Government's Assault on Freedom to Work; T. DiLorenzo

labor servicesin return for remuneration. Sincefree trade in the labor market is mutually advantageous,it benefitsboth parties. Moreover, labor market freedom entails many other free doms,such as freedomof contract,of choice,and of association.To maximizetheir own well-being, workers and employersmust be free to contract with whomever they want, to associate with whomevertheywant,and to have as widea choice oflabormarketoptionsas possible,so longas they don't interfere with the equal rights of others. Thus, an unregulated labor market is most con ducive to individual workers' (and employers') pursuit of happinessand economicwell-beingas they subjectivelyvalueit. Government can play two different roles re gardingthe labor market. One role is to serveas a "referee" by enforcingvoluntary contracts, pro tecting private property rights, and generally maintainingthe rule of law. Government,in other words,can enforce the rules of the game without directlydeterminingthe outcome.

The secondrole of governmentis to.make rules that determinethe outcomeby passinglegislation Dr. DiLorenzo holds the Probasco Chair of Free Enter prise at the University of Tennessee at Chattanooga. and issuingregulationsthat affectwages,working conditions, and other aspects of labor markets. This second role is the predominant objectiveof governmental labor policy in democratic coun tries,and it conflictswiththe objectiveofeconom ic freedom. Rather than protecting private con tracts and private property, government all too often attenuates the rights of both individual workersand employers. The reason governmentsdo a poor job of pro tectingtheserightsis the basicasymmetryin polit ical decision-making in democratic countries. Generallyspeaking,governmentspass legislation to benefit relatively small, well-organized, and well-financedinterestgroups.The costsof the leg islation are usually hidden and widely dispersed amongthe generalpublic.To promisevoterswell definedand exaggeratedbenefits,and to hide the costs,is the route to a successfulpoliticalcareer.

Thus, labor legislation is typically (but not always)intended to improve the economicwell beingof one groupby diminishinganother's.Such laws infringeon the economiclibertiesof individ uals and groupsthat are less politicallyeffective.2 Mostlabor l~slation, in other words,amountsto protectionism-it tries to protect the jobs and incomesof one group of employeesby restricting the opportunities of others. Like protectionist trade policies, such laws tend to impoverish an entirenationwhileprovidingbenefitsto a relative ly small,politicallyactiveminority. The types of legislation (and their economic effects) to be discussedare: 1) union legislation, 2) domesticlabor legislation,and 3) immigration 336 THE FREEMAN • SEPTEMBER 1991 legislation.Giventhat there are literallythousands of labor laws and regulations,the followinganaly sis is at best a preliminaryassessmentof economic freedomin the labormarket.Onlythe mostsevere labor market interventionsare considered.

Althoughpreliminary,suchan analysisisimpor tant becauselabor marketfreedomis arguablythe mostimportant economicfreedomof all. Without the freedomto earn a living,citizensare bound to becomeever more subservientto the state. I. UnionLegislation Much labor legislationdeals with the relation ships between unions and employers. From the perspective of economic freedom-especially freedom of association-there is nothingparticu larlyobjectionableabout "combinationsof labor" any more than there is about any other combina tionofindividualsforwhateverpurpose,solongas the group does not interfere with the equal rights of others. A government that respects economic freedomwillnot restrict therightsofindividualsto associatefreelywithoneanother,norwillit restrict the rightsofindividualswhochoosenotto beasso ciatedwith any suchgroups. Labor law in democratic countries contains muchrhetoricabout protectingfreedomof associ ation,but in realityit doesa poorjobofit.Govern mentsinterfereor meddlewithprivatecontractual relationships between workers (or their unions) and employerson a massivescale.Mostunionleg islation attempts to replace private, voluntary labor contractsand agreementswith governmen tal edicts. In essence,it socializeslabor relations.

Furthermore, much legislation confers special privilegeson labor unionsoften to the detriment of individualworkersand employers. Compulsory Unionism. One example of such legislationis lawsthat encourageor evenmandate unionization. In the United States, for example, labor legislationdiscussesthe importanceof free dom of association,but then it talks of such free dom in terms of freedoms"to form, join, or assist labor organizations"3for the purposeof collective bargaining.Many of the employee "rights" pro tected by U.S. labor law are ones that can be advancedonlythrough unionization. Thus, an important measure of labor market freedomis the degree to whichlabor law protects individualworkersrather than unions as organi zations.Since the interests of individualworkers are quite often in conflict with the interests of unionofficials,a legalframeworkthat encourages or mandates unionization diminishesindividual economicfreedom.Laws that mandate collective bargaining,for example,are a restrictionof work ers' (and employers') freedom. A worker may prefer to bargain individually,and an employer may prefer to ignorea union.

