Why Not Deregulate Labor? J. Davenport

John A. Davenport Why Not Deregulate Labor? DESPITE the tendency of economists to create more problems than they solve, there seems to be a growing consensus that the American econ omy will gain as we lift strangling governmental regulations from in dustry as in the case of oil and transportation. But just below the surface, students of the business scene are beginning to ask a more far-reaching question. If deregula tion is good for business, why should it not be extended to the biggest and most important market in the coun try, namely the labor market which today is cluttered up by minimum wage laws, over-elaborate safety and health rules, and the laws affecting so-called collective bargaining? Says Manuel Johnson, Assistant SecreA former editor of Barron's and Fortune, Mr. Daven port is author of The U.S. Economy and a frequent lecturer on political economy. tary of the Treasury, "Maybe here is an idea whose time has come."

Mr. Johnson, to be sure, is not an entirely disinterested observer. Two years ago while still teaching at George Mason University he joined hands with two academic col leagues, James T. Bennett and Dan Heldman, to publish a small book entitled Deregulating Labor Rela tions (Fisher Institute, $12.95).* The book has received passing attention from some learned journals but so far only a yawn from the public press. Which is too bad because this little volume puts the labor problem and the labor cost problem into a new perspective-the perspective of over regulation. In making good this thesis the au thors assume that despite much loose *Fisher Institute, 6350 LBJ Freeway, Suite 183E, Dallas 75240. 601 602 THE FREEMAN October talk to the contrary, a man's work and skill is the most precious com modity he possesses and should sell in the market like any other com modity. Their second thesis is that employers questing for profit are simply middlemen between con sumers on the one hand and workers on the other, and that freedom of contract is essential to human lib erty. Their third thesis is that over regulation of labor markets is be coming an extraordinarily expen sive operation not only in terms of sacrifice of principle but in terms of unemployment and of loss of produc tivity and national output. Irideed the authors calculate that total deregu lation of the labor market might produce benefits to our society amounting to a stunning one hun dred and seventy billion dollars per year.

This is an amazing figure but as the authors themselves indicate, it must be handled with great care, for it includes many disparate ele ments. By far the largest cost of reg ulation, amounting to two-thirds of the total, is attributed to OSHA-the Occupational Safety and Health Administration-set up in 1973 with the best of intentions but by now transmuted into what Murray Wei denbaum has dubbed a "growth in dustry," involving a huge bureau cracy and concerning itself with such minute matters as the grain and slant of ladders in our mines and factories. Here the authors argue that much of what OSHA attempts to do might better be accomplished by giving free play to market forces. Hazardous occupations will always command higher than average wage rates. Faced by such costs employers will, in the long run, be led by self interest to put in safety equipment. I am frankly somewhat dubious of pushing this particular argument to an extreme since, in the long run, as Keynes cynically remarked, we shall all be dead. From the Industrial Revolution forward, governments have in fact tried to lay down gen eral rules for enterprise. The real case against OSHA is that its rules are not general but specific and have produced a veritable mare's-nest of regulations that have not on the record diminished industrial acci dents and in fact bear hardest on in termediate firms seeking to enter the competitive race. The way out may not lie in the total decapitation of OSHA but in step-by-step reduction of its manifold and often preposter ous activities.

Outrageous Unemployment While OSHA is by far the most expensive of our experiments in reg ulation, it is by no means the only one making for unemployment and lost output. Hours of work and min imum wage laws are a case in point. Here the heavy hand of government not only bears down on employers 1983 WHY NOT DEREGULATE LABOR? 603 but actually denies job opportunities to men and women able and willing to work outside the government standards. The evidence is now overwhelming that minimum wages in particular bear hardest on those which government in its wisdom is trying to help-the poor, the disen franchised, and minority groups in general. As Walter Williams and others have shown, the minimum wage today set at $3.35 an hour ac counts in no small part for outra geously high unemployment of nearly 50 per cent among black youth. Such laws should be allowed to die on the vine as they become irrelevant due to creeping inflation.

