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Source link: http://archive.mises.org/8450/labor-day-and-freedom/

Labor Day and Freedom

September 1, 2008 by

It isn’t clear that Labor Day is worth celebrating. According to the US Department of Labor, Labor Day “is a creation of the labor movement and is dedicated to the social and economic achievements of American workers.” It is also a holiday that is largely grounded in fiction. Part of the traditional narrative of the labor movement is encapsulated in this passage from the US Department of Labor’s website: “The vital force of labor added materially to the highest standard of living and the greatest production the world has ever known and has brought us closer to the realization of our traditional ideals …” FULL ARTICLE

{ 60 comments }

jp September 3, 2008 at 10:49 am

michael:
You are concerned with fairness which is always a worthy concern.

It’s important to understand why the modern union isn’t a fair institution. In Ontario, for instance, law says that a shop can choose to unionize with the agreement of only 50% of employees. With the union thereby in place, the other 50% can choose to join the union or not, but regardless they must pay the same union dues that the union members pay (about 2.5% of their salary).

In other words, even if they don’t support the aims and wishes of the union, dissenting workers are required by law to financially support those aims. This amounts to forced participation in a group and amounts to a major violation of individual rights. About the only thing an individual who doesn’t support a union can do is quit. But if their chosen profession can only ever be exercised in a union-controlled environment, quitting is not an option. Thus unions in Ontario prosper on the backs of unwilling members.

Governments in Canada, the US, and Europe have all created labour laws that limit the rights of individuals not to join unions, though it’s probably the worst in Canada. If you think it’s fair that the majority uses law to exert force over the minority, then we’ll just have to disagree. But if you see the unfairness in that, you’ll have to reconsider your support for the modern union.

The only fair unions are those that operate in a free society that has rid itself of laws that force participation.

michael September 3, 2008 at 10:55 am

David, you say “Without responding to the details of the debate that has gone before, Id like to point out that unions are not after a ‘fair deal’ for their members. They are after an unfair deal for their members, at the expense of both the employers AND the unemployed, who are locked out of the market by minumum wage agreements.”

Both sides of the bargain are looking for advantage. There’s no doubt that if labor were to hold the power (as they briefly did after WW Two) they would demand more than they were owed– just as presently the management is in a dominating position, and takes far more from both labor and the shareholders than can be justified. That is in the nature of the human beast.

IMO, the proper approach to all this is not to further juggle control in favor of the guys currently on top, but to endorse a system where each side of the triangle has a roughly equivalent say in how the pie is to be cut.

Bosses are certainly worth something to the company, as are investors. But to say the workers are irrelevant and worth no more than whatever pennies are tossed on the ground for them is, I think, a distortion.

A note on the minimum wage. Yes, there are people without rights today, who work for less than the minimum, fill these dirt jobs and cower in fear that they will be discovered. They are called the “illegals”.

Let’s say they earn four bucks an hour, or $8,320 a year. And let’s say they want to put a roof over their heads, and the cheapest trailer they can rent is $600 a month. Using the 30% rule, it would require the earnings of three of them just to pay for one trailer. And that in fact is how they live.

So you see, we’re already there. We have no minimum wage. Most fry cooks and shelf stockers earn more than the official minimum anyway, so it’s absolutely not a limit to employment figures.

ICE recently raided the big hog plant down the road in Tar Heel, losing most of their workers to deportation. So did they them just dip into the huge pool of unemployed labor, locked out of the market by the minimum wage? No, they advertised and found no takers. Even offering twelve bucks an hour, no one else wanted to do the work. Just desperate Mexicans.

The lowest paid US citizens here would be illiterate ex-felons with no more than an eighth grade education. Their pay rate starts at about $6.50. Hardly anyone was affected by the increase in the minimum wage.

Jeremy September 3, 2008 at 8:22 pm

Michael,

Your commentary is great – I guess I say so because my thoughts and opinions used to square with yours 100% (_especially_ after majoring in Economics in school, and taking classes like Labor Economics, Economics of the Public Sector, etc).

The only difference is the framework that we look at things through – _everything_ changed for me when I read several very influential works in Austrian economics.

The initial responses to your comments were not so great, but they improved very quickly – Magnus’ were especially on the mark, and I hope you carefully read and respond to them.

You may see us as ignorant and squaring against the interests of the worker, but the truth is that no one is more concerned about the worker than Austrian economists.