The benefits of individual,rather than collec tive, bargainingare clear. Research in labor eco nomicshas shownthat collectivebargainingtends to reducethe dispersionofwages.Morespecifical ly, more productiveworkers are usuallypaid less than they could have earned had they bargained individually, whereas less productive workers often earn more, as union wages are set at some thingcloseto the medianwagewithina bargaining unit.Thus,ifcollectivebargainingimposesan out come on all employees,it is bound to make some of them-usually the most productive ones worseoff. Despite the fact that some workers are made worse off, it is illegalfor workers in a unionized industry in the United States and many other countriesto bargainindividually.Suchbargaining is deemed an "unfairlabor practice"and is a pun ishableoffense. Yellow-DogContracts.Withregard to employ ers' rights, it is illegal in many countries for an employerto refuseto bargainwitha union.In the UnitedStatesit is aper se violationofthe National Labor Relations Act to refuse to bargain with a union, but it is not illegalfor a union to refuse to bargainwithan employer.Socalled"yellow-dog"

contracts.-agreements between employers and employeesnot to havea union-have been illegal in the United Statesand manyother countriesfor decades. Laborhistorianshavefoundthat one ofthe rea sonsforsuchcontracts(which,it is worthstressing, were voluntary) was the desire by workers to avoidthe work disruptionsand loss of wagesdur ing strikesthat characterizeunionizedindustries.4 Moreover,sincesuch agreementswere voluntary, they musthave benefitedemployersand employ ees, just as all voluntaryfree market agreements do. Either party was free to end the employment relationship"at will"if dissatisfied.

GOVERNMENT'S ASSAULT ON FREEDOM TO WORK 337 The only waythat such agreements could persist in a free marketplace is if they were "efficient" in the sense that they enhanced the welfare of both parties-the anti-union employees and employers who must have believed that unionization would not be in their best interest. Thus, legislation that outlaws such contracts must necessarily make some workers and employers worse off. Exclusivity.Another aspect of labor legislation that grants special privileges to unions at the expense of economic freedom for workers is so called exclusiverepresentation. Exclusivitygivesa union, once it has been certified, the legal right to be the exclusivebargaining agent for all workers in a bargaining unit, whether they wish to be repre sented or not. Any attempt by employers or work ers to bargain individually-even over the most mundane things-is illegal. Exclusivitygivesunions a legal monopoly in the employee representation business. It not only is illegal for workers to bargain individually with their employers; exclusive representation legisla tion also prohibits bargaining through another, competing union, or any other agent.5 Protected from competition by exclusive repre sentation laws, unions act like all other monopo lists: they restrict their "output" and raise their prices. Because unions face no competition in the employee representation business, they are less constrained than they otherwise would be from charging excessive dues and also are likely to pro vide fewer services to their members.

Evidence of the latter type of behavior abounds. In the United States, unions are major participants in all sorts of political causes that are unrelated to labor relations or to the economic welfare of their members. Unions have been active in the pro abortion movement; they have spent considerable resources in support of left-wing authoritarian governments in Central America, Africa, and else where; they are part of the anti-nuclear power movement; they have lobbied for sanctions against the South African government; and they actively lobby for socialistic economic policies (Le., price controls and nationalization of some industries) that, by hampering economic growth, are not in the best interests of the workers they represent. 6 Exclusivity allows unions to shirk some of their basic responsibilities, such as contract administra tion, bargaining, and grievance handling, in order to pursue political causes that are irrelevant or even harmful to the economic welfare of workers.

An indication of how far afield American unions have strayed from their basic responsibilities is a 1989Supreme Court decision that it is unconstitu tional to compel workers to pay union dues to finance activities that are not directly related to bargaining, contract administration, and grievance procedures. In the case of Beck v. Communication Workers of America, the Court found that the union spent less than 20 percent of its dues rev enues on appropriate expenses. The other 80 per cent was spent on politics. Other cases have found that as little as 10 percent of dues revenues are spent on legitimate purposes. The Supreme Court ruling willlikelyweaken the monopolistic grip that unions have over their members, but exclusivity continues to entrench much of their monopoly power. Because of the monopoly powers granted to them by exclusivitylegislation, unions may also be unresponsive to their members' demands for changes in collective bargaining strategies. There have been many cases in the United States, for example, where workers were convinced that they would have to make concessions if they wanted to remain employed. Union officials,however, often have refused to heed the preferences of their members, sometimes causing the members to lose their jobs. Unions would be more likely to cater to their members' preferences if there were competi tors in the employee representation business, but such freedom of choice is precluded by law.

