Using a large, individual-level wage data set, we examine the impact of a major technological
innovation—the development of powerful and economical steam engines—on skill demand and
the wage structure among the merchant marine during the turn of the century, 1892-1912. The
new technology created demand for highly skilled workers, the engineers, in charge of
maintaining the engines. On the other hand, technological innovation may have been deskilling
for production work since experienced able-bodied seamen were replaced by laborers in the
engine room. We find a substantial wage premium on steam vessels, even controlling for rank
and occupation. The steam premium reflected a compensating differential in some occupations
but it may have also reflected the sorting of better workers to steam. We also document the wage
structure over a longer time period, 1865-1905, using wage observations in sailing vessels.
Similar to previous studies which have examined other industries, we find that the skill premium
(measured as the ratio of wages at the 90th and the 10th percentiles) did not change dramatically
over this period. We do find, however, that wages fell in occupations, such as sail makers and
able-bodied seamen, which utilized skills that were not readily portable across technologies.