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Freeman Essay #39: “Workers Exploited?”

In the June 1999 Freeman I contributed also that month’s “It Just Ain’t So!” column.  It’s below the fold.

The late Nobel laureate economist George Stigler rightly insisted that anecdotes are not reliable data on which to base judgments about the state of the world. Labor lawyer Thomas Geohegan either never heard, or he ignores, Stigler’s wise warning. Geohegan relies on a handful of anecdotes to argue in the January 24, 1999, New York Times that American workers are increasingly exploited by their employers (“Tampering with the Time Clock”).

The thrust of Geohegan’s argument is that employers are forcing more and more workers to work more and more hours “off the books.” “Go anywhere,” he asserts, “a supermarket. A nonunion hotel or club. Any nursing home. There’s a very good chance that the staff is working for nothing some of the time.” The consequence, Geohegan asserts, is that the American worker now suffers “longer hours, less vacation, more stress on the job.”

His apparent solution for this problem is stronger labor unions and stricter government-enforced work rules. For example, he wants the government to require that time-and-a-half be paid not only to hourly employees who work overtime (which is the current rule) but also to workers at the professional and managerial levels.

Record-Setting Leisure

Geohegan’s facts are mistaken—not surprisingly, given his reliance on anecdotes—and his economics is gobbledygook. First the facts. Today’s American workers enjoy more leisure—both at work and at home—than any previous generation of workers. Since the Great Depression, the number of hours worked per week by the typical American worker fell from 44 in 1938 to 38.6 in 1960 to 36.9 in 1973 and to 34.4 today. Moreover, the number of vacation days rose from six in 1938 to seven in 1960 to eight in 1973 and to 10.5 today. The number of holidays and personal days during this period increased even more dramatically.

Geohegan would question these data, arguing that Americans work ever-more hours off the books. Presumably, employers are reducing the number of hours that employees are formally required to work, while increasing the number of hours—without pay—that employees are in fact required to work. But again, aside from some anecdotes, where’s the evidence?

The same consistent and substantial decline in hours worked that marks the modern workplace also marks the modern home. Holier-than-thou pundits routinely condemn capitalism for turning out excessive quantities of gadgets and gizmos. But the fact is that these gadgets and gizmos relieve us of many of the monotonous household tasks that burdened our parents and grandparents. Automatic dishwashers cut the number of hours we spend at the dreary task of cleaning up after dinner; microwave ovens reduce the amount of time necessary to prepare meals; no-iron fabrics mean less time caring for clothes; Jiffy Lube and Pep Boys now change our cars’ oil in minutes; improvements in health care and household sanitation diminish the amount of time that we are down with illnesses; on-line shopping enables us to spend less time in stores. These and countless other advances brought to us by the free market have slashed the number of hours that we must give over to household chores.

All told, say researchers W. Michael Cox and Richard Alm, “In 1996, an average lifetime’s waking hours devoted to work, both on the job and at home, stood at an all-time low of 21.8 percent, compared with 24.8 percent in 1973.” (See Myths of Rich and Poor, Basic Books, 1999.)

Our greater leisure time isn’t spent idly. We spend this time—and larger portions of our income—on entertaining activities. For example, there are today five times more adult softball teams than there were in the mid-1970s. The proportion of the population that today attends professional sporting events is almost twice what it was in 1970. The same is true for live symphonies and operatic performances. And the number of pleasure trips we take today is three times higher than it was back then. Finally, the proportion of Americans who donate some of their time to volunteer efforts is today double what it was in the mid-1970s.

Government Can’t Help

The facts show overwhelmingly that American workers are not only paid more today than at any time in the past, but that the amount of leisure time we have to enjoy our higher incomes is at an all-time high. But let’s suppose for the sake of argument that the facts are opposite of what they really are; that is, let’s suppose that Geohegan’s picture of the American worker’s lot is accurate. Would increased government regulation of the workplace—both directly and through special privileges granted to labor unions—improve matters? Hardly.

Government mandates of pay, fringe benefits, and working conditions inevitably worsen the lot of the typical worker. The reason is that government-mandated pay and working conditions are substitutes for what workers themselves prefer.

The classic case is minimum-wage legislation. When government mandates that no worker be paid less than $5.15 per hour, all workers who are worth less than that to employers, but who would prefer to work at some lower wage rather than be unemployed, are forced by this legislation out of their jobs. They are made worse off. Identical logic applies to government-mandated fringe benefits—including worker leave and improved working conditions. At best such mandates merely change the compensation packages to ones that workers prefer less than the packages that would be offered in the absence of the regulation.

Employers compelled by government to offer more employee leave will offer employees less of other forms of pay, such as wages, pension contributions, or employee discounts. The number of possible adjustments is countless. And to the extent that employers cannot offset the costs of any government mandate, the consequence for many workers is devastating: unemployment. When government piles mandates atop mandates, it artificially and unnecessarily raises firms’ costs of hiring workers. Firms that would have hired 1,000 workers now hire only 850; firms that would have hired 100 workers now hire only 70; firms that would have hired ten workers now hire only nine—and some firms that would otherwise have sprung to life now are never formed; they are snuffed out in advance by reckless government regulation of the conditions of employment.

So even though Geohegan’s statement of the “facts” is a sham, it is also dangerous. The danger lies in people’s believing what he says and, in response, endorsing the destructive policies he proposes.

Genuine data, however, belie the gloomy and sinister picture painted by Geohegan. These data are nowhere better collected, reported, and interpreted than in Cox and Alm’s book, as well as in the many books of the late Julian Simon. Almost any single chapter from the works of these scholars proves that Geohegan’s argument just ain’t so.