Agency Shop. A further infringement on the economic liberties of workers is the socalled agen cy shop, whereby workers who do not belong to a union must nevertheless pay union dues. The rationale for the agency shop is derived from exclusivity. Since unions are required to bargain for all workers (union and nonunion) in a bargain ing unit, it is supposedly necessary to compel all workers to pay for bargaining services. In the terminology of economics, collective bar gaining is said to provide workers with "public goods," and compulsory union dues supposedly are necessary to prohibit free riding. But since gov ernment created the situation where all workers are forced to submit to a single monopoly bargain ing agent, a better phrase than "free riders" would be "forced riders." Workers are forced to accept 338 THE FREEMAN • SEPTEMBER 1991 the results of union bargaining and, where an agency shop exists, also are forced to support the union financially. To workers who are worse off because of this arrangement, exclusivity creates a "public bad," not a public good: workers are forced to pay dues for the "privilege" of being made worse off. An agency shop literally consti tutes taxation without representation and is a seri ous encroachment on economic freedom.

Union Violence. The long history of union vio lence can be readily explained by economic theory. In order to push wages above competitive levels, unions must restrict the supply of labor services on the market. They strike or threaten to strike in order to do this, and strikes are often more effec tive if workers who choose not to strike can be intimidated by violence. Employers also can be subjected to violence, threats of violence, and the destruction of property unless they acquiesce to union demands. ll. DomesticLaborLegislation Governments also deprive workers of economic freedom through laws and regulations that affect wages and working conditions. Although these restrictions vary greatly,they all share the common element that they substitute governmental for individual (or market) decision-making. They all are carried out under the pretense that govern ment somehow has better knowledge of the "best"

wages, hours of work, types of jobs, and so on, than individual workers and employers have. This type of thinking is what E A. Hayek calls "the fatal con ceit" because of the dire economic consequences to which it lends intellectual support. Minimum Wage Legislation. Most democratic countries have a minimum wage law that raises wages of low-skilled workers above going market rates. Virtually any economics text explains that mandating above-market rates causes unemploy ment by pricing low-skilled workers out of jobs. There is no better example of a law that hurts those whom it purports to help or that constitutes a clearer infringement on economic liberties. As Adam Smith said in The Wealth of Nations, "The patrimony of a poor man lies in the strength and dexterity of his hands," and to deprive him of this through restrictive labor legislation "is a manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him."

The minimum wage law even harms workers who are not priced out of the market by it. If employers are forced to pay higher wages, they either willlay off some workers or cut back on oth er fringe benefits so that the total compensation package doesn't exceed each worker's marginal productivity. Thus, freedom of choice is dimin ished for workers who may prefer a different mix of wages and fringe benefits. The minimum wage law is inefficient and inequitable, but it persists for several political rea sons. First, it lends itself to demagoguery better than most government policies. It is natural for politicians to claim to be able to solve social prob lems by simply passing a law, and what nicer law than one mandating higher wages for the poor? A second reason is that unions want to price unskilled nonunion labor, which competes with more skilled, union labor, out of the market. In the name of compassion for the poor, unions lobby for legislation that makes the poor even poorer. The minimum wage is a device through which the poor are used as political pawns to the benefit of dema gogic politicians and politically active unions seek ing protectionist legislation.

Maximum-Hour Legislation. Another infringe ment on economic liberties is maximum-hour leg islation which, in general, limits the number of hours that workers can work and/or mandates that higher wages must be paid for any work hours over a specified amount. Since overtime pay provisions increase labor costs, the effect is to reduce the level of production and, consequently, the number of hours worked. Individuals who prefer to work more hours or to vary their work hours over the course of a week may be precluded from doing so. Davis-Bacon Laws. Another related measure of labor market intervention is the existence of laws, such as the Davis-Bacon Act in the United States, which mandate that government-specified wages be paid. In the case of Davis-Bacon, the govern ment-specified "prevailing wage" in an area must be paid on all Federally supported construction projects, even if the Federal support is less than 1 percent of the cost of the project. The "prevailing"

wage is almost always the union wage, and the GOVERNMENT'S ASSAULT ON FREEDOM TO WORK 339 effect of the Act is to drive lower-wage, nonunion labor from the market. Making wages artificially high restricts competition from lower-wage firms, depriving their owners, managers, and employees of economic opportunities. Restrictions on Child and Female Labor. For over a century various countries have prohibited or limited child and female labor. The rationale behind the restrictions is that they supposedly are needed to protect women and children from being exploited by employers. Even though this rationale for regulation is widely accepted by the general public, the regula tions are not likely to protect the intended benefi ciaries. It is difficult to perceive that regulations prohibiting such work would benefit those individ uals who voluntarilychose to work. If they felt they were being made worse off by their employment situation, they would simply quit.

There is evidence, moreover, that when such regulation originally was being proposed in Eng land there was fierce opposition to it by the wom en whom the regulationwas supposedto help. It is likely, therefore, that such regulation may always have been designed to protect incumbent workers from competition. OccopationalLicensing Laws. Occupational licensing laws have been shown to create barriers to entry in literally hundreds of professions in the United States and many other countries.7 The restrictions come in many forms, such as license fees, educational requirements, and regional or national examinations. Licensing has been defended on the grounds that it assures professional competence and pro tects consumers from lower-quality products and services. These arguments mayor may not have merit, and they will not be discussed in detail here. But regardless of the motivation for the laws, their effect is to make it more difficult to enter regulated professions. Consequently, many individuals are deprived of employment opportunities.

