Skip to comments.FREE TO CHOOSE 8: "Who Protects the Worker?" (Milton Friedman)
Posted on 08/16/2006 12:02:37 PM PDT by Choose Ye This Day
FREE TO CHOOSE: Who Protects the Worker?
Friedman: People who earn their living in a modern heavy industry seldom engage in the kind of back-breaking toil that was the everyday lot of most workers a century ago. And yet they earn far more. What has produced these improvements? The offhand reaction of most people is likely to be that labor unions are largely responsible for the enormous progress workers have made in the past two centuries. But clearly, at least for the U.S. that cannot be true. After all, in the 19th Century when workers did very well, there were hardly any labor unions at all. And even today, no more than one out of four or five workers is a member of a trade union. And the remainder do very well indeed in achieving the highest level of living in the world. Labor unions do, of course, benefit their members but far from being a key to the development of the modern society. They are a throwback to an earlier pre-industrial era to the agreements among craftsman in the middle ages or to go back even earlier, more than 2000 years ago to the agreement among medical men in Greece.
From the tiny Greece island of Kash, the coast of Asia Minor is four miles away in the mist. Twenty five hundred years ago a hospital and medical school flourished on Kash. The great Hippocrates, the founder of modern medicine, work there. Legend has it that Hippocrates taught his students in the shade of this plain tree. He welcomed anyone who wanted to learn, so long as they paid his fee. There is another legend that St. Paul stood here and preached the Gospel of Christianity. What isn't legend is that Hippocrates and his followers started medicine on the road forward to becoming a science. When Hippocrates died at the age of 104, or so legend has it, this island was full of medial people, his students and disciples. Competition for custom was fierce. Some 20 years after he died they got together and constructed a code of conduct. They named it the Hippocratic Oath, after their old teacher and master. Every new physician, before he could start practice, came to this spot back here in front of those columns and took the Oath. The oath was full of fine ideals for protecting the patient. But it also had a couple of other things in it. Listen to this one, "I will impart a knowledge of the art to my own self and those of my teachers and to disciples bound by a stipulation and oath according to the law of medicine, but to none others." Today we'd call that a closed shop. Or listen to this one referring to patients suffering from the agonizing disease of kidney or bladder stones, "I will not cut persons laboring under the stone but will leave this to be done by men who are practitioners of this work." A nice market sharing agreement between physicians and surgeons. Hippocrates must turn in his grave when a new class of medical men takes that oath. After all, he taught anyone provided only they pay his tuition. He would strongly have objected to the kind of restrictive practices that physicians all over the world have adopted to protect their custom. In the United States the American Medical Association has for decades been one of the strongest labor unions in the country, keeping down the number of physicians, keeping up the costs of medical care, preventing competition by people from outside the profession with those in it. All, of course, in the name of helping the patient.
Without warning, anyone of us may suddenly need medical care. If we do, we want the very best care we can get. But who can give us that care?
It is always a graduate of an expensive medical school who has a union card called a medical license? Or might it be someone like this a trained paramedic working for a private enterprise organization rendering emergency care?
Paramedic: And hopefully we'll get a very good contract out of that.
Friedman: Many such businesses provide primary care for emergency cases in the United States. This particular paramedic team is attached to a fire department in southern California. They're good at their job. But it's not unusual to find local physicians objecting.
Joe Dolphin: They take the Hippocratic Oath here in the United States and they believe that they should be the one that is treating their patient. They should be the one that saves that patient's life. And if someone else does it, it just kind of interferes with everything that they have been taught.
Friedman: But why should medical care be a monopoly of licensed physicians? Shouldn't anyone who is capable of providing effective help be free to do so.
Paramedic: I'm going to take your blood pressure here. Okay, any one see him go down?
Friedman: You can be sure that no one would be able to stay in this business very long unless he can demonstrate by performance that he's doing a good job. Joe Dolphin knows that very well.
Joe Dolphin: We've taken some statistical samples of the kind of effectiveness paramedics have in California. Giving an example of that, in one district of California that we serve which is a county which is populated to the extent of 580,000 people. Before the introduction of paramedics, less than 1% of the patients that suffered a cardiac arrest or their heart stopped, lived through their hospital stay and were released from the hospital. But with the introduction of paramedics, just in the first six months of operation, 23% of the people who's heart stops, are successfully resuscitated and are released from the hospital and go back to productive working society. We think that's pretty amazing. We think the facts speak for themselves. However, relating that to the medical community is sometimes very difficult. They have ideas of their own.
Paramedics: Respirations 12 and regular by... Looks good to me Dave. How are you reading this down there? Are you guys ready to go? Yeah. It says Code Two. Code Two?
Friedman: Disputes between union and non-union workers are not always as high-minded as between organized medicine and Joe Dolphin. One day in 1978, workers at a coal loading dock on the Ohio River in southern Indiana continued to work after the Mineworker's Union had called a strike. That night, a crowd of armed union men invaded the site.
John Persinger: And then they fired a little building sitting here after they fired Mr. Tegain's car here. And threw another fire bomb into the trailer, others had ran on back and were firing trucks and shooting holes through tires with hand guns. I'd gone back beyond the loading dock here. Standing back in there. I could hear them shooting and the air escaping from truck tires. Course there's so many people moving around and doing so much damage and setting so many things on fire, there were a lot of things going on at one time. We should have been heavily armed and shot these people did something to stop such destruction. I wouldn't have believed that a rabble rouser could have gathered together that many irresponsible people to come on to a person's property and do this kind of destruction until I'd finally seen it done.
Friedman: These workers are on the other side of the union fence. They're building two social security offices in Baltimore. On this government project everyone's a union worker. They rely on their union to protect them against competition from non-union labor. But some local contractors see a very different side to a closed shop.
