Indentured Migration in America's Great Basin: Occupational Targeting and Adverse Selection

From colonial times to the present, America's population growth-including the migration of skilled foreign workers looking for opportunities in the New World-has significantly influenced its economic growth and development. The majority of immigrants used savings to relocate. Others, however, did not have sufficient wealth to migrate on their own, particularly young workers. In the face of imperfect credit markets, seventeenth- , eighteenth- , and nineteenth-century institutions facilitated migration by advancing credit to migrants in return for limited claims on their labor after their arrival in America. Notable examples include European indentured servitude and Chinese contractual labor. Indentured servants contracted to work for colonial planters in return for an advance of credit to cover the high costs of the trans-Atlantic voyage. Similarly, Chinese Six companies advanced credit to Chinese workers in return for their labor along America's Pacific frontier.¹

A similar arrangement evolved during the nineteenth century for European Mormon converts migrating from Liverpool, England, to America's Great Basin. Like European servants and Chinese workers, these British migrants fre uently lacked the resources to make the journey without aid. Hence, the Mormons established the Perpetual Emigrating Fund (PEF) to facilitate their migration. Like indentured servants and Chinese workers, the PEF migrants were expected to repay transportation expenses after their arrival in America. Unlike Chesapeake planters and the Chinese Six companies, the PEF did not profit from foreign migration; it had other objectives.

As a financial intermediary, the PEF encountered asymmetric information between itself and those that it assisted. It faced adverse selection, in that it had no way to determine the probability that individual migrants would repay their debts; and moral hazard, in that it had no way to determine how many migrants would honor their commitment once they arrived in the Great Basin. To reduce its risk, the PEF implemented a series of unique selection criteria to deal with asymmetric information.

This article supplements the historical literature on the PEF-mainly the works of Larson and Arrington. It also examines the migrants who used the PEF and how the institution evolved to influence the Great Basin's labor-market development. Further, a comparison between the demographic profiles of PEF migrants and of European indentured servants provides a good understanding of how financial intermediaries contributed to America's economic development.²

The History of the PEF

America's Great Basin extends from the Sierra-Nevadas on the west to the Rocky Mountains on the east. In the nineteenth century, most west ward migrants were discouraged from settling in this region because of its parched and barren soil; the Great Basin's internal waterways drain onto desert flats instead of running to the sea. However, the region's inhospitable features and remote location were precisely the features that attracted members of the Church of Jesus Christ of Latter-day Saints (Mormons) to it, since they wanted to minimize outside interference with their peculiar life style.

Many of the early migrants to the Great Basin were from Europe. Pope indicates that foreign migration increased continuously between 1850 and 1870. In 1850, 27 percent of Utah's population was foreign born. By 1870, the share had grown to 65 percent, the majority from Britain. The PEF's emphasis on relocating European immigrants contributed heavily to the area's population growth.³

The decision about whether to issue credit belonged to an operative, known as the Liverpool agent, who screened migrants for the attributes and characteristics that Great Basin community leaders preferred. Repayment from previous PEF participants would allow future migrants the same opportunity. The PEF's objectives are clearly stated in its articles of incorporation:

Whereas, in the fall of 1849, the Church of Jesus Christ of Latter-day Saints did, by voluntary donation, create a fund for the laudable and benevolent purpose of facilitating the emigration of the poor to this state, and whereas labor, industry, and economy is wealth and all kinds of mechanics and laborers are requested for the building up and extending the benefits of civilized society , subduing the land, and otherwise...