were just 64 % of the total compensation of VOC servants. The average compensation above wage of the VOC servants in the sample was 9,320.61 florins, which is close to the earnings of an Amsterdam craftsman working for 22 years. Taking into account this non-negligible part of the VOC compensation package, total compensation for the average VOC servant during 22 years would be 24,091.24 florins, which corresponds to a premium of 147 % relative to the earnings of a skilled worker in Amsterdam. To earn the same as the average VOC servant, the Amsterdam craftsman would have had to work for 54 years, the laborer 74, and a worker who spent half of his career learning a skill 63.
The high premium confirms these overseas jobs were indeed opportunities to make a fortune, but only if the individual was lucky enough to survive harsh conditions overseas.
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Rei, C. Careers and wages in the Dutch East India Company. Cliometrica 8, 27–48 (2014). https://doi.org/10.1007/s11698-013-0093-3
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DOI: https://doi.org/10.1007/s11698-013-0093-3