Harry Leef: We don't feel that anyone should be denied a choice and we feel every man should have a choice if he wants to be unionized or not. Not legislated not saying he must belong to a union. If you feel when you tell a man he must belong to a union or he must do this or that, you are taking freedoms away from this man. The freedom of choice of this businessman here to choice me to do business with me. All businesses needs its right to choice to do business with each other. By the same token, our employees have the right to choose whether they want unionization or not.
Friedman: On this government site, authorized personnel only really means unionized personnel only. Unions have long recognized that the surest and most effective way for them to get power without violence is to have the federal government on their side. That's why so many strong unions have made it a point to locate their headquarters close to the source of power.
The heads of the trade unions that cluster near Capital Hill know this place very well. It is the room assigned to the Committee on Education and Labor of the House of Representatives and it is where much of our labor legislation is discussed and shaped before presentation to Congress. I know rooms like this myself very well. Because I've often testified before Congressional Committees and they all meet in rooms like this, up there on the podium is where the members of the House or of the Senate sit. Of course, behind them there will be clustered a bunch of aides. As you know, there are something like 30_40 aides for every single member of the House and the Senate. And very often in one of these committee rooms there will be almost nothing but aides around. When I've sat in the bear pit over here, where the witnesses sit to testify, I've sometimes thought that maybe the whole thing was a show being conducted by and for the aides with an occasional member of the House or Senator dropping by to see what the show is all about.
This is a room in which hearings were held on the most recent increase in the minimum wage for example. Who do you suppose testified here in favor of a higher minimum wage right? Do you suppose it was representatives of the poor people who are supposedly being helped by the bill? Not a bit of it. The major people testifying for it were representatives of the American Federation of Labor. The AFL-CIO. The major organization of trade unions in this country. There's hardly a member of one of their trade unions who works for a wage anywhere close to the minimum wage. Despite all the rhetoric about helping the poor, they were in favor of a higher minimum wage for a very different reason. Because it would protect the members of their unions from competition from the lower and lesser skilled people. To see the effects of minimum wage laws in action, go to a place like this where they sell quick and inexpensive food. You don't need much training to start work on this job. It used to be a traditional training ground for the unskilled. Not any longer thanks to the minimum wage laws.
Lee Roberts: From the workers point of view, the people that it was supposed to help are the people in some cases it's hurting the most. Such as minorities, unskilled labor and young people. A businessmen, especially a small businessman cannot afford to bring in these people at the higher wage. They are willing however, to take apprentices and to train them. It's very difficult to do now under minimum wage laws.
Friedman: To people who are discriminated against most by high minimum wage, right, are the people with low skills which includes a disappropriate number of Negroes. Indeed I have long believed that the minimum wage rate was the most anti-Negro piece of legislation on our statute books. Not by intention, but through its results.
The more they get paid, the better people can live. Whether they are paid in cash or in kind. The staff restaurant in the Department of Housing and Urban Development in Washington, D.C., these people are eating subsidized food. Like all civil servants federal workers get extremely generous fringe benefits. They have also had an incredible degree of security. It has been almost impossible to fire a civil servant. In January, 1975, a typist in the Environmental Protection Agency was so consistently late for work that her supervisors demanded she be fired. It took 19 months to do it and this incredible 21 foot long chart lists the steps that had to be gone through to satisfy all the rules and all the management and union agreements.
Unnamed Individual: This is really a typical horror story is what it amounts to. It shows the number of steps you have to go through.
Friedman: The process involved the girl's supervisor, his deputy director, his director, his director of personnel operations, the agency's branch chief, an employee relations specialist, a second employee relations specialist, a special office of investigations and the director of the office of investigations. This veritable telephone directory, need I add, was paid with taxpayers money. Who could invent a better protected job than this one before it came to it's end?
Worker: We now have a time certain at which the decision has to be made with the agency.
Friedman: Half an hour's drive out of Washington, you come to Montgomery County where many very senior civil servants live. It has the highest average family income of any county in the United States. Of the people who live here who are employed, one out of every four works for the federal government. Like all civil servants, they have job security, salaries linked to the cost of living, a fine retirement plan also linked to the cost of living, and many manage to qualify for Social Security as well, becoming double-dippers.
Many of their neighbors are also here because of the federal government. Congressmen, lobbyists, top executives of corporations with government contracts.
As government expands, so does this neighborhood. Government protects its workers just as trade unions protect their members. But both do it at someone else's expense. It doesn't have to be that way.
Dick Pashley is an electronics engineer. He designs memory systems for computers. He works for Intel Corporation, one of many companies which have sprung up south of San Francisco at a place that they call Silicon Valley.
Dick Pashley: All these companies have one thing in common. They are trying to get engineers to work on their projects. Now myself, I'm one of these engineers and so obviously I get letters in the mail, phone calls, the like, where people are trying to get me to leave Intel and go to this particular company. One of the companies right across the street here, Intercel, is one of the new companies that's forming in this area. And they are hunting for people just like myself to come in and what they do is they'll offer you like typically a like a 30% higher salary, stock options, a bonus and several other things to get you to move to their company. Since it's not really a move, it's very easy to do because you're only going across the street. It's not a big traumatic thing where you are leaving let's say one city and moving to another. It's very straightforward.
Friedman: In the free labor market everybody benefits. When the market is restricted, things are very different. These Mexicans are heading for the United States side of the boarder. There are real problems about permitting unrestricted immigration into a welfare state. It's one thing when people come for jobs and are on their own which is the case through most of American history. It's another thing when a welfare system will support them come what may at the expense of other people. Yet look what happens when you try to interfere with market forces.