If you take the time to begin reading some of the clearer books that address the issues you have brought up, your views on these issues are likely to change dramatically. I recommend:

-> Economics in One Lesson
-> Economics for Real People (These two books address your issues directly, and are both simple, straightforward, and rewarding reads about what we think of as real economics)
-> Money, Bank Credit, and Economic Cycles by Jesus Huerta de Soto (the clearest book on the Austrian Business Cycle theory and monetary policy, period, written only in 2006 – money and monetary policy are the most confusing and conflicted areas in economics – this book refutes Keynsianism, Monetarism, Neo-classical theory, and shows step by step how inflation of the money supply enriches some at the expense of many and cause recessions and depressions. 100% recommended)

If you can read all three of these books and not undergo a complete change in the way you look at the world, I would be very surprised.

Please try to take the time to read these (the last two are available as free downloads on Mises.org), and see if they don’t cause you to look at things in entirely different ways than now.

newson September 3, 2008 at 10:19 pm

to michael:
the fact that the minimum wage is below the market wage doesn’t justify keeping the rule on the statute books. abolishing it would not fill the abattoir with willing workers at below market rates, as you’ve said.
re: hog city – who’s the winner here? the “exploited” foreign workers, who get forcibly repatriated, or the plant which closes through staff shortages? perhaps once those illegals get dumped across the border, and we no longer have to consider their lot, then we can all feel better about ourselves. seems to me these people voted with their feet. are they all fools?

michael September 5, 2008 at 8:52 am

First, I know everyone here has missed my pithy comments on Austrian School economics yesterday. My apologies, I was at jury duty.

Next, Gene Berman has hit a number of nails on the head. And your comments deserve a proper response.

Gene, you say “Your arguments are stated and organized with a clarity identifying you as serious. And, you are right..none of the other commentors has refuted your arguments with their own. rather, they have provided a few sound-bite-type counters.”

Thank you for the left handed compliment. I braced myself for the following “But…” phrase. And you do not disappoint.

“But the fact remains that you are about as far wrong as it possible to be. Moreover, you are of an intelligence level that has been able to absorb the propaganda dispensed by almost all of mainstream American education for well over 70 years and integrate it to a degree worthy of a socialist professor.”

As it turns out, my experience is not in academia. I never thrived in that arid environment. And back in ancient times, when I was an undergrad, the profs, hired by this right-to-work state to inculcate the young, didn’t lean left in any fashion. Not even in the social sciences– history, sociology and anthropology. So I missed my dose of propaganda, subsequently going out into the world to form my own impressions as to where the gears and levers were located.

My experience has largely been in personnel management, where I directed the labors of others. So all my comments come from the school of Reality, where I had to balance payroll according to the needs of my work force as well as against the value of their efforts to the company.

“The reason that the economic theory to which this site subscribes and seeks to propogate has not yet succeeded in its aims and, in fact, does expand so relatively slowly is due in part–a significant part–to the fact that it contains no “segments” which can be considered (and either proven or disproven) in isolation from the whole. It is comprehensive and fully integrated, taking as its only “assumption” one underlying reality: that men ACT, that is, men do whatever they do because they prefer that mode to some other at that moment in time.”

I am avidly reading and learning at this site. And I’ve formed one solid observation thus far: that it is the Austrian School that is composed of academics with scant experience of the real world, and that the elixir they’re selling is based upon an internally consistent bubble of theory, divorced from the actualities of the workplace and marketplace. Put another way, I strongly suspect that the advocates I encounter on these pages have never had to butt heads in the actual workaday battleground of management vs labor. Thus, respectfully, you have formed some outlandish ideas as to what is actually taking place there.

In my world, the consumer and the producer are one. This individual both works for money and spends it, and hopes that the net balance between those activities is a positive one. Sadly, since about 1973, this person has been steadily losing ground.

I attribute the reason to our country’s adoption of “trickle down” theory, according to the tenets of Mr Milton Friedman and under the direction of the character actor Ronald Reagan. And observe that over the duration of this experiment, those being trickled down upon have gotten poorer and poorer, until the typical net worth of the family unit has approached zero.

And I have further observed that the money being taken from their pay checks has accrued in the pockets of capitalist investors, growing fat on the accumulation of unearned income.

And that the needs of the two groups have intersected at the moment of easily available consumer credit. So much cash has piled up that it can’t find a home in the financial markets without causing huge speculative bubbles, where too much money chases a finite store of value. So it has been loaned out to the desperate wage earner to help his ship from sinking.

