Payroll in the American Whaling Industry

Whaling was a hugely important industry in America throughout the 19th century — at its peak in 1880 it contributed $10 million to the United States GDP, making it the fifth largest sector of the economy. Whales were sought after primarily for their blubber, which was used to fuel oil lamps. The first petroleum oil well would not be drilled in America until 1859, and up to that point whale oil was one of the main illuminants used to light American homes.

Spurred on by strong demand for whale products, the whaling industry grew 1,400% between 1816 and 1850. However, it wasn't just consumer demand that led to the hyper-growth of whaling in America. A unique employee compensation structure also encouraged an entrepreneurial rush to whaling. According to Harvard economist Elmo P. Hohman, "The method of wage payment in the whaling industry was a singular one. The whaleman was not paid by the day, week, or month, nor was he allowed a certain sum for every barrel of oil or for every pound of bone captured. Instead, his earnings consisted of a specified fractional share, known as a lay, of the total net proceeds of a voyage."

Similar to a modern technology startup, various members of a whaling crew, depending on their relative importance to the overall success of the voyage, received different portions of the proceeds of the voyage. The captain could have had as much as 1/8 or 1/10, referred to as a "short lay," while the less experienced crew had to accept "long lays" between 1/160 and 1/250. Whaling voyages could last as long as 40 months, during which the crew members earned no wages and spent all their time aboard the ship. Deductions were assessed to the future earnings of crew members when they made use of certain supplies during the trip, like medicine and alcohol, or as penalty for rules violations. As a result, a large amount of bookkeeping was required to keep track of an employee's wage balance. It was not unusual for a seaman to find himself in debt to his employer at the end of the voyage!

But was it worth the risk? The average wage for a field laborer in 1850s America was about $10 per month, according to the US Census. In contrast, working aboard a whaling ship meant free room and board, plus a shot at marvelous riches if the voyage was lucky. For example, "At the close of the fourth whaling voyage of the ship Benjamin Tucker, of New Bedford, in 1851.... the gross value of this cargo was found to be $47,682.73. After subtracting from this a series of charges which amounted to $2,362.73, the net proceeds were fixed at $45,320.00.” In this example, a green hand with a lay of 1/200 was then entitled to $226.60 as his gross earnings for the entire voyage while a captain with a lay of 1/10 was credited with $4,532.00.

The incentives built into this method of compensation are nicely summed up by Ishmael, the narrator in Herman Melville's Moby Dick:

I was already aware that in the whaling business they paid no wages; but all hands, including the captain, received certain shares of the profits called lays, and that these lays were proportioned to the degree of importance pertaining to the respective duties of the ship’s company. I was also aware that being a green hand at whaling, my own lay would not be very large; but considering that I was used to the sea, could steer a ship, splice a rope, and all that, I made no doubt that from all I had heard I should be offered at least the 275th lay—that is, the 275th part of the clear net proceeds of the voyage, whatever that might eventually amount to. And though the 275th lay was what they call a rather long lay, yet it was better than nothing; and if we had a lucky voyage, might pretty nearly pay for the clothing I would wear out on it, not to speak of my three years’ beef and board, for which I would not have to pay one stiver.

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Sources

• Wages, Risk, and Profits in the Whaling Industry - The Quarterly Journal of Economics
• How Profit Sharing Sent Captain Ahab in Search of Moby Dick - Forbes, Tax Notes Contributor Group
• The Spectacular Rise and Fall of U.S. Whaling: An Innovation Story - The Atlantic
• Statistical View of the United States - US Census
• Moby Dick - Herman Melville

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