This licensing-induced reduction of employ ment opportunities likely imposes a greater bur den on lower-income individuals rather than on higher-income people since it often deprives the former group of valuable opportunities to accu mulate human capital-opportunities they may not otherwise be able to obtain. Again, there is much evidence that occupational licensing is often a politicalresponse to pressures from incumbent practitioners who want protection from competition. An anecdote willillustrate what I believe to be typical of the politics of occupation allicensure. Economist Walter Williams recently appeared on a televised debate with Congressman Charles Rangel. Williams, who is black, made the point that the licensing of hairdressers in Rangel's home state of New York discriminates against blacks. It does so, said Williams,because to become certified as a hairdresser one must pass a practical exam as well as a more academic one that includes math problems. (The relationship between the ability to coif hair and the ability to do mathematics is, to say the least, dubious.) Williams pointed out that an equivalent percentage of blacks passed the practi cal exam as whites, but the failure rate of blacks on the academic exam was several times higher than the whites. Williams blamed the discrepancy on inferior government schools that so many black New Yorkers are compelled to attend.

Congressman Rangel, who also is black, did not dispute the test results and did not deny that the system kept many of his constituents unemployed. But he nevertheless supported the licensing sys tem. His preferred "remedy" for urban unemploy ment was not to eliminate the sources of unem ployment, such as occupational licensing laws, but to increase welfare spending. This type of behavior is readily explained by ele mentary public-choice logic. On the "demand side," the unionized practitioners are well orga nized and well financed politically,and are able to use the political process to protect themselves from competition with occupational licensing reg ulations. Those who are harmed by the regulations are not well organized and, hence, are less politi cally effective. From a "supply side" perspective, politicians can win votes from the incumbents by supporting licensing, and they can also win votes from those who are denied employment opportunities because of licensing by offering them welfare pay ments or government patronage jobs.

In this instance the citizens whose liberties are abridged are made effective wards of the state either as welfare recipients or by relying on anoth er form of handout-a government job-for their livelihood. Thus, occupational licensing is yet 340 THE FREEMAN • SEPTEMBER 1991 another way in which the poor are used as mere political pawns by cynical political opportunists. Equal Pay for Equal Work Laws.These laws are intended to protect certain groups, particularly women, from wage discrimination by mandating that employers pay equal wages for the "same" work performed by·workers of different sex and race. The irony is that these laws·result in reduced employment opportunities for those who are sup posedly helped. If an employer pays females less than males, for example, it is because he subjectively values female labor less highly. He may genuinely believe that his female employees are less pro ductive and less capable, or he may simply be dis criminating against them because they·are wom en. In either case, equal pay for equal work laws will induce the employer to hire fewer female workers. If forced to pay equal wages, the employer will prefer male workers. Thus, women who are willing to work at least temporarily for lower wages in order to prove that they can do the job are denied the opportunity.

In other words, women can provide employers with economic incentives to hire them, despite dis crimination, but are not permitted to do so because of "equal pay" laws. Thus, equal pay for equal work rules, which are supposed to reduce discrimination, actually increase it. That these laws harm the groups they are sup posed to help is made clear by the fact that in some countries, such as South Africa, there is no pretense that the laws are supposed to protect people who are discriminated against. In South Africa, white racist labor unions lobbied for "equal pay" laws for black workers because they knew the laws would protect white employees from competition by relatively less skilled black workers. Since most blacks were less experi enced, forcing employers to pay them wages that exceeded their marginal productivity would price them out of jobs.8 In other countries the motiva tion behind the laws may be well-intentioned,but the effects are the same.

Equal pay for equal work laws reduce economic freedom, but "equal pay for work of comparable value" legislation would be even worse. This is a proposed system of governmental wage determi nation whereby government bureaucrats, rather than the marketplace, would set wages. I will not say anything more about this other than it's already been tried-in the Soviet Union, China, and Eastern Europe-and it doesn't work. History shows that such governmental control over wages is grossly inefficient and inequitable. Employment Quotas. Most democratic govern ments have policies that require employers to make some of their hiring and promotional deci sions solely on the basis of non-economic factors, such as race or sex. Obviously, this deniesindivid uals the freedom to seek employment or career advancement based on merit. In the United States, employment quotas origi nally were enacted with the promise that they would not be used to force employers to make decisions based solely on race. The late Senator Hubert Humphrey promised that the Civil Rights Act of 1964 "does not require an employer to achieve any kind of racial balance in his work force by giving preferential treatment to any individual or group." The phrase "affirmative action" was coined by President Kennedy in his executive order that "affirmative action" should be taken to assure that Federal contractors do not make employment decisions based on race, creed, color, or national origin.9 In practice, socalled affirmative action poli cies do exactly the opposite of what their propo nents claimed they would. They require that employment decisions be made specifically according to employees' race, creed, color, or national origin. Consequently, "non-preferred"