The beauty of the plan is that the cash being loaned allows the lender to continue living off the fruits of his wealth, enabling him to become an idler and no longer have to contribute anything to society. The borrower enters the cycle of debt, and pays out to his owner many times the amount of money he has borrowed. So for millions of Americans, life is possible at the disadvantage of becoming a wage slave.

My approach was to always give a little more in wages, and to ask a little more in effort. And I’ve found that to be a workable approach to management.

Interestingly the credit trap also works on an international scale. Have you noticed the resemblance between the worker’s reliance on debt and America’s reliance on overseas dollars? We make very little now, but have accumulated an inordinate share of the world’s capital. So we trade our dollars– pictures of presidents– for real goods. Then the makers of the products we consume loan the money back to us, enabling us to buy more. Thuis gradually, nations like the Chinese come to own us… as our trade imbalance and federal budget become ever increasingly out of kilter.

The money, here, is not real. But the trap is… and both the American worker and the nation itself have become ensnared in it.

It is fashionable to parcel out blame to one of the two political parties– usually, for some reason, to the Democrats. But surely everyone can’t have missed the fact that this is a bipartisan effort. Spend, spend, spend… but never tax. That way the party rolls merrily on, and no one ever has to pay the piper!

michael September 5, 2008 at 9:28 am

Hi Gene, me again. My response was overlong, so under separate cover I am here commenting (briefly, I’m sure we all hope) on two subjects: organized labor as extortion racket and the market value of wages.

In the first case, anyone’s evaluation must be seen as subjective. If you’re an employee, the bosses keep it all to themselves, hanging out on the golf course while you pay their bills. And if you’re in the investor class, you see a need to beat your agents (executive management) mercilessly with a stick to see that they don’t give away all your God given income to a bunch of rabble with dirty collars.

But certainly we all see the tripartite nature of employment: there is labor, there is management and there is ownership. For this admirable economic system to work, there should be some sort of parity between their rewards.

Demonstrably, there is not. Again, using the convenient period 1973-present as our field of study, we find tremendous gains during the period on behalf of capital and management, with levels of remuneration hitherto undreamed of… at the expense of the guys who actually do all the work. Even a brief glance at the econometrics will offer abundant evidence that this is so.

If you admit, and find all this equitable and fair, I think that just identifies you by class.

My own class identity, if you’re still wondering, was forged in the crack where the demands of ownership on upper management, those of management on the serfs below, and the needs of my labor force all came at loggerheads. I came to see outcomes as being victorious if all three parties came away from my negotiation equally disgruntled.

And I got pretty good at it. That brings us to the action of the laws of supply and demand on labor rates.

Here I think mere theory ill equips us to the task of keeping the economic engine in good tune. After toiling in the fields of others, I took what I learned and formed my own company.

Further, I had the elemental good sense not to sell control to faceless investors, by incorporating. I stuck with a field I could self-finance.

So there was no onus to please either ownership or management. I could do as I pleased. And I found the most satisfying course to be (1) that I got more business by charging my customers a little less, and (2) I paid my employees a little more, keeping them both happy and motivated to do good work.

Naturally this formula gained me less profit (a concept I interpreted as my wages for running the show). I only made double or triple what my employees took home, as opposed to several hundred times– as one sees in executive pay packages nowadays. Yet I was still able to retire on schedule, with a clean conscience, and I have enough cash to meet all my needs without having to scrimp.

Funny how that all worked out. I would call it a life successfully lived.

michael September 5, 2008 at 10:00 am

Jacob S writes “The yardstick by which to judge the importance of a decision between employer and employee (the suppliers of labor services) or between the employer business and any other of the factors of production is the consumer reaction in the marketplace. Businesses are merely agents of consumers whose job it is to coordinate the factors of production to supply goods and services demanded by the consumers. Whether or not the employer business and employees of that employer business do a good job in supplying the goods and services demanded by the consumer at the price the consumer is willing to pay is voted on everyday in the marketplace. That is the only yardstick that counts.”

Quite so, JS. And I would point out that the employee and the consumer are one and the same person. And that his wants, needs and preferences, when you come right down to it, are indivisible. By whatever means necessary, he or she would like to finish up the month in the black. And the current model, of less pay and cheaper prices, has over the years put him or her increasingly in the red.

Anyone seeking to see if improvement could be gained would suggest we try the other model for a while. It is working quite well in Europe, and the value of the Euro continues to maintain a quite healthy level.

