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Chapter Six: Making the Free Market Work for More People

 

I have a theory of about free markets: The freer they are, the more quickly producers go out of business. Consumers benefit from systems of free and open competition, but the ones who sell products beat themselves down to the bottom with falling prices. Agriculture is the classic example. Farmers produce much the same commodities as their competitors. When crops are plentiful, supply exceeds demand and the price drops. When crops fail, there is little to sell. Most farmers eke out a living somewhere between those two extremes.

Compare their situation with that of medical doctors. Not everyone can go into medicine. State licensing boards dominated by the medical profession have erected educational barriers in the name of ensuring quality practice. To become a doctor, one has to go to school for many years and then endure several years of residency, working long hours for low pay. Those with sufficient stamina, intelligence, and financial resources to complete the process become doctors. Supply seldom outstrips demand. With respect to demand, doctors enjoy an additional advantage of deciding how much of their service customers purchase. Someone else - an insurance company - pays for it. Doctors can prescribe as many pills or operations as they, in their professional judgment, deem necessary. The patients, who don’t have to pay, seldom complain. This system virtually guarantees that doctors will make lots of money.

In other words, to succeed in a free market, you either have to be lucky or else rig the system. How does this situation relate to the average working man or woman? Some workers are lucky - e.g., persons with computer programming skills during the dot-com boom or preparations for the Y2K crisis - but the majority cannot be. This type of worker needs to look to government, the chief rigger of markets. With a little ingenuity, government can pass laws and regulations which drive up wages. The trick is to restrict labor supply.

Proponents of increases in the minimum wage do not understand this. They try to force wages up but that only distorts the labor market, causing employers to get rid of some workers. A better way is to pass laws that restrict labor supply and then let the free market do the dirty work. What techniques will accomplish this? The answer was written on my campaign sign: “I believe that the Federal government should reduce the standard workweek to 32 hours by (the year) 2010.” Government-imposed reductions in working hours reduce labor supply and, in the long run, drive prices - i.e., wages - up.

The business community (with a few notable exceptions) has been dead set against this approach. Labor unions were once its chief supporter. In fact, the labor movement in the 19th century was primarily a movement for shorter work days. In the 20th century, the eight-hour day was achieved; and, later, the five-day week. The forty-hour workweek became the legal standard through enactment of the Fair Labor Standards Act of 1938. This standard became effective in covered industries and occupations in 1940. Since the 1940s, however, the long-term progress toward shorter work hours has come to a halt in the United States. Census Bureau data show that the average hours of work in the U.S. economy declined from 43.5 hours in 1947 to 38.0 hours in 1982, but have since climbed back up to 39.2 hours in 2001.

Let me suggest several reasons for this reversal of the downward trend. Chief among them is the fact that organized labor has ceased to push for or even support proposals to reduce work time. The business community remains adamantly opposed. Government, too, is opposed since it can’t tax leisure; it prefers “economic growth”. Before the Fair Labor Standards Act was passed, the president of the American Federation of Labor, Bill Green, expressed reservations because he feared this legislative approach would encroach upon what had long been the unions’ prerogative.

The law provided that employers compensate covered workers by paying them at an hourly rate of one-and-one-half times their normal rate of pay when the employers required workers to work more hours in a week than the standard workweek. Unintentionally, the higher pay rate has created a perverse incentive for employees to seek that kind of work. Instead of clamoring for further reductions in the workweek, union workers are individually seeking overtime work. The labor movement reflects its members’ priorities. Unions also realize that, because of strong employer opposition, they would risk having production outsourced to another firm, state, or country if they succeeded in getting shorter hours.

While the level of work hours has been stagnant in the United States, the historic reduction of hours has continued in other parts of the world. In February, 2000, the French government introduced a statutory workweek of 35 hours. This law has created or saved an estimated 200,000 jobs. Italy, which earlier had aspired to follow the French lead, instead enacted a law allowing ten months of parental leave. The Dutch, moving to a 36-hour week, work an average of 1,370 hours per year, compared with 1,966 hours in the United States. Many European countries, including the Netherlands, Denmark, Austria, Sweden, Norway, and Switzerland, have significantly shorter work hours than in North America yet enjoy comparable rates of unemployment. In Asia, once known for its long hours, the Chinese government switched to a 40-hour workweek for state and other employees in May 1995.

American workers now average more annual hours than the Japanese. Even so, statistical averages can be deceiving: While the percentage of part-time workers is increasing in the United States, the average workweek of salaried workers who regularly work at least 20 hours a week increased from 43 to 47 hours between 1977 and 1997. Employees putting in at least 50 hours per week increased from 24% to 37% of the work force during this time. Labor won a great victory in June 2002 when the Accreditation Council for Graduate Medical Education decided that medical interns working as many as 120 hours a week could endanger patients’ health. From now on, their workweeks will be limited to 80 hours.

In 1970, the International Labor Organization adopted the “Holidays with Pay” convention, calling for employers to grant three or more weeks of paid vacation to employees with at least one year of service. Thirty years later, U.S. workers were still averaging about two weeks of paid vacation per year. Laws enacted in the 1980s gave workers in Austria, Belgium, Denmark, Finland, France, Luxembourg, and Spain a minimum of five weeks’ paid vacation per year. French and German workers typically receive six weeks of paid vacation during the summers and sometimes an additional week or two during the rest of the year. American commentators tend to look down upon the Europeans contemptuously for working shorter hours, suggesting that the “work ethic” might be a key to our economic success. Americans want to work long hours, they suggest. Recent polls show, however, that 49% of Americans believe that too much emphasis is put upon work and not enough upon leisure.