individuals who may be more qualified are passed over by employers who must satisfy the government's preferences for discrimination in the workplace. There is mounting evidence, moreover, that even many of the "protected" minorities are denied economic opportunities because of affirmative action policies. Economist Thomas Sowell has found that the relative economic position of "protected" minority groups in the United States actually fell after employment quotas were instituted. "In 1969, before the federal imposition of nu~erical 'goals and timetables,' Puerto Rican family income was 63 percent of the national average. By 1977, it was down to 50 percent. In 1969, Mex ican American family income was 76 percent of the national average. By 1977 it was down to 73 percent. Black family income fell from 62 perGOVERNMENT'S ASSAULT ON FREEDOM TO WORK 341 cent of the national average to 60 percent over the same span."10 Sowell also found that blacks with less educa tion and job experiencehavefallenfarther behind, while blackswith more education and experience have been advancingeven faster than their white counterparts. He offers a clear explanationof this phenomenon: Affirmative action hiring pressures make it costlyto have no minorityemployees,but con tinuing affirmativeaction pressures at the pro motion and dischargephasesalsomake it costly to have minority employees who do not work out well. The net effect is to increase the demand for highly qualified minority employ ees whiledecreasingthe demand for less quali fied minority employeesor for those without a sufficienttrack record to reassure employers.

Those who are most vocalabout the need for affirmativeaction are of course the more artic ulate minority members-the advantaged who speak in the name of the disadvantaged.Their positionon the issuemay accordwiththeir own personal experience, as well as their own self interest.11 Thus, like the minimumwage and occupational licensinglaws, employment quotas deny employ ment opportunities to those who need them the most-relatively unskilled and uneducated minoritieswho are "targeted" for help by the gov ernment. Govemment"Jobs" Programs.All democratic governmentshave long been involvedin employ ment or job trainingprograms.Despite their pop ularity, however, they reduce economic liberties and employmentopportunities. It is impossiblefor governmentto "create" jobs because of the law of opportunity cost. Govern ment may "create" somejobs withsuchprograms, but it necessarilydestroysother private-sectorjobs by diverting financial resources from the private sector (through taxes, government borrowing, or inflationary money creation) to pay for the gov ernment jobs. At best, government "jobs" pro grams alter the composition of employment, but not the aggregatelevel.

Furthermore, manygovernmentjobsare waste ful because they don't meet legitimate consumer demands. The history of government jobs programsis filledwithexamplesof "make work" jobs that seem to emphasize politicalpatronage more than employmentopportunity.12 The reason government jobs programs remain popular despite their failure to stimulate employ ment (or training,for that matter) is that the ben efits are well defined-job recipientsknow where the jobs came from and whom to thank (or vote for)-whereas the costs are hidden. Those unem ployed becauseof the crowding-outeffectof these programshave no idea of the causeof their unem ployment. This is one way-generating unemployment that governmentjobs programsdiminisheconom ic freedom. They also impair economic freedom and opportunity because the kinds of jobs and training determined by government bureaucrats are not necessarilythose that people wouldfreely choose in the private sector. This allows govern ~ent bureaucrats to exert a degree of control over whattypesofjobswillexistand whattypesofskills people will possess.

Givinggovernmentsuchpowersopensthe door for ever-expanding governmental control of the allocationof labor. In totalitarian regimessuch as the SovietUnion there is a nearlycompletedomi nation of the labor market by government. Its "jobs programs" are so extensive that "everyone works for the state. The only "real" jobs in the SovietUnion are ones held by black marketeers. In Nazi Germany, government officials were allowed to monitor and control every proposed job change, thereby directing workers into those endeavors the bureaucrats thought served "national interests" regardless of the interests of individualswho comprisedthe nation. Of course, modern democratic governments don't possessanythinglike the powers over labor markets that the Soviet Union does or Nazi Ger many did. But the differencesare only a matter of degree (albeit a large degree). Along with exten sive employment programs, all democratic coun tries keep extremely detailed personal informa tion on workers and labor markets, and they use that informationto shape governmentpolicy.

Government employment programs threaten economicfreedom in a very general sense in that consumersovereigntyis replaced by bureaucratic sovereignty.In a free market the typesof jobs cre ated are those that serve the desiresof consumers. Government jobs, on the other hand, usuallyare 342 THE FREEMAN • SEPTEMBER 1991 designed to serve the whims of political authori ties, which often are in conflict with consumers. After all,if there is a legitimate consumer demand, there is an incentive for a private entrepreneur to meet it and to hire workers to assist him in doing so. Thus, to a large extent, government jobs are created to provide goods or services that con sumers either have not expressed a preference for or, if they have expressed a preference, it was a negative one. Mandatory Government Arbitration. All the labor market interventions discussed thus far involve government's attempt to intervene in pri vate contractual relations between workers (or their unions) and employers by setting wages, establishing bargaining procedures, and so forth.