Worker: Well there's fairly large groups of aliens on the hillsides waiting for dark to set in. Other groups that are still on the Mexican side of their boarder. They'll be coming in shortly I imagine. We have electronic sensors buried in along the hillsides around the most traveled trails to alert us from these alien crossings. And from the sensor we work ahead of them, try to head them off.
Friedman: This is not a case of good guys against bad guys. The officers are simply trying to do their duty. The poor Mexicans are driven by hunger and attracted by the prospect of jobs.
Worker: You do good work.
Friedman: The law enforcing people have an impossible job.
Officer: They're gonna run, they're gonna get picked up sent back but sooner or later their going to make it one minute after the next.
Friedman: In one month in 1978 60,000 illegal immigrants were arrested on this stretch of the boarder. But believe it or not, the boarder patrol estimated at nearly 200,000 found their way through to places like this in northern California where there was work waiting for them.
Illegal Mexican immigrants are not cheap labor around here. Many earn more than the minimum wage law demands. They can do so because farmers need many extra hands during the harvest season and there is a shortage of domestic labor available. Jill Hammond and her partner run a farm that produces plump California raisins.
Jill Hammond: There's pending legislation which would make it illegal for farmers to hire undocumented workers. And supposedly it would impose a $1,000 fine per worker on the farm, I can't imagine that it would actually go through. If it did there'd be a full scale farmers revolt around here.
Victor Bedvian: Matter of fact, last year there was quite a bit of activity in the Kermin area which is about 15 miles west of Fresno. Many of the farmers banded together and as much as we warned the boarder patrol to stay off their property. They were going to back that up with guns I'm afraid. They were very upset about it and because their situation was desperate. They needed the workers and they needed the work to be done now. And the boarder patrol was interfering with that as they saw it.
Friedman: Violence by employers to assure the availability of workers is no more justifiable than violence by trade unions to assure their members jobs. But violence is one of the things you are very likely to get when you try to prevent a deal between people who have jobs to offer and people who are looking for jobs. 15 years ago the economy of Spartanburg, SC was stagnant. It depended on peaches and cotton. Wages were lower than the national average and unemployment was higher than the average. Then, dramatically, the picture changed. The people in Spartanburg decided to make their town a center of free trade. They did this by using a new right to work law, eliminating many restrictions on labor. The city council cut taxes to the bone. They advertised the fact that Spartanburg was a place worth investing in.
By any standards, let alone Spartanburg's, the result was revolutionary. Industrialists came from Germany, Switzerland and all over the world to build factories to set up plants. The workers of Spartanburg clearly benefited from the new industries. The first to notice were the people who owned and ran the traditional industries.
M.L. Cates: In terms of the business, it has been a problem for us. It means we've got to be on our toes, we've got to be sure we're providing a good work place that we are providing good jobs and what have you, and that we are running as competitively as possible. I think that on the worker's point of view, this is certain to provide them with more opportunities to, for a market for their product, their labor, their expertise.
Friedman: Suddenly, in a free market, workers who once could not find jobs are now at a premium. Everyone benefited, workers and employers alike and the town thrived. One of the workers who arrived in Spartanburg was Mr. Juma. He came as a refugee from Edie Amiens Uganda.
Mr. Juma: We came in this country just with $139. I had a family, my wife and two kids. And, we came with only four bags of clothing which weighs about 40 pounds each, but we're not allowed to take more than that. We had to leave all our possessions, all our property in Uganda. And myself, I just came down to Flowers Baking Company and I was hired as a laborer to work in the plant at $2.49 per hour.
Friedman: Five years later he is chief accountant of the company. In a free market his best protection his real wealth, turned out to be his skills and his desire to use them.
Juma: America has to offer me a lot of things. And this is a great country. I came in this country penniless, today I own a house, I own three cars, my wife has got a good job, I myself have got a good job and the children are schooling and everything has been working so fine. I believe this because of opportunity. This is where everyone wants to work in this country. There is lot of opportunity.
Friedman: When unions get higher wages for their members by restricting entry into an occupation, those higher wages are at the expense of other workers who find their opportunities reduced. When government pays its employees higher wages, those higher wages are at the expense of the taxpayer. But when workers get higher wages and more civilized working conditions through the free market, when they get them by firms competing with one another for the best workers, by workers competing with one another for the best jobs, those higher wages are at nobody's expense. They can only come from higher productivity, greater capital investment, more widely diffused skills. The whole pie is bigger, there is more for the worker, but there's also more for the employer, the investor, the consumer and even the taxpayer. That's the way a free market system distributes the fruits of economic progress among all the people. That's the essence of the age of the worker.
Participants: Robert McKenzie, Moderator; Milton Friedman; Lynn Williams, International Secretary, United Steel Workers of America; Walter Williams, Professor of Economics, Temple University; Ernest Green, Assistant Secretary of Labor, Department of Labor, Washington, D.C.; William H. Brady, President, W. H. Brady Co.
MCKENZIE: The discussion is already underway here at the University of Chicago, so let's join it.
L. WILLIAMS: Well, we tried a free market system without labor unions. We tried it back in the 1920s and into the '30s and it led the world into the biggest economic disaster it's ever seen in modern times. Now I don't think that we're talking free market or labor unions. We're talking free market with or without labor unions and a free market system without labor unions is a total disaster.
MCKENZIE: Let's get other reactions to this, now, around the group. Is the free market system, Milton's Friedman's been arguing I think, not labor unions, which best protect the interests or serve the interests of the worker? Walter Williams, your reaction.
W. WILLIAMS: Well, I think clearly labor unions serve the best interests of workers who happen to be members of labor unions at the expense of workers who are excluded from being members of labor unions.
