Some economists worry that, while labor markets are not truly free in the United States, they are about to become even less free. Goodman (2018) of Forbes talks about the threats to the current market including robots, the gig economy and the way employee benefits are acquired nowadays. Goodman (2018) points out that because robots do not have to be paid, and are essentially slave labor, they are increasingly more popular with business investors who see more and more dollar signs with their greedy little eyes. The gig economy is also a threat to human workers, according to Goodman (2018). By the gig economy, Goodman (2018) means people working as freelance or contract workers. He explains these matters because “When independent contractors compete against employees, the former are competing in a what is largely a free market, while the latter are working in a highly regulated market. Unlike employees, independent contractors are not hindered by minimum wage laws, wage and hour regulations or labor law in general” (Goodman, 2018). That means some independent contractors and freelancers will accept less than the going rate just to earn some money while employees are paid a standard wage that continues to creep downward.
Goodman (2018) also points out that while employers are regulated, the benefits they used to offer are no longer regulated. Some employers used to offer health insurance, but now that they no longer are required to, they do not (Goodman, 2018). In fact, benefit packages have gotten more and more slim. If they do not offer health insurance, employees must go without or purchase their own after taxes. Employers can offer it at a reduced price before taxes, but do not because it is costly for them in minor ways such as having to hire someone to implement the benefit programs. This costs employers something, maybe not too much, but enough that they do not feel their employees are worth the expenditures especially when they can purchase robots or hire independent contractors.
The local labor market in my city is pretty much like the local labor market in most American cities: it is no longer free. Whitehouse (2018) of Bloomberg says, “For much of the past century, American companies and their workers prospered together. As productivity increased, employees received a big piece of the gains. More recently, however, that relationship has weakened. The benefits of tax cuts and rising sales are going primarily to shareholders in the form of profits. As a result, the share of national income accruing to labor is hovering around record lows” (Whitehouse, 2018). This is the same issue that Goodman (2018) points out. Investors want profits. They do not care how them come even if they are at the expense of the employees who make those profits for them. That is what has driven technology like robots, the gig market and the corporate takeover of the American legislative process.
Some believe that the free market as Adam Smith defined it should reign. They believe if left to itself, the market will right all wrongs; however, this did not work in another example of a messed-up labor market, slavery. It took a civil war to right that wrong, so those who staunchly adhere to capitalism need to rethink their position before there is another civil war in which the poor rise up against the rich and take over. Some economists agree with this position. The Committee for Economic Development (CED) (2017) says, “A worthy government role does not mean we should hand over full control of markets to government. The free market may still be superior to government in getting most of the prices and flows of resources right” (CED, 2017). What the CED (2017) suggests is that the economy should adhere to broader economic principles rather than regulating narrow rules. If the regulations are based upon principles, then they will adapt as the economy changes (CED, 2017). In other words, there should be regulation that fosters some parts of the economy such as the labor market, but the regulations should not be so widespread that they inhibit the workings of a free market.
CED. (2017, September 27). Regulation and the Economy. Retrieved from Committee for Economic Development: https://www.ced.org/reports/regulation-and-the-economy
Goodman, J. (2018, June 20). Free the Labor Market. Retrieved from Forbes: https://www.forbes.com/sites/johngoodman/2018/06/20/free-the-labor-market/#3992fd162228
Whitehouse, M. (2018, October 21). U.S. Labor Markets Aren’t Truly Free. Retrieved from Bloomberg: https://www.bloomberg.com/opinion/articles/2018-10-21/free-markets-could-make-workers-better-off
After conducting research on free labor markets world-wide, I discovered that the United States is ranked first in labor market freedom, with Canada, Korea (republic), Japan, the United Kingdom, Switzerland, Australia, and Denmark following behind. At the bottom of this ranking includes France, Spain, and Italy (Monkham, 2016). The constructs evaluated to come to this ranking include government-mandated vacation days, union coverage, long-term employment, and labor law. In the past, employees of companies that became more productive and prospered received a piece of the gains; however, recently those gains have been more commonly given to shareholders in the form of profits. A common argument regarding free labor markets is that employers will be able to pay employees as little as they want, with unions having no legitimate stance for change.
Evidence suggest that employers currently do exercise their power to hold down wages, sometimes even resulting in “race to the bottom” practices. While there is great concerns over the NLRA, and those concerns certainly hold some validity due to observations in the current labor market (Sprague, 2016). A completely open labor market with no form of regulation would result in chaos in the form of discrimination, low wages, and benefits, not to mention employee satisfaction. Employees would have to work at ridiculously low rates without any other choice. Rather than deregulating or loosening the NLRA, perhaps the reasonable and effective method would be to transform it. Work councils could be one answer to this growing issue. With work councils, “Employees would elect works council’s representatives from existing employees; alternatively, workers could be allowed to vote for a variety of representatives and the number of seats on the works council allocated for each type of agent would be proportional to the number of votes received” (Budd, 2018, p. 485). This method would also influence employee’s sense of legitimacy and justice, resulting in increased cooperation and productivity. Romans 13:2 (ESV) says, “Therefore whoever resists the authorities resists what God has appointed, and those who resist will incur judgment. For rulers are not a terror to good conduct, but to bad.”
Budd, J. W. (2018). Labor relations: Striking a balance (5th ed.). New York, NY: McGraw-Hill Irwin.
Monkham, C. (2016). The fate of workers in a free-market economy: The OHADA perspective. Labor Law Journal, 67(2), 415-423.
Sprague, R. (2016). Regulating the market. American Business Law Journal, 53(2), 199-202.
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