In addition, governments also intervene in the arbitrationof labor disputes. The U.S. govern ment, for example, has a "Federal Mediation and Conciliation Service" that cajoles negotiating par ties into "voluntarily" cooperating in order to end a labor dispute. The federal government has only limited power to mandate a settlement for most workers (with the exception of those covered by the Railway Labor Act), but it can apply signifi cant political pressures to achieve that end in virtually any industry. The effect of this interven tion is that disagreements between workers (or their unions) and employers often are settled according to criteria established by the Federal Mediation and Conciliation Service, not by the negotiating parties. Although there is no formal power to force such agreements on most industries, the federal govern ment's ability to "induce" an agreement should not be underestimated. American industry is so heav ily regulated, and so many businesses accept gov ernment subsidies, that government has a tremen dous amount of leverage over the private sector.

Government has a long list of "carrots and sticks" it can use to affect private bargaining outcomes. It can threaten regulation and the withdrawal of sub sidies, or it can bribe the bargaining firms and unions with promises of subsidies and other gov ernmental favors. Occupational Safety and Health Regulation. Modem democracies also heavily regulate "occu pational safety and health." This intervention gives government enormous powers over private labor relations because an argument can be made that almost any aspect of a business operation is at least tangentially related to safety and health. Governments have taken advantage of these broad powers to regulate everything from the con struction of ladders to the shape of toilet seats. Research has shown, however, that occupation al safety and health regulation is not likely to improve workplace safety, despite massive expen ditures. 13 Furthermore, the regulation has inter fered with market forces, which "address" the problem through compensating wage differentials.

That is, in a free market, employees in more dan gerous jobs will be paid higher wages, all other things equal. Employers must pay higher wages to attract workers to more dangerous jobs. This won't necessarily eliminate or even reduce the incidence of workplace accidents but, then, neither does reg ulation. Furthermore, reliance on compensating wage differentials, rather than regulation, would avoid the loss of jobs associated with the heavy costs of occupational safety and health regulation. It also would give workers and employers more freedom in determining how to improve work place safety, rather than relying on bureaucratic edicts. There is much to commend this market approach, for no one has stronger incentives to assure a safe workplace than employees them selves. Regardless of how well-intentioned the safety regulators may be, they just don't have the incentive or the detailed knowledge required.

It should be kept in mind that there are econom ic (and common-sense) incentives to reduce work place accidents, for accidents are costly to employers and especially to workers. And it should be remembered that governmental "safe ty" regulation can provide a false sense of security. Job safety depends ultimately on how careful and responsible individual workers are. If they are told by governmental safety inspectors that their work place.is "safe," they.may be less inclined to take their own precautions. The end result may be a less safe workplace. Employer PayroUTaxes. All democratic coun tries have mandatory employer payroll taxes, the most significant of which are taxes for unemploy ment insurance and old-age pensions, or social security. A detailed examination of the economic effects of such programs is beyond the scope of this GOVERNMENT'S ASSAULT ON FREEDOM TO WORK 343 essay,but several aspects of them are particularly relevant to economic freedom.

First, these programs constitute what might be called "mandated benefits," whereby govern ments compel employers to finance certain bene fits on behalf of their employees. One implication of this is that employees consequently have less freedom of choice to determine their own mix of wage and non-wage remuneration. Furthermore, even though the taxes are at least partly paid by employers, they are passed on to employees in the form of lower wages or other benefits, thereby constituting a hidden tax on workers. Because the tax is hidden, workers are less able to make well informed choices regarding their own compensa tion mix. Government-operated unemployment insur ance and socialsecurity programs often allowgov ernments to become monopolists in the provision of those services. There are many actual and potential substitutes for these governmentcon trolled programs but it is difficult, if not impossi ble, for them to compete with government. For example, individual retirement accounts (IRAs) compete with the Social Security system in the United States, but since the system drains so much income from workers through mandatory pay ments, there is much less available for private retirement plans.

It also would be possible for individual workers to contribute to an IRA-type account to be used as unemployment insurance, but governments usual ly prohibit such options. This is especiallyunfortu nate in light of the many failures of governmental unemployment insurance, which essentially pays people not to work by offering unemployed work ers "replacement income" as a percentage-some times close to 100 percentof their prior wages. By reducing the cost to workers of being unem ployed, unemployment insurance lengthens the duration of unemployment. It also increases unemployment by indirectly subsidizingindustries that experience seasonal or cyclical variations in employment. For example, without unemployment insurance a firm with an unstable employment pattern would have to pay higher wages to attract workers. The higher wage would be necessary to compensate workers for the risk of becoming unemployed. But with unemployment insurance the government compensates workers for becoming unemployed.

