It seems intuitive that a free market would lead to a “race to the bottom.” In a global marketplace, profit-chasing employers will cut costs by paying workers less and less, and shipping jobs to China.
It’s a reason that progressives say government must step in.
So America now has thousands of rules that outlaw wages below $7.25 an hour, restrict unpaid internships and compel people to pay union dues. These rules appear to help workers. But they don’t.
“Collective bargaining” sounds good. Collective bargaining “rights” even better. Employers are more sophisticated about job negotiations than individual employees, so why shouldn’t workers be able to join together to bargain?
They should be. But in 27 states, labor laws force workers to join unions. When CBS offered me a job, I had to join AFTRA, the American Federation of Television and Radio Artists. I didn’t want to. I don’t consider myself an artist. I didn’t want to pay dues to a union that didn’t appear to do much. But I had no choice.
Laws that force workers to join unions treat millions of diverse people, most of whom want very different things, as undifferentiated collectives. That means that good workers get punished.
When I was at ABC and CBS, union culture slowed us down. Sometimes a camera crew took five minutes just to get out of the car.
But without a minimum wage or union protection, wouldn’t employers abuse workers? In a real free market, no, they can’t. Because workers have choices. Employers have an incentive to maintain a good relationship with employees – one that keeps them reasonably loyal – because workers can quit and go work for a rival.
If globalism leads to a “race to the bottom,” why do 95 percent of American workers make more than minimum wage? It’s not because companies are generous, but because competition forces them to offer higher wages to attract good workers. Companies may move jobs overseas to escape high U.S. wages (or U.S. taxes and regulations), but they clearly prefer to keep jobs here, close to their headquarters, suppliers and customers.
Unions once helped advance working conditions, but now union rules hurt workers because they stifle growth by making companies less flexible. When I arrived at CBS, I was stunned to discover that I couldn’t even watch a video in a tape player without risking a grievance being filed by a union editor, saying I’d encroached on his job. Work ground to a halt while we waited for a union specialist to press the “on” button. ABC and CBS, being private businesses that had to compete, eventually got rid of those rules. But it took years.
Unions eventually hurt union workers because unionized companies atrophy. Non-union Toyota grew, while GM shrank. JetBlue Airlines blossomed, while unionized TWA and Pan Am went out of business. Unions “protect” workers all the way to the unemployment line.
When I criticize compulsory unions and regulations, it’s not because I want rich employers to get fat off the labor of workers. It’s because I’ve learned that markets are fluid – and the best way for more workers to find good jobs is to leave everyone free to make any contract they wish.
Outlawing the low-wage job that taught a teenager skills or the internship that gave a kid a foot in the door doesn’t insulate people from hardships of the market. It insulates them from knowledge about how to function in an ever-changing economy.
That’s not compassion. That’s a denial of reality.
Advocates of “kind” central planning overlook the gradual, piecemeal improvement that markets make. Focused on government’s promise of once-and-for-all solutions (promises that rarely lead to actual solutions), people miss how free markets gradually help humanity solve problems.
Economic historian Robert Higgs joked that it will always be easier to rally politically inclined people behind unrealistic, revolutionary causes than to rally them around subtle economic progress, because no crowd marches behind a banner proclaiming, “Toward a Marginally Improved Society!”
The best way to help workers is to get the government to butt out and let competitive markets work.