Big Labor and Big Government; K. Kerrigan

Inasmuch as national and international competitive market conditions have made labor unions increasingly irrelevant in the private marketplace, the only way unionists can achieve their goals is through the coer cive power ofgovernment. The union move ment's plan is to place government at the center of the American economy through regulations and mandates which it gets to design. To do this it needs complicit politi cians who believe that big government should aggressively and unapologetically micromanage American business. To that end, big labor has embarked on a militant course "to end social and worker injustice. " With renewed enthusiasm, labor is pushing the minimumwage hike, "corMs. Kerrigan is president of the Small Business Survival Foundation in Washington, D.C. porate responsibility, " and the expansion of legislative relics like the Davis-Bacon Act. A mere cutback in the growth ofgovernment spending-or even small steps to reform the regulatory overload in programs like the Occupational Safety and Health Act-are described by labor as an attempt to unleash havoc on American workers.

In a speech this spring before labor lead ers in Washington, D.C., Mr. Sweeney portrayed a world in which "greedy bosses" take advantage of all workers, especially "women and minorities and low-wage workers." According to Mr. Sweeney, smaller government translates into" a world with no environment safeguards, no public health protections for families, and no health and safety protections for workers at their jobs. " In this same world described by Mr. Sweeney, Americans will be "trapped permanently. . . in a society" controlled by big business and the rich. Of course, pro grams for the poor and elderly are wiped out in order to pay for massive tax cuts for the wealthy. Union leaders are putting a lot of capital in the idea that iforganized labor can be seen as an institution that cares about all work ers-not just its own members-that the movement will be viewed as necessary and relevant again. To accomplish this feat, the centerpiece of their crusade to attract more workers into labors' ranks is the campaign to increase the minimum wage.

561 562 THE FREEMAN • AUGUST 1996 Labor leaders have termed this endeavor their "living wage" campaign, although it is well documented that very few of those workers making minimum wage depend on it as a single source of income for raising families. It also remains very hard for work ers to start making a "living" when, as a low~skilled worker, you have been priced out of the labor market because the unions have demanded an increase in the legal wage floor-a consequence most economists agree occurs with each minimumwage increase. The rhetoric of labor leaders also would have us believe that minimum-wageearners are forever trapped at this wage scale. This is simply untrue. Census Bureau data re veals that minimum-wageearners, on aver age, will make $6.09 per hour within a year. Comparing Apples and Oranges Most disingenuous is the labor move ment's assertion that the minimumwage has dropped to a "forty-year low" -a declara tion that goes unchallenged by wage hike opponents, yet has become the key rallying cry behind labor leaders' efforts to enact the increase. Forty years ago, the minimum wage mostly applied to skilled jobs like manufacturing. Jobs in restaurants and the retail industry were exempt. Today, the wage scales of skilledjobs in manufacturing and other industries are highly competitive.

Simply put, wagehike supporters are com paring apples and oranges when measuring the wages of skilledworkers forty years ago, versus those of low-skilledworkers today. Though characterized by labor as a plot by right-wing zealots to keep corporate profits soaring at the expense of hard working Americans, minimumwage hikes draw fire from a wide spectrum of econo mists and activists. The Democratic Lead ership Council (DLC), an organization once headed by President Clinton, asserts in a recent statement that "raising the minimum wage is not the answer" to helping people out of poverty. While affirmingthat a wage hike will cost jobs for low-skilled workers, the DLC's most damning pronouncement is that the cost of the· increase "would be borne dis proportionately by lower income families." That cost would be borne by poor families in the form of higher prices amounting to what the DLC calls a "regressive transfer,"

which makes the poor "a little more worse off in order to improve the lives, at least for a time, of a group of people which is predominately non-poor." For labor leaders to proclaim their con cern for all workers, while at the same time pushing for minimumwage hikes at all lev els of government, is a twisted exercise in logic. Nonetheless, the minimumwage is sue is shrewdly being used by labor as a means to an end-to reconnect with the workforce in order to be seen as relevant again, and to force the ouster of politicians who challenge its cause. The-Move Toward "Corporate Responsibility" The labor movement would like to see politicians hoodwink American businesses into supporting its cause through induce ments provided by the federal government. This failed European model, which mistak enly unites government and business as close working partners, has sadly resur faced in the United States.

Called industrial policy in some parts of the world, it is better known to labor leaders and their advocates in academia and Con gress as "corporate responsibility." Inter estingly, the corporate responsibility model recognizes the benefits of tax cuts and regulatory relief, but only for those busi nesses that meet certain standards estab lished by the U.S. government. For example, a Senate supporter of labor has proposed a program of corporate re sponsibility whereby participating busi nesses-or A-Corps as they are called would receive special tax and regulatory treatment in exchange for abiding by several provisions: a percentage of corporate in come (determined by the government) must be allocatedfor worker training; the business BIG LABOR AND BIG GOVERNMENT 563 must provide a government-approvedhealth care plan for all employees; the CEO and other executives must agree to have their salaries capped; and the business must par ticipate in a collectively bargained (union) pension plan utilizingan employee trustee.

Labor leaders are touting these types of proposals as ways to help the "anxious middle class" deal with the hardships of corporate downsizing and government cut backs. Unfortunately, these plans only cre ate a new level of bureaucracy, which dis penses tax favors to companies deemed socially worthy by the federal government. The most glaring shortcomings of the corporate responsibility model is a total lack of understanding as to the trends shaping the twenty-first century economy. Unmis takably, key attributes of this economy will include diversity, mobility, and entrepre neurship. In other words, workers will con tinue to want different things at different stages in their lives, and they will change careers with greater frequency. In addition, experienced workers who become down sized are, in larger numbers, opting for self employment and entrepreneurship. It is doubtful whether these smaller enterpris es-responsible for the bulk of U.s. job creation-will have the extra cash to allo cate toward "corporate responsibility."

Attention, Teachers! According to a March 1996 report by the U.s. Senate Joint Economic Committee, corporate responsibility proposals "explic itly contradict" twenty-first century trends, and "would make workers more dependent on their current employers at a time when public policyshould be encouraging individ ual responsibility through upward mobility and portable benefits." Labor unions indeed fear policies that would make workers less dependent upon institutions (such as labor unions). That is why they continue to advocate bigger gov ernment and the expansion of the programs, agencies, and laws that govern the Ameri can workplace. Working hand in hand with the politicians and bureaucrats who oversee such programs, labor unions exert a pow erful influence over the laws which make them relevant. Take away such laws, and labor leaders find themselves stripped of power. Sud denly, their reason for existence comes under scrutiny. Whilebiglabor may succeed in its attempts to slow down the movement toward limited government, it is highly un likely that it will overcome the power of the marketplace-a force moving individuals away from dependence on unions and gov ernments and more toward independence and economic freedom. D Back issues of THEFREEMAN for classroom use H ere's a wonderful opportunity to introduce your students to ideas on liberty-at no cost to you or your school. We are offering cartons of past Freeman issues free of charge, post paid. Each carton contains over 100 copies of a single issue. Simply send your request, with shipping instructions, to: FEE, 30 South Broadwa)T,Irvington-on-Hudson, New York 10533.