This in turn makes unstable employment more attractive to workers than it otherwise would be. The increased supply of labor in those industries will reduce wage rates, which in turn diminish the incentive for firms to do anything about unstable employment patterns. Thus, unemployment insur ance encourages unstable sectors of the economy to expand, resulting in higher overall unemploy ment. Both unemployment insurance and social secu rity taxes are major infringements on the economic liberties of workers and employers, because they place severe limitations on freedom of choice, freedom of exchange, freedom of contract, and freedom of association. Because government con trols a significant portion of workers' income through these programs, and because the pro grams crowd out privatesector alternatives-if the law permits alternatives at all-individuals are denied all these freedoms. Peter Ferrara describes how the Social Security system infringes upon individual economic liber ties. Government-controlled social security, he writes, ... forces individuals to enter into contracts, exchanges, and associations with the govern ment that they should have the right to refuse.

It prohibits individuals from entering into alter native contracts, exchanges, and associations with others concerning the portion of their incomes that social security consumes. It pre vents individuals from choosing courses of action other than participation in socialsecurity, although these courses of action will hurt no one. It prevents individuals from enjoying the fruits of their own labor by taking control of a major portion of each individual's income. The program prevents individuals from arranging their own affairs and controlling their own lives. It operates by the use of force and coercion against individuals rather than through volun tary consent. The social security program thus restricts individual liberty in major and signifi cant ways, violating rights that are worthy of great respect.14 The same can be said for any government mandated benefit program. Taxes on Labor Income. Perhaps the most important interference with an individual worker's 344 THE FREEMAN • SEPTEMBER 1991 economic freedom is the income tax. The income tax denies a worker the ability to keep the fruits of his or her own labor, and is truly a way in which workers are exploited-by government.

Karl Marx's labor exploitation thesis was half right. He complained that labor was unfairly exploited because it supposedly produced all val ue-an incredibly naive and simplistic assump tion-yet it received only a small part of it in the form of wages. Marx was correct about labor being exploited, but he was wrong about who the exploiters were. By blaming capitalists, he ignored the productive contributions of capital and entrepreneurs. He also ignored the fact that gov ernment is the major source of worker exploitation by expropriating income to which government itself has no legitimate claim. Ironically,Marx was a strong proponent of progressive income taxa tion' which exploits workers even more than pro portional taxation. Income taxation is,in effect, a form of slavery or forced labor. It forces individuals to pay taxes so that part of their income is given away to someone else-farmers, corporations, welfare recipients, defense contractors, unions, and thousands of oth er well-organized special interest groups-who did nothing to earn or deserve it. H. L. Mencken's dictum that an election is an advance auction in stolen property is as true as it is trite.

Of course, not all income that is taxed is neces sarily used for government-mandated income transfers. To the extent that some of it is used to finance a criminal justice system, national defense, and in generally maintaining the rule of law, it enhances rather than diminishes economic free doms. However, these functions are a relatively minor aspect of the modern welfare state. The modern state is a vast income redistribution machine that shuffles wealth around within the middle class. MandatingJob Security.Many countries have various laws and regulations that supposedly guar antee "job security" by restricting the flow of cap ital. Laws that make it more costly or prohibitive to close down a plant are examples. Such laws may be well-intentioned, but they deprive workers and business owners of economic freedom and are undeniably harmful to a nation's economy. By hampering economic growth, they ultimately impoverish the workers in whose name the laws are enacted. Job security laws, in other words, reduce job security.

Advocates of such legislation usually ignore the fact that workers and. employers often negotiate various types of "job security" provisions in their contracts. It must be realized that if, for example, a union wants a contract that includes severance pay if the plant closes down, that provision will be "paid" for by a negotiated reduction in wages or other fringe benefits. There is no free lunch; acquiring such benefits requires trade-offs. That's why laws that mandate job security provisions reduce economic freedom. They deprive workers of freedom of choice by forcing them to accept one particular benefit-a benefit they may not want if they know how much it costs them in terms of for gone wages. Socalled job security legislation also deprives employers and business owners (share holders) of economic freedom. It prohibits them from making the best use of their resources, which can only be impoverishing.

m. Immigration Freedom of migration is a basic human right that is essential if individuals are to be free from governmental oppression. The ability to change employment or to seek employment elsewhere even in another country-is a hallmark of eco nomic freedom. Thus, free immigration and emi gration is most conducive to economic freedom and opportunity. No country in the world has perfectly free immi gration. The United States is generally regarded as among the most free-there are about twice as many immigrants entering the U.S. each year as there are in all the rest of the world combined. Yet America does place restrictions on immigration. Since all countries place some limits on immi gration, one method of comparing them is by cal culating the allowable number of immigrants as a percentage of the nation's population. Taxes on Immigration.Some countries charge immigrants fees or taxes. In such cases large statu tory numbers of allowable immigrants may not be very meaningful if the charges are so high as to exclude large numbers of people. Therefore, the existence of "entrance fees" into a country is another criterion that may be used. The amount of the fee may be standardized as a percentage of GOVERNMENT'S ASSAULT ON FREEDOM TO WORK 345 average annual income in the country receiving the immigrants.