Better still, they should be elimi nated entirely as an affront to the principles of a free and humane economy. Unfortunately, as the authors make plain, such principles are ne gated not just by substantive regu lations but by the fact that. govern ment has also sought to lay down "procedural" rules for employer-em ployee relations. Until the Depres sion Thirties trade unions in partic ular had to earn their way in organizing industry. The passage of the Norris-LaGuardia Act in 1932 and the subsequent National Labor Relations Act changed matters. Act ing under the Commerce Clause of the Constitution, Congress granted to unions extraordinary and unique privileges. Under the new rules: 1.) Unions gain exclusive bar gaining rights in a plant whenever they can command a bare majority of workers present and voting at a union election. 2.) The employer is bound to bar gain with this unit whether or not he thinks it is to his interest or to the interest of his employees.

3.) Except in Right to Work states union shop contracts are tolerated under which employees must at least pay union dues as the price of a job. 4.) All labor disputes are initially thrown into an administrative agency, the NLRB, which in effect makes labor law as it goes along and is by its very nature politically mo tivated. Freedomof Contract In criticizing this form of legisla tion and in seeking its repeal, the authors make clear that they are not against unions, so long as they are voluntary associations, nor against collective bargaining in so far as it proves .. a useful tool in determining pay and working conditions. What they consider unwarranted and un justifiable is the government's man dating a particular form of such bar gaining wherein the union becomes a kind of independent "third party" in labor negotiations, more con cerned with its own aggrandizement than with the interests of the work ers it purports to represent.

Thus, in so far as unions can push 604 THE FREEMAN wage rates above the level that would be set by the free market they may temporarily benefit a particular group of workers but at the cost, when times are bad, of widespread unemployment and displacement, as in the case of automobiles and steel. More seriously, present law pre vents workers from direct access to management and leaves dissidents in a kind of no man's land. Collec tive bargaining as currently en forced is tantamount to the collec tivization of labor. What the authors ofthis book plead for is a much greater extension of freedom of contract where some workers would no doubt choose to join unions but others would prefer to deal with their bosses directly. It will be argued that this would produce chaos in labor relations. But just here it is well to remember that unions today constitute somewhat less than 20 per cent of the labor force, and a declining share at that. In the great majority of cases employers and em ployees manage to work out their differences without the help of gov ernment-sponsored unions.

The authors are also admirably clear on the point that workers should be allowed to withdraw their services when they find it to their interest to do so. But such voluntary withdrawal which amounts to res ignation differs from the conditions that exist today when strikers are almost always sure of retaining their jobs, meanwhile drawing unemploy ment insurance and welfare pay ments at public expense. Moreover the aim of the present strike-a mil itary term-is not just to withdraw labor but to close down the employ er's plant and, by violence or threat of violence on the picket line or else where, to prevent others willing and able to work from working. Men have no right to do this and every state in the union has laws against such ac tions. The tragedy today is that these laws are rarely enforced. The over regulation of labor in so many par ticulars has led to an all· but total disregard for the common law.

Back in the seventeenth century Sir Henry Maine argued that the progress of civilization might be measured as a society passes from status to contract. With this expo nential jump the West threw off the last vestiges of feudalism and serf dom and entered into an era of Lib erty under Law. In the past fifty years governments have been rush ing pell-mell to reverse such progress. Deregulating Labor Relations is a sustained plea for turning the clock forward again. ® Clarence B. Carson Judicial Monopoly Over the Constitution: Jefferson's View Do the Federal courts have a mo nopoly of the interpretation of the Constitution? Further, are the judges, in the words of Thomas Jef ferson, "the ultimate arbiters of all constitutional questions ... "?1 There is little reason to doubt that the pre vailing view in the country would give a resounding affirmative an swer to the first question. There are dissenters, of course, but so far as they are numerous and widely influ ential, their dissents are to particu lar decisions or opinions of the courts, not to the propriety of the courts making some decision.