Matthew Lau: Who protects the lowly worker? Not unions, not government

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeFP CommentMatthew Lau: Who protects the lowly worker? Not unions, not governmentThe free market, not government and unions, is what makes workers better offGovernment, like unions, have an overall negative effect on workers. Photo by Blair Gable/PostmediaLabour Day is invariably accompanied by pronouncements from progressives about how unions and government benefit workers and protect them from exploitation. However, the reality is the opposite. Even if they sometimes benefit certain privileged workers in the short run, the main effect of unions and government expansion is to harm workers overall, with the most disadvantaged members of the labour force suffering the worst consequences.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountFamed economist Milton Friedman, though he passed away nearly two decades ago, remains the most effective antidote against economic nonsense peddled by union activists and supporters of government expansion. The chapter “Who Protects the Worker?” of his 1980 classic book Free to Choose, co-authored with his economist wife Rose, is still today among the best expositions of basic labour economics. In it the Friedmans dispel the myth that unions and government help workers and conclude free market competition is the real source of workers’ protection.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againOne reason the answer to, “Who Protects the Worker?” cannot be unions is that most workers are not unionized. In Canada today, the union coverage rate (the percentage of workers covered by a collective agreement) in the private sector is only 15.1 per cent. Among the industries with the lowest union coverage rates are professional, scientific and technical services at 3.4 per cent, and finance, insurance, real estate, rental and leasing at 8.2 per cent. Does anyone believe lawyers, accountants, engineers, computer systems designers and bankers in Canada are helpless and underpaid workers in need of union protection from their rapacious capitalist employers? If not, it should be clear that unions are not the source of workers’ protection.According to the Friedmans, the key to understanding the effect of unions is the most elementary principle of economics: the law of demand, which says the higher the price of something the less people are willing to buy. For example, higher wages for airplane pilots make air travel more expensive, leading fewer people to fly, resulting in fewer jobs for airplane pilots. So how do unions try to secure higher wages for airplane pilots? By reducing the number of pilots. The basic source of union power, the Friedmans write, is “the ability to keep down the number of jobs available, or equivalently, to keep down the number of persons available for a class of jobs.”Unions reduce the number of jobs mainly by lobbying government to protect unionized workers from competition and pushing the most disadvantaged workers out of the job market, including through occupational licensing, restricted bidding policies, unbalanced labour relations laws and other anti-competitive regulations. That unions are anti-competitive and reduce productivity and efficiency is best illustrated by this statistic: compared to the union coverage in the private sector of 15.1 per cent, in the public sector it is 77.5 per cent.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Government, like unions, have an overall negative effect on workers. To be sure, government protects some workers: mainly, government employees who receive measurably higher average salaries and better benefits than comparable private-sector workers, retire earlier, miss far more days of work annually, and enjoy far greater job security even if they are relatively unproductive. However, most workers are not government-employed, and everyone is forced to pay higher taxes for inefficient government services. The net effect of bigger government is to make workers worse off.Government regulation also fails to protect workers. Take the minimum wage for example. Both Canadian and American studies find raising the minimum wage reduces employment among low-wage workers, and that youth, visible minorities, immigrants and the disabled are particularly negatively impacted. “Minimum wage advocates believe that the employment cost is worth the small wage increase received by those who remain employed,” economist William Poole said in a Wall Street Journal article in 1996. “I do not understand this callous position… Those who will lose their jobs are the weakest and most vulnerable members of the labor force.” Notably, if minimum wage laws create unemployment among the most disadvantaged workers, laws that set a minimum standard for working conditions or other benefits have a similar negative effect.If not unions and government, what is the source of workers’ protection? Just as consumers are protected from exploitation by a given seller by the existence of other sellers (i.e., by market competition), workers are protected from exploitation by a given employer by the existence of other employers for whom he can work. “Competition for his services – that is the worker’s real protection,” as the Friedmans put it. The free market, not government and unions, is what makes workers better off.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.