Enforcement. Many countries are concerned about illegal immigrants. From the perspective of labor market freedom, however, the more illegals the better. The fact that the United States finds that its enforcement of illegalimmigration is weak, and that its borders are "out of control," is a plus. Consequently, another measure of labor market freedom is the budget of the appropriate immigra tion enforcement agency as a percentage of the nation's total governmental budget. The higher the budget allocation, the stronger the enforcement and the lesser the degree of economic freedom. Labor Market Tests and Lists of "Undesir abies." In some countries, laws specificallyoutlaw immigration if the immigration enhances a free market in labor. In the United States, immigrants are required to prove that their employment won't displace an American worker and that their pres ence won't reduce wages. This is clearly a protec tionist law instigated by organized labor.

Some countries limit immigration according to racial or ethnic criteria. America has a long history of discriminating against Chinese and Japanese immigrants in this way, although such discrimina tion was outlawed in 1965. Amnesty. Granting amnesty to illegal immi grants who over a period of years have estab lished "roots" in a country dilutes immigration restrictions and, consequently, enhances econom ic freedom. Temporary Workers. Since a half a loaf is better than none, countries that allow temporary "guest workers" exhibit a higher degree of economic freedom, all other things equal, than those that don't. ConcludingThought Government at all levelsspends hundreds ofbil lions of dollars each year ostensibly to help the unemployed and others living in or near poverty. Despite these massive expenditures, however, the welfare state is a failure. Paying people not to work only fosters perpetual dependency.

Rather than continuing to fund a counterpro ductive welfare system, a more direct means of reducing poverty would be the deregulation of labor markets. As this essay has shown, the major forms of government intervention in labor mar kets serve only to "protect" certain groups of workers from competition by denying job oppor tunities to others. More often than not, those workers who are denied job opportunities because of government intervention are those most in need: the least skilled, least educated, and least affluent. D 1. Economic freedom requires a set of customs, moral constraints, or laws that prevent individuals or groups from committing violent or coercive acts against others. Thus, mutual consent between two burglars plotting a robbery, for example, is not an example of eco nomic freedom in the sense we are discussing. 2. See Bernard Siegan, EconomicLibertiesand the Constitution (Chicago: University of Chicago Press, 1980);Richard Epstein, Tak ings (Cambridge, Mass.: Harvard University Press, 1985);and Terry L. Anderson and Peter J. Hill, The Birthofa TransferSociety(Stan ford, Calif.: Hoover Institution Press, 1980).

3. National Labor Relations Act, Section 7 (emphasis added). Quoted in James T. Bennett, Dan C. Heldman, and Manuel H. John son, DeregulatingLabor Relations(Dallas: Fisher Institute, 1981), p.50. 4. Morgan O. Reynolds, Powerand Privilege:Labor Unions in America(New York: Universe Books, 1984),p. 98. 5. Thomas J. DiLorenzo, "Exclusive Representation in Public Employment: A Public Choice Perspective," Journal of Labor Research,Fall 1984,pp. 371-90. 6. For a detailed discussion of the political agenda of organized labor in the United States see James T. Bennett and Thomas J. DiLorenzo, DestroyingDemocracy:How Government Funds PartisanPolitics(Washington, D.C.: Cato Institute, 1985),chapter 13. 7. A thorough discussion of the economics of occupationallicens ing is found in S. David Young, The Rule of Experts:Occupational Licensingin America(Washington, D.C.: Cato Institute, 1987).See also R. D. Blair and S. Rubin, RegulatingtheProfessions(Lexington, Mass.: Lexington Books, 1980); and Timothy R. Muzoildo and Bohumir Pazderka, "Occupational Licensing and Professional Incomes in Canada," CanadianJournalof Economics,November 1980,pp. 659-67.

8. Walter E. Williams, South Africa'SWar Against Capitalism (New York: Praeger, 1989). 9. Thomas Sowell, CivilRights:Rhetoricor Reality?(New York: William Morrow & Co., 1984),p. 39. 10. Ibid.,p. 51. 11. Ibid.,p. 53. 12. Thomas J. DiLorenzo, "The Myth of Government Job Cre ation," Cato Institute PolicyAnalysis,February 1984. 13. W. Kip Viscusi, "The Impact of Occupational Safety and Health Regulation," BellJournalof Economics,Spring 1979. 14. Peter J. Ferrara, SocialSecurity:The InherentContradiction (Washington, D.C.: Cato Institute, 1980),pp. 275-76.