A few years ago, I would have thought I’d gone insane to say this but…I think governments should work towards abolishing minimum wage laws and reducing the power of unions.
However, I think a supportive infrastructure needs to be in place beforehand. This would include robust transfer payment policies for the unemployed and other vulnerable groups. As well, a public provision of health care and education that private entities are free to compete against. Unions should be limited in their ability to oppose firms that aim to cut costs by reducing or replacing their workforce but should be supported by laws when negotiating wage rates and working conditions. I think this direction draws on some strengths of the free market and on the goal of equitable distribution of income. Flexicurity comes to mind.
Tags: education, health care, minimum wage, unions
January 11, 2012 at 12:58 am |
The best explanation of what minimum wages actually are and what effects they have was given by Nobel laureate Milton Friedman:
If you want to learn more, I can only recommend his book “Free to Choose”.
January 11, 2012 at 1:38 am |
Thanks, though he would certainly cringe at the proposal of publicly funded education, health care and transfer payments for the unemployed. At least, that’s my understanding of his view, if I’m not mistaken.
January 11, 2012 at 3:34 pm |
Couldn’t a legislative support of wage negotiations by unions end up doing the same harm, although not for all society, as minimum wage laws?
Of course, Milton Friedman wouldn’t agree completely, but in the end he was smart enough to support more freedom over less.
Still, a lot of problems concerning state funded remains, because there is not even an opt-out possible, whereas a free market mainly consists of opt-ins. So, i.e. in state funded healthcare you have to pay for it, whether you use it, you want or don’t even think about it. And still there needs to be a way of supporting those unable to support themselfes…
January 26, 2012 at 2:49 pm |
I don’t see a problem with mandating taxes to fund these goods/services as I don’t see it as individuals paying for themselves personally. A publicly supported system means everyone pays for everyone, not each person paying for themselves. This point may not seem important but I think it changes things when we talk about opting in or opting out.
It is my opinion that a free society can only thrive if it imposes some obligations and some restrictions. That is, I don’t think a society that requires participation in the redistribution of income is a society that isn’t free. Nor do I think a society that doesn’t restrict others from their freedom to harm others is a society that isn’t free.
Why should individuals who participate economically in society (i.e. have an income) have the “freedom” to not help take care of it?
As for legal support when negotiating wages, how could this create the same problem that minimum wage laws *could* cause (i.e. real-wage unemployment *if* the rate is above market equilibrium)? Good laws would simply help unions make their voice heard and help keep firms from intimidating or bribing unions. That is a matter of human rights so I don’t see it as an anti-market goal. Of course, RWU could still occur. But in a flexible labor market, firms would be free to renegotiate when the contract expires. If the economy is in a recession then they will simply bid the rate down (or downsize if households are too stubborn).