MCKENZIE: Ernest Green?
GREEN: I don't think you can have a democratic society without having trade unions. I think if you look at any democratic country, it's essential to it, right of workers to organize and I think it's consistent if we are to maintain a democratic country, those freedoms that the right of workers to organize is a primary objective that maintains a democratic country, those freedoms that the right of workers to organize is a primary objective that we have to maintain.
MCKENZIE: Bill Brady?
BRADY: Well if they are so vital, why are so many union members leaving the union? Why are they, why are they losing so many __ why are the unions losing so many decertification elections? Why has the number of union members declined so precipitously from 23 percent of the labor force to what is it now __ less than 19, 18 percent?
L. WILLIAMS: All depends whose figures you're reading. But workers aren't leaving the labor movement in droves. The union is not declining precipitously. My union, the United Steel Workers of America, the major unions in the country, many small ones are out organizing and growing. The mix of work __ the mix of work in the society is changing. We have some employers, as we saw in the film, who can't wait to rush off to the south and try to get in an anti-union environment and invest their money in prosperity in the south instead of in the north and surely if you invest money anywhere you're going to have prosperity.
MCKENZIE: Let me just __
L. WILLIAMS: So we also have a mix in terms of Civil Service and service workers, where we have employers who have grumbled on that film about $2.90 minimum wage.
BRADY: I don't know that if you __ I don't know that if you invest money anywhere that you're going to have prosperity. I don't think that that's a given. That is, you seem to me to be dealing in a premise there that is incorrect.
(Several people talking at once.)
MCKENZIE: Wait a minute now, wait a minute. The key question we're discussing is: Who protects the worker? Is it the labor union or the free market that best serves his interest?
W. WILLIAMS: Well, it seems like from the evidence that I have, from a number of research projects that I've engaged in, I found that labor unions protect their members often at the expense of disadvantaged people. And it's a very, very interesting question that labor unions down through the ages have discriminated against all kinds of people in favor of a particular class of workers.
L. WILLIAMS: We haven't, Walter, we haven't
W. WILLIAMS: We find that labor unions have gone out on strikes and have murdered and maimed people because other people sought entry and in terms of Mr. Green's remark, he says that in the free democratic society we need labor unions. Yes, that is true, we need the right for voluntary association, that is people have the right to form association, but it should not be a requirement that you be a member of a labor union in order to establish a contract for employment.
L. WILLIAMS: Can't we get some __ can't we get some perspective in this, Walter. Talking about unions down through the ages makes no sense at all in terms of where we're at now in this century at this time. This business of trying to relate where unions come from to the, to the medical profession and Hippocratic oaths, Hippocratic oaths or hypocritical oaths, however one looks at that, back in the Greek aeons really have very little relevancy.
W. WILLIAMS: Yes it does.
L. WILLIAMS: The violence, see hear me out a minute , I waited patiently.
W. WILLIAMS: Okay, okay.
L. WILLIAMS: The violence it's associated with __ well, not so patiently, but I waited. The violence associated with the labor movement and so on have been minimal and was a reaction in this century, not over the ages, a reaction in this century to the violence done workers by corporation and powerful economic groups when there was no workers' organization to protect them and no way to deal with their greed and with their power __
MCKENZIE: Okay. Now, now I'm turning to Milton because he's heard the flavor of the discussion.
FRIEDMAN: Sure. What Lynn Williams is now saying is utter nonsense. There's no other __ no two ways about it. The conditions of the worker in this country before there was labor unions were very important __ improved very greatly. You cannot tell me the millions of people, my parents, your parents, for all I know, parents of many people around, came to this country from Europe in order to be exploited and in order to be subjected to violence. Of course, there were incidents of violence.
GREEN: I disagree with that vehemently. I mean most of the blacks came to this country not voluntarily, but they were shipped here.
FRIEDMAN: The blacks __
GREEN: And the interesting thing about the issue on __ on Spartanburg though __
FRIEDMAN: The blacks did not __ excuse me, hold on for a second.
GREEN: Is that you left out __
FRIEDMAN: Hold on.
MCKENZIE: Let him finish and then back to you.
GREEN: All right.
FRIEDMAN: The blacks are an exception and I agree with you completely.
GREEN: Twenty-two million exceptions, though.
FRIEDMAN: But they are a very important exception. But there are also millions and millions __the people that Mr. Williams represents are not mostly blacks. They are mostly from the Slavic countries, came from Eastern Europe.
L. WILLIAMS: If you look at the membership of the Steel Workers __
FRIEDMAN: If we __ if we go back, the violent __ there was violence, of course, there always has been violence. It's not excusable, I'm not excusing violence on the part of anyone, but I agree with Mr. Green and with Walter Williams that people should be free to organize. Of course they should be free to organize. What I object to is the special privileges that have been given by government to labor unions which are not available to other groups at all. When labor unions have used violence in industrial disputes they are not subjected to the same sanctions as people ordinarily are. When cars are turned over in the course of a labor dispute, how often do people go to jail as a result of it?
L. WILLIAMS: Dr. Friedman and Walter Williams go back in history and they take a look at a situation where America was empty, where we didn't have anything like the sophisticated industrial economy we have today, but had a much more agricultural and rural kind of economy and of course when the __ when the impoverished peasants of Europe, my ancestors and most of our ancestors, except for the slaves, which is another situation, but when these people came from Europe and came to a wide open continent with the most fertile soil then available to anyone in the world, naturally there was progress; and I or any of us would be mad to deny progress. But as that developed and as population increased and as we moved into a much more sophisticated industrial economy, we moved then into the situation in the 1930s, or earlier than that , at the end of the century. As some of the more skilled jobs came along, the labor movement didn't happen by accident. Didn't happen because there wasn't a need there. The results of this development, even with all the wealth available in America, the results of this development was that many working people were not having anything like, by standards of civilization or whatever, anything like their fair share in this progress.