The responsibility for the long-hours policies clearly rests with U.S. economic and political leaders who ignore international labor standards. By 1996, the U.S. government had ratified only twelve of 176 labor conventions adopted by the International Labor Organization, the lowest percentage of any industrialized nation. U.S. Labor Secretary Reich indicated, though, that our government that year might soon ratify ILO convention #111, which prohibits employment discrimination based on race, sex, religion, political opinion, and ethnic or social origin. During the 1990s, the International Labor Organization refocused its attention upon a set of “core labor standards”, which included the right of association, freedom from forced labor, prohibition of child labor, equal pay for equal work by men and women, and prohibition of racial, religious, or other discrimination. The United States volunteered to be the first nation to be reviewed for compliance with those standards.

It was interesting to me that standards pertaining to wages and working hours are no longer considered to be core labor standards. The ILO’s first convention, adopted in 1919 at a conference in Washington, D.C., established the eight-hour work day as an international labor standard. The 8-hour day was the object of the famous “May Day” strikes which took place on May 1, 1886 across the United States and Canada. The May Day holiday, resulting from that action, is celebrated in almost every industrialized country on earth though not in the United States. Obviously, U.S. policy makers want nothing to do with international standards which call for reduced work time. Instead, the “core” standards have to do with such things as gender equity in the work place, the right to form unions, and freedom from racial or religious discrimination, reflecting our core political values today.

All roads lead to the preoccupation which Americans, or our power elite, have with racial, gender, religious, and other discrimination. That is why I chose, as my second issue in the campaign for U.S. Senate, a policy expressed in this statement: “I believe in the full citizenship, dignity, and equality of white males (and of everyone else, too.” Dignity for white males is not one of the core values of our current political system. I think this helps to explain why Americans will accept the poor economic and political leadership which they receive.

When we look at this record of poor performance, the question is often phrased: Are women and minorities suffering worse than other people - read, white males? Already, the divisive mentality sets in. If women and minorities are suffering worse, then perhaps we need Affirmative Action or business set-asides for women and minorities. We need more Democrats in office who will promote such policies. If women and minorities are suffering worse, then it might be because of intentional discrimination by white males. Legal action might be required - more work for lawyers. The thought does not arise that everyone - whether it be women, minorities, or white males - may need emancipation from the poor leadership which they have been getting in U.S. society. Is it a surprise that our leaders do not want us to arrive at that conclusion?

In the 1930s and 1940s, when employers were battling militant labor unions, they sometimes found it useful to hire black strikebreakers. The unions were forced to court the black community as a defensive move. The Communist Party thought that disaffected black Americans might be recruited to its cause. U.S. business and political leaders found it useful to support the nascent Civil Rights movement to quiet black discontent. This gave rise to a socially divisive politics. Elite classes in the United States found that pitting black against white, white against black, diverted attention away from themselves. When the women’s movement came along, we now had women fighting men, and men fighting against women, with conflict reaching down into the family.

Since women and minorities were both “victims” of social oppression, the oppressor had to be that part of the population which was left: white males. Affirmative action was instituted to overcome patterns of past discrimination favoring such persons. The new “oppressor” - white males - was also the type of person who had once been stalwarts in the labor movement. Yet, the unions also bought into this concept, thrilled with the prospect of bringing “new blood” into their flagging movement. They were not astute enough to realize that, in buying into this scheme, they were undermining the Solidarity principle upon which the labor movement was based. Union membership dropped from 31.4% of the work force in 1960 to only 14.1% in 1997. The managerial class had won.

What a slick move this represented! Affirmative action tells white males, a cantankerous group which had once formed the core of opposition to corporate leadership: You are a privileged class. Women and minorities have suffered at your hands. They are the only authorized victims. You have no right to complain. To women and minorities, it says: Look, we (the bosses) have bent over backwards to help you. You, as you well know, have been hired by other criteria than merit. In any fair and open competition, you might not be here. You, too, have no right to complain. Therefore, neither white males nor women and minorities have a right to complain about the people at the top. Neither side sees what is happening, so bent are they on fighting each other. This is a classic trick of self-perpetuating leaders: Focus attention upon an external threat so that the problems of internal management will be ignored. In this case, stir the pot of racial and gender divisiveness so that we can stay in power, continuing to serve ourselves rather than our constituents.

Actually, I think that women and minorities have been dealt a bad hand, though not for the reasons usually suggested. Overt discrimination, while it exists, may be less a factor than poor timing in their bid for economic equality. Before the 1950s, most women stayed home. Blacks were stuck in occupational ghettos. Both groups set their eyes on more ambitious career goals about the time that job opportunities were dwindling. The reason for that was the phenomenon of “automation”. With the introduction of labor-saving equipment, labor productivity was rapidly increasing. Greater labor productivity means that a given group of workers can produce more in a given time period; alternatively, a smaller group can handle the same volume of production. In any event, increased output did not create as many new jobs as previously. The number of factory jobs held steady or declined. Workers - mostly white males - who already had jobs held on to them more tightly while newcomers to the work force were frozen out.

A proposed remedy to free up jobs for new people was to shorten the workweek. However, that remedy was rejected. Therefore, the increasing number of black and female job seekers did not find as many opportunities to take high-paying union jobs as previous generations of workers had found. But instead of shortening work time, policymakers hit on the idea of affirmative action, which would ration the new jobs according to racial and gender criteria. It was a solution which appeased political groups but did not solve the underlying problem.

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