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Friday, December 18, 2009

Workers of the World Unite for a Free Market

Protected firms can get away with abusing workers.

By way of Roderick Long I’ve learned that has some pretty rough rules for its employees. (Long draws on the Huffington Post and the Times Online.) According to the Times, employees at the Bedfordshire (UK) warehouse were:

  • Warned that the company refuses to allow sick leave, even if the worker has a legitimate doctor’s note. Taking a day off sick, even with a note, results in a penalty point. A worker with six points faces dismissal.
  • Made to work a compulsory 10½ hour overnight shift at the end of a five-day week. The overnight shift, which runs from Saturday evening to 5am on Sunday, means they have to work every day of the week.
  • Set quotas for the number of items to be picked or packed in an hour that even a manager described as “ridiculous”. Those packing heavy Xbox games consoles had to pack 140 an hour to reach their target.
  • Set against each other with a bonus scheme that penalises staff if any other member of their group fails to hit the quota.
  • Made to walk up to 14 miles a shift to collect items for packing.

It also reports that workers are “Given only one break of 15 minutes and another of 20 minutes per eight-hour shift and told they had to notify staff when going to the toilet. Amazon said workers wanted the shorter breaks in exchange for shorter shifts.”

In a help-wanted ad posted at Express, Amazon tried to attract employees to its Coffeyville, Kansas, fulfillment center with such benefits as, depending on the job, standing stationary 8-10 hours or walking 10-15 miles a day: “[M]ust be able to repetitively lift, bend, stoop, and squat while selecting items.” The job pays $10.50 daytime, $11 nights.

Reuters reports that “A former Inc worker has sued the online retailer, saying it shorts as many as 21,000 warehouse workers nationwide on overtime pay.”

Controversy Erupts

When the news hit the libertarian blogosphere, controversy erupted. Controversy? How could that be? A couple of bloggers at the LRC Blog (see this and this) dismissed the Huffington Post’s notice as just the standard progressive’s whining about “capitalism.” Gosh, people actually were expected to work for their pay? one commenter asked sarcastically.

But libertarian Long’s Austro-Athenian Empire blog took a different tack. Rather than asking why Amazon employees didn’t find jobs elsewhere, Long wrote, “a better question would be: ‘Is it likely that Amazon would be able to get away with this crap in a non-oligopsonistic labour market?’”

It’s a fair question that libertarians don’t ask nearly enough. For the record, oligopsony is the flip side of oligopoly, that is, a small number of buyers, in this case, of labor services. (I would go further and say a small number as the result of government restrictions on competition—but I get ahead of myself.)

I surmise that the typical free-marketeer reaction to the Amazon story is this: People take those jobs voluntarily after judging that what they receive in pay is worth more than what is required of them. Using good praxeological reasoning, we can be confident that, all things considered, these jobs are the best opportunities available to the people who take them. Thus there are no grounds for complaint.

Well, not quite. While the application of praxeology is valid, what if the set of opportunities available is artificially constricted by government action? That would make it a different story. (The point is applicable to third-world sweatshops workers and Bob Cratchit also.)

And how might that set be constricted? By all the things we free-marketeers constantly grumble about: occupational licensing (from flower arranging to hair-braiding to taxi driving to teaching), zoning (separating commerce and residence), government-held land (creating artificial scarcity), and barriers to entry from taxes and regulation that are a greater burden on potential and nascent businesses than to established firms. Moreover, explicit and implicit privileges (such as eminent domain, transportation subsidies, economic-development benefits, government product standards, and patents) induce concentration and cartelization, leaving fewer and larger firms bidding for workers’ services.

Less Bargaining Power

In general, any government intervention that makes it harder to start businesses pushes people into the labor market with less bargaining power than they would have in a free market. Less bargaining power for workers means more bargaining power for bosses. So it stands to reason that some percentage of the workforce must put up with lousy job conditions they would reject in a minute if there were a wider array of better opportunities, including self-employment. But there isn’t because the State, with the backing of established businesses, has kept those opportunities from coming into existence—sometimes by outright prohibition, sometimes by “progressive” measures to “protect” consumers and workers. Technology now makes it more feasible for people to work independently, but statutes and ordinances still stand in the way.

It all comes down to the same thing: squelching competition and creating dependence on thusly protected big hierarchical and often authoritarian