MCKENZIE: Now you're arguing that in a free market, for labor, everyone benefits. Does that mean that you would favor abolition of all immigration restrictions?
FRIEDMAN: The situation of immigration restrictions really has to do with the question of a welfare state. As I say in the film, I would favor completely free immigration in a society which does not have a welfare system. With a welfare system of the kind we have, you have the problem that people immigrate in order to get welfare, not in order to get employment. You know, it's a very interesting thing, if you would ask anybody before 1914 the U.S. had no immigration restrictions whatsoever, I'm exaggerating a little bit, there were some immigration restrictions on orientals, but it was essentially, mainly free. If you ask anybody, any American economic historian was that a good thing for America, everybody will say yes it was a wonderful thing for America that we had free immigration. If you ask anybody today, should we have free immigration today, everybody will __ almost everybody will say no. What's the difference? I think there's only one difference and that is that when we had free immigration it was immigration of jobs in which everybody benefited. The people who were already here benefited because they got complementary workers, workers who could work with them, make their productivity better, enable them to develop and use the resources of the country better, but today, if you have a system under which you have essentially a governmental guarantee of relief in case of distress, you have a very, very real problem.
MCKENZIE: But this is true of every western industrialized country.
FRIEDMAN: That's right and that's why today __
FRIEDMAN: __ under current circumstances you cannot, unfortunately have free immigration. Not because there's anything wrong with free immigration, but because we have other policies which make it impossible to adopt free immigration.
MCKENZIE: Well I'd like other reactions. Is it at all feasible to open the door of the labor market internationally now? Bill Brady?
BRADY: I would __ I would say yes providing they open the door to us. I think that the door to not only the labor market, the door to all markets should be __ should be open. That is the product markets.
W. WILLIAMS: My feelings about the undocumented workers of Mexican-Americans are inscribed at the foot of the Statue of Liberty. I think that the people should have the right to come to this country. Now, those who would say, you know, I hear a number of people saying that, well the immigrants are contributing to our unemployment problem. And I point this out to some people, I said, "look, you know, this is the same rhetoric that the Irish used when the blacks were coming up from the north, " you know, they're using blacks as scapegoats. They're saying, "get those people back where they came from so that our members can get jobs, " you know. Unions were as well doing this, you know, they called them scabs, strikebreakers, etcetera, etcetera. So I do not wish for Mexican-Americans to become the new scapegoats of our particular national problems. They are not the problem, and our nation benefits to the extent that these people come here and work. And to that extent __ to that extent__ so it's kind of good for them to remain illegal aliens as opposed to being legal aliens where they're subject to our welfare programs, so that we don't want them to come here to __
(Several people talking at once.)
GREEN: I think that this country cannot have a group of workers to remain outside the framework of our laws and our protection. And as long as we have workers who are attracted to the United States because of the standards of living; and I think minimum wages play a part in that as part of that attraction. But it seems to me to have undocumented workers without providing either a means of protection for them and it seems to me that we've got to go to the question of providing the amnesty for those generations of workers who have come here over a period of time, now two, three, maybe four generations. We have to see that they have the same rights and protection of all other workers. And as it stands now, large numbers of them live outside the framework of the laws and statutes that we have on the __ on our books.
MCKENZIE: Comment Milton.
FRIEDMAN: They do and the tragedy of the situation, as what Walter Williams point out, that as long as they are undocumented and illegal they are a clear net gain, the nation benefits and they benefit. They wouldn't be here if they didn't. The tragedy is that we've adopted all these other policies so that if we convert them into legal residents it's no longer clear that we benefit. They may benefit, but it's no longer clear that we do. What Lynn Williams said before is again a travesty on what was actually going on. The real boost to the trade union movement came after the Great Depression of the 1930s; that Great Depression was not a failure of capitalism; it was not a failure of the private market system as we pointed out in another one of the programs in this series; it was a failure of government. It was not the case that somehow or other there was a decline in the conditions of the working class that produced a great surge of unionism. On the contrary __ unions have never accounted for more than one out of four or one out of five of American workers. The American worker benefited not out of unions, he benefited in spite of unions. He benefited because there was greater opportunity because there were people who were willing to invest their money because there was an opportunity for people to work, to save, to invest. That's still the case today. You say, we have to provide them with something or other Ernest. Who are the "we"?
GREEN: We the people.
FRIEDMAN: How do we the people __ but how do we the people do it?
GREEN: And it seems __ we the people provide them the protection by seeing that their safety __
MCKENZIE: You're talking about the immigration population now.
GREEN: __ and occupational health codes that protects the environment that they work in, see that they have civil rights laws that protect their own person. See that they have civil liberties laws that protect them further. We the people of this country provide that protection.
W. WILLIAMS: Why are they coming here it's so bad? If they don't have, you know, you're kind of painting an image, you know. Why are these people coming? We're not pulling them here by chains.
GREEN: It's obvious why people come here; it's one of the wealthiest nations in the world.
(Several talking at once.)
MCKENZIE: Gentlemen, don't all talk at once. Lynn, and then __
W. WILLIAMS: So what are you talking about protecting them?
GREEN: Why did you leave Little Rock, Arkansas to go to Philadelphia? It seems to point__
L. WILLIAMS: It seems to me that it's obvious __
W. WILLIAMS: Would you extend the courtesy to finish. Look, look, first thing, look, let me say the following things: There's some basic things that we need to know.
L. WILLIAMS: Well now are you going to say the thing I was interrupting and then say five more things. I mean there isn't all afternoon.
