A third adverse side-effect was that workers did not always benefit, fully or immediately, from technologically-induced gains in companies’ productivity and profitability. In the early stages of each industrial revolution, wages tended not to rise in line with productivity, causing labour’s share of the national income pie to fall. 29  This, too, tended to add to popular discontent and damage social cohesion. Labour’s  income share has also fallen in a number of advanced economies over the past few decades. 30  A final side-effect is that periods of technological transition were often lengthy as well as painful. In the first Industrial Revolution, many displaced workers had still to find alternative work by the middle of the th  19 century, with income inequality running high and labour’s share falling. This period is known by historians as “Engel’s pause”. 31  Subsequent industrial revolutions have seen similar, if less long-lived,  pauses. If economic hardship is widespread and social cohesion damaged, a societal response is needed. One such response is the creation of new pieces of social infrastructure – in other words, institution building. Each industrial revolution saw a surge in such institution-building, to cushion the adverse side-effects of technological change on jobs and pay. In this way, the recessionary hit to workers and the economy could be shortened or dampened. Broadly speaking, two such sets of institution emerged. One set equipped workers with the new skills they needed to thrive in a new jobs environment.
Sarah Dahlgren: More resilient, better managed, less complex – strengthening FMUs and linkages in the system Remarks by Ms Sarah Dahlgren, Executive Vice President of the Financial Institution Supervision Group of the Federal Reserve Bank of New York, at the Securities Industry and Financial Markets Association Conference, Boca Raton, Florida, 29 April 2014. *  *  *  Good morning and thank you for inviting me to your Annual Operations Conference. This event brings together an important cross-section of market participants – and looking at the attendance, I think there is good representation of nearly every important part of the financial system in the audience. Today, I am going to talk about the progress that the industry has made to address weaknesses identified through the financial crisis and to build resilience to future shocks. I will also offer some observations on areas of remaining challenges, particularly as we focus on the interconnections between and among various market participants. As always, my remarks today reflect my own views and not necessarily those of the Federal Reserve System. It’s hard to believe that it’s been over five years since the onset of the worst part of the financial crisis – and I’m not sure whether it feels longer or shorter than that! But one thing I’m certain of is that a lot has changed in those five years, including fundamental changes in rules and regulations, as well as substantive changes in how firms and the system are structured and operate.