Pennsylvania Law September 5, 2008 at 3:16 pm

I think all too often these holidays are used as a day off work and not utilized the intended purpose. Labor Day is an important day and all would do well to do some research on the history of this holiday.

michael September 5, 2008 at 4:42 pm

Michael: “But about one third of the labor force are being paid far below the cost of making an adequate living in this country.”

fundamentalist: “That’s probably true, althugh I might disagree with the percentage. But for the most part, with exceptions, these a young people and immigrants working at entry-level jobs. Entry-level jobs aren’t supposed to pay a living wage because new workers don’t have the necessary skills.” etc.

It’s amazing how cloistered your view is yet, how certain you are of its truth. No, there are 35 or 40 million among us ensnared in low wage jobs and all that goes with that kind of poverty. And not just black people, nor in Appalachia. Every state in the union (well, maybe not Massachusetts) has its population unable to rise from poverty. The condition is multigenerational.

A few, like yourself apparently, rise from this condition and congratulate yourselves endlessly. But the way out you took is not available to all, for reasons of intellect and education. Many are just hopelessly stuck.

“Say we raised the minimum wage to $20.”

That’s just silly. Positing absurdities doesn’t prove your argument.

In any case, minimum wage increases are not necessarily the best approach to take. There are those among us who like the negative income tax, for people filing with low wage earnings. I think Cato has some interesting speculations in this area.

Michael: “I am a humanist, meaning that I consider the welfare of the population to be of greater importance than the welfare of some economic unit like the dollar.”

fun: “Don’t think that the two are necessarily opposed to each other. The welfare of the poor is intricately tied to the value of a dollar.”

It’s a simple equation. By paying the low-level workers whose efforts create their fortunes less, investors make more. So regardless of the value of one purchasing unit, over time the buying power of the one group diminishes… while the buying power of the other grows beyond their ability to consume. So they must then look for ever newer vehicles for investment, else be compelled to stack their vast fortunes in warehouses.

A logical move is to expand consumer credit, further enabling their workers to survive for the moment on borrowed funds.

You then offer an extended paean to the Waltons, who are merely the inert relatives of the guy who built the empire (now deceased). Collectively they have the acumen and drive of a sackful of doorknobs. Yes, jobs have been created at the stores. But they are far fewer in number than the low-paying jobs that were extinguished by those stores.

Collectively, payroll has decreased per unit of sales. That greater efficiency is expressed in lower prices. But it results in fewer employees, getting paid less than before Wally forced the mom and pop stores off the employment map. The net result is a diminution of value for working people: fewer jobs, each paying less than before.

Michael: “The productivity increases have already occurred. Between 1973 (a convenient watershed year) and 2004, productivity increased nineteen percent, while real wages increased about one percent.”

fun: “Actually, productivity fell from 1973 until about 1992, then rebounded until about 2001 and has been flat since.”

Not so. Take a look at chart no. 2:

http://www.econedlink.org/lessons/index.cfm?lesson=EM221

Which says: From 1950 to 1973, productivity grew at an average annual rate of 2.8 percent. But from 1973 to 1995, growth in productivity slowed to an increase at an annual rate of 1.4 percent. From 1996 to 2000, productivity increased at an annual rate of 2.5 percent, almost equal to the 1950 to 1973 rate.

fun: “Average real wages lost ground from ’73 until ’92, then rebounded with productivity.”

I’d be happy to look at any source you can find for this.

fun: “The difference between socialist/Keynesian economics and Austrian econ is that the socialists pit workers and owners against each other while Austrians rightly see how dependent each is on the other.”

What a crock. The tone of the article here is that the contribution the workers make toward perpetuating our generally prosperous economy is nil. No one, not even the Chicago School, more belittles the worth of labor in the value-added process of(for example) transforming ore in the ground to automobiles, computers and the like.

fun: “Price inflation does not cause a net societal gain. If prices rise the same amount as wages, there is not net gain.”

I didn’t say it did. You didn’t take the time to comprehend my argument… which is that when labor gains a greater share of the total pie, prices may rise but purchasing power increases even more. While when ownership gains the greater share, prices drop but even more so does purchasing power among low-end workers.

This has nothing to do with the size of the total money supply. It has only to do with the way the pie is cut.

JOBLESSINUSA August 4, 2010 at 6:25 pm

The surest and most expedient route to wealth and happiness is NOT working a time clock job for some Jerk determined to to get rich and NOT paying taxes on the wealth thus created.
Think and do for yourself Grass Hopper…

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