W. WILLIAMS: You know, labor unions, and minimum wages for that case cannot improve the condition of the working people of the country.
L. WILLIAMS: We do it everyday.
W. WILLIAMS: Because if__ are you suggesting __
L. WILLIAMS: We improve the working conditions of working people in countries all around the world, everyday.
W. WILLIAMS: Well you know this __ you know what you're telling the audience, you're saying that you can solve the problems in Bangladesh. You can make them a rich country if you tell them to unionize like we are __
L. WILLIAMS: I didn't say that.
W. WILLIAMS: __and demand high wages.
L. WILLIAMS: No, I didn't say anything remotely like that.
W. WILLIAMS: It's productivity that keeps income low.
MCKENZIE: Lynn, let him finish.
BRADY: I come back to my initial question: why are so many leaving the union?
L. WILLIAMS: There aren't very many leaving the union.
BRADY: Oh, there are too. I've given you the statistics.
L. WILLIAMS: Ah, now, do you think I'm __ you grind off some percentages. I live in the labor movement.
BRADY: You __ do you have other percentages?
FRIEDMAN: In or on?
L. WILLIAMS: In, with and on. And of course they pay me, of course, and I don't have any objection to that at all.
FRIEDMAN: Neither do I.
L. WILLIAMS: At least we got you a few minutes ago __ we got you to get the labor movement up into this century. And I agree with the observation you made __
L. WILLIAMS: I agree with the observation you made that the industrial union movement __ that there was a union movement came out of the, out of the dirty '30s and out of the depression and grew and that was essentially and industrial union movement. But I wonder if __ I wonder when I hear your commentary on the film and so on about unions and restricting practices and restricting access to industry and all of this, I really __ I don't mean it disrespectfully, but I really wonder __
FRIEDMAN: Don't mind being disrespectful, it's all right. I'm used to it.
L. WILLIAMS: I really wonder if you, if you do understand how the industrial union movement, which is __ the more recent part of the union, how it really operates. We're not telling anybody who they have to hire.
MCKENZIE: Let's raise the question, which certainly is dealt with in the film: have minimum wages __ which is a form of government intervention __ served the interests of the poor and indeed of the working class generally? Now I know you've spent a good deal of time looking at this __
W. WILLIAMS: Yes. Okay, well, at least form the standpoint of teenagers, particularly minority teenagers, the minimum wage law has acted to destroy a number of employment opportunities. For example, back in 1948, the black youth between 16 and 18 had an unemployment rate of 9.4 percent and white youth was 10.4 percent or 10.2 percent. The labor force participation rates of blacks was considerably higher than that of whites. And with each increase in the minimum wage law, we had the dramatic reversal that we have now. And so the minimum wage law has the effect of saying that if you cannot produce $2.90 worth of goods an hour, you don't deserve a job.
GREEN: I don't think __ you can't look just at the minimum wages __
W. WILLIAMS: But __
GREEN: __ you've got to look at the relocation of firms. You've got to __ you've got to look at the movement of people. You've __ I mean you can't __ you can't do that.
W. WILLIAMS: Well, can't we just __ well you look at the relocation of firms. A lot of people try to say a lot of jobs move out to the suburbs. Well, you find black an white unemployment ratios the same in the suburbs as you find in the cities. So it's __ I mean, it's the minimum wages.
L. WILLIAMS: Yes, but taking one element __ you're taking one element out of a long historic development and you start comparing 1920 __
GREEN: Even if you hold constant __ if you hold constant __
(Several people talking at once.)
MCKENZIE: Lynn is next, Lynn and then Ernest Green. Come on now.
GREEN: I understand the law of educational achievement.
MCKENZIE: Lynn and then Ernest Green.
GREEN: You get a differential between black and white unemployment rates __
MCKENZIE: I'll bang the gavel. Come on. Lynn.
L. WILLIAMS: Well you're taking __ you're taking one element, years ago in a situation that's entirely different that we're in today and drawing some conclusions__
W. WILLIAMS: Minimum wage. That's what's different.
L. WILLIAMS: No, no. There are many other things that are different. The enormous movement of black people in this country between 1948 and now. You can't just wipe that out. And you can't say that's __
W. WILLIAMS: White people move too.
L. WILLIAMS: __ you certainly can't say that's the minimum wage. But you know __
MCKENZIE: Wait now. I want this case made. Has the minimum wage served the interests of the working people in this country?
L. WILLIAMS: I don't think there's any question __ I don't think there's any question that the working people of this country would be much worse off than they are today, the youth of this country would be much worse off than they are today if we didn't have minimum wage.
MCKENZIE: All right, now, Bill Brady. You __ come on.
BRADY: No, it's I __
MCKENZIE: On minimum wages __ good idea or not? You're an industrialist.
BRADY: No. It's a bad idea. It is patently one of the, one of the worst things that can __ that we can do to our youth. We prevent them from __
GREEN: Bill, how many kids do you have?
BRADY: __ we prevent __what's that?
GREEN: How many kids do you have?
BRADY: I have two.
VOICE OFF SCREEN: It's not important how many kids you have.
GREEN: But it is. Minimum wage doesn't affect his industry. His wages are far above the minimum wage.
FRIEDMAN: Minimum wage doesn't affect a single one of his members.
(Several people talking at once.)
MCKENZIE: Hold it. Hold it. Hold it. Milton has the floor.
L. WILLIAMS: We have not gone to support minimum wage legislation in this country __
MCKENZIE: Gentlemen, hold it a moment.
L. WILLIAMS: __ simply to look after our own interests in something as you describe.
MCKENZIE: Hold it a moment.
(Several people talking at once.)
MCKENZIE: Hold it a moment now. Milton __
L. WILLIAMS: Of course we have not. We are a people's organization __
MCKENZIE: Lynn __ the Chairman has said the floor is Milton's.
FRIEDMAN: I was saying that there is not a single one, I suspect, of the members of your union who is affected by the minimum wage. They are much higher.
L. WILLIAMS: As a matter of fact that is a deduction.
FRIEDMAN: You say that you are a public service organization.
L. WILLIAMS: I say we're a people's organization.
FRIEDMAN: You're an organization of your workers. And if you aren't representing the interests of your workers they ought to fire you.
L. WILLIAMS: And we're out __
FRIEDMAN: If you tell us that you are going against the interests of your workers and you are simultaneously saying to your workers __ I'm not doing what you hired me for.
L. WILLIAMS: Oh, come on. This is, this is pure sophistry. I'm not __
FRIEDMAN: It's not sophistry in the slightest.
L. WILLIAMS: __ I am not talking __
FRIEDMAN: I'm just trying to __
L. WILLIAMS: I am not talking about representing the interests of our workers. Our union represents a lot of people.
FRIEDMAN: Right. Right. It does.
L. WILLIAMS: And some of the people are the ones that you're probably aware of, the people who work in big steel mills __
FRIEDMAN: That's right.
L. WILLIAMS: __ and all the rest of that.
L. WILLIAMS: But we also go out and organize workers all the time and win certification votes despite Bill Brady's comment about that and many of the workers we organize are workers who are affected by minimum wage. And the result of our organizing them is that we're able to bring them above the minimum wage.
W. WILLIAMS: The point is, is that, I think that both these gentlemen, we all should recognize is that unions in the United States support the minimum wage. They are the major supporters. They spend millions and millions of dollars in lobbying for the minimum wage law. They do it out of the name of concern and being in the interest of people. Now, in South Africa the unions are far more honest. That is those white racist unions over there they say we support minimum wages and equal pay for equal work so as to protect white jobs. That is to protect white jobs__
L. WILLIAMS: Are you implying __
W. WILLIAMS: __ from low price competition.
L. WILLIAMS: Are you now implying, wait, that we're white racists?
W. WILLIAMS: No, I'm not saying that. I'm saying that it doesn't make any difference about the intent. The effects are __ the effects are __
GREEN: Walter, the Urban League supports minimum wage the __ Ben Hooks at NAACP supports minimum wage.
MCKENZIE: The floor belongs to Ernest.
W. WILLIAMS: They have very good reasons to support minimum wage.
W. WILLIAMS: Their group that they represent __
GREEN: Why __
W. WILLIAMS: They represent middle class blacks.
GREEN: No, no, no.
W. WILLIAMS: They don't represent the poor blacks on the streets.
GREEN: The membership of the NAACP probably has as many __
W. WILLIAMS: And they're owned by them. They're owned by the AFL-CIO.
L. WILLIAMS: They aren't owned by the AFL-CIO.
MCKENZIE: Order. Order.
L. WILLIAMS: That is a conservative's view __
MCKENZIE: Order. Order.
L. WILLIAMS: That is a conservative's view __
(Several people talking at once.)
MCKENZIE: Order! I'm going to __ I'm going to __ I'm going to __ I'm going to turn to Milton now. Are you saying, then, that you would advocate the repeal of minimum wage legislation?
FRIEDMAN: Of course.
MCKENZIE: You would.
FRIEDMAN: Of course I would.
MCKENZIE: Bill Brady, Bill Brady.
BRADY: I should like to ask Ernest and Lynn why they want to restrict a minimum price to labor. Why don't you let me have a minimum price on the products that we manufacture?
L. WILLIAMS: Well we aren't hare, as I understand it, to discuss your problems at the moment in terms of the owners __
BRADY: Is there a difference why a minimum amount of profit ___
L. WILLIAMS: Well, you're the people I assume who are so anxious to have the free market system and to compete with each other and all the rest of it, we're talking about the needs of the workers and we're talking about the needs of the people who come into a society which isn't providing enough employment for them; which clearly doesn't seem to be able to provide enough employment for them and what are we going to do? And I think this notion that somehow if we just let every guy who is running a hamburg stand or whatever, we just let all these people exploit the young people of this nation in any way they chose, pay them any little rate they could get away with, that everybody would then go to work, would everybody then have a job, is absolute nonsense.
MCKENZIE: I want to bring Milton to one of the final stages of his film, which is Spartanburg, South Carolina.
MCKENZIE: And I want to know what your __ what conclusion you're drawing from that. Would you, in effect, like to see the whole of the United States become as it were, Spartanburg writ large?
MCKENZIE: Yeah. What would that mean? And then we'll get their reaction to it.
FRIEDMAN: It would mean a widening of the opportunity for everybody. It would mean an opportunity for employers all over to compete with one another for workers. It would mean an opportunity for workers to find jobs which can make the greatest use of their own skills and their own capacities. It would mean that consumers would be able to get better products at lower prices. You know, consumers enter into this situation, too. You might think that somehow or other, you know __one of the things that's always a mystery to me, if a $2.90 minimum wage benefits people why wouldn't a $6 minimum wage be better? Wouldn't a $10 minimum wage be better? Why don't these people come out for a $200 figure minimum wage? If all you had to do to make a country __
VOICE OFF SCREEN: You're pretty smart __
FRIEDMAN: Two hundred dollars an hour.
W. WILLIAMS: Or extend it to babysitters.
FRIEDMAN: Yeah. If all you need to improve the lot and the conditions of people is to legislate a higher __
MCKENZIE: You're back on minimum wages. I want to know how Spartanburg __
FRIEDMAN: All right. Spartanburg improves matters because it introduces a wider range of competition and the real thing that protects the worker is the existence of alternative employers seeking his services, just as what protects the consumer is alternative sellers.
BRADY: Milton, you omit one thing that it would do. And it would result in a very substantial increase in capital investment.
FRIEDMAN: Absolutely. It would.
BRADY: And capital is the worker's second best friend.
L. WILLIAMS: This is only to say, surely __
FRIEDMAN: Everybody can benefit.
L. WILLIAMS: This is only to say that a busy economy, one in which there's investment and development and so on is an economy that's a good economy for working people and for everyone else. I think we say that in the AFL-CIO. at least once a month, all the time. There's nothing in which __ there's nothing in which we're more interested than having a busy, functioning economy. The question is how to bring that about. I do suggest and I think __ I think can be defended as long as we want to discuss it, that the prosperity we have in America today that the labor movements have made an enormous __ the labor movement has made an enormous contribution to that and in the absence of the labor movement and in the absence of minimum wage this would not be as prosperous a country as it is.
MCKENZIE: Now hold it there __ hold it there, Lynn. I want to get a reaction to that. He stated the case for what unions have achieved. Could we go around, first of all, do you accept any part of that?
W. WILLIAMS: No, it's preposterous, you know, as I suggested before. I mean, if we, you know, if minimum wages could make people richer __
MCKENZIE: Unions we're talking about now.
W. WILLIAMS: Well, if unions could make people richer __
W. WILLIAMS: __ all you have to do is tell people in Bangladesh why don't you unionize and demand a higher wage. You could be rich like the United States.
L. WILLIAMS: We're telling everyone in the world.
W. WILLIAMS: It's productivity.
L. WILLIAMS: We told them in Japan it works.
MCKENZIE: Lynn __
W. WILLIAMS: The workers have higher wages in our country because they're more productive. That's how you get higher wages. And this just plain __ I mean, it's nonsense.
BRADY: And why are they more productive?
W. WILLIAMS: Because they have capital __
BRADY: Enormous capital investment.
(Several people talking at once.)
BRADY: And the higher wages are paid and the higher the capital intents of industry.
L. WILLIAMS: And because there are consumers to buy the stuff who have wages which enable them to go into the marketplace and buy something.
BRADY: Without the capital investment they wouldn't have the wage and it would be no way of paying them without the capital investment.
L. WILLIAMS: If all those workers weren't making any money there wouldn't be much prosperity__
BRADY: There would be no way of paying it without the capital investment.
MCKENZIE: Ernest Green, what's the reply, your reply?
GREEN: I stand by my initial statement, that it is a prerequisite of the democratic society to have trade unions, organizations aligned, workers to band together in their mutual interests, and __
VOICE OFF SCREEN: Are you saying voluntary associations?
GREEN: And if that, if that group __ I'm saying that trade unions like A. Philip Randolph's sleeping car porters, the Pullman car company would have never, on its own, given those workers who worked very hard and were very productive people, well educated, any increase in their wages had it not been for the intervention of Randolph.
FRIEDMAN: The crucial issue is whether governmental measures which have the effect of favoring union organization of giving them privileges and immunities that are not accorded to other organizations in the society, benefit the society as a whole, or harm the society as a whole. The proposition I tried to make in this film was that the source of the prosperity of this country was freedom of enterprise, freedom of employers to hire, of workers to work for whom they wanted to; and insofar as unions have played a role, they have protected some workers at the expense of others, and have retarded the prosperity of this country. I think that Lynn Williams' statements to the contrary cannot be supported by any empirical or other evidence that he has, understandably, I'm not blaming him for this, he would be faithless to his job if he did not believe sincerely in what he's saying. I'm not questioning his sincerity, but sincerity is a much overrated virtue in our society. The plain fact is that there is no evidence whatsoever that either unions or minimum wages have made positive contributions to the prosperity of this country. Some unions have, of course, some unions have done great harm. It's not an open and shut picture in which you can make a sweeping statement. But on the whole, the growth of this country __
VOICE OFF SCREEN: I'd like for you to make a sweeping statement.
FRIEDMAN: I do. The sweeping statement I make is that the prosperity of this country derives primarily from freedom of enterprise and freedom to hire, to employ, to work, and not from restrictive measures imposed by trade unions.
MCKENZIE: Everybody briefly now. Ernest __
GREEN: And I would say that the intervention of the strong Federal Government, who those employers hire, the kinds of protection, the wage standards, health conditions, are the requirement of this government to protect these people. Because the history of it has shown that hasn't occurred; and in your case in Spartanburg, South Carolina, again, I argue that the only reason that they can come back now and attract firms from Switzerland and Germany is because, one that we had a strong government that provided protection for all of its citizens which didn't occur fifteen years ago.
MCKENZIE: Bill Brady.
BRADY: Economic freedom, in my opinion, should not be abridged. I think that these two gentlemen are advocating that it be abridged. They're advocating a retention of the minimum wage; they're advocating, I think, Lynn Williams is advocating the retention of the Davis Bacon Act. They do not, it seems to me, believe that freedoms are interdependent and indivisible. There are freedoms __ there is economic freedom; there is press freedom; there is freedom of assembly; there's religious freedom; and you are advocating to me a great abridgement of economic freedom and when you do that you injure the other freedoms that we have. And if you do it enough, as we are doing in this country today, if you do it enough we are in danger of losing all of our other freedoms.
MCKENZIE: Now we leave this very spirited discussion, and I hope you'll join us again for the next episode of Free to Choose.
Watch for a young Prof. Walter Williams.
Free to Choose ping #8.
You can watch this whole episode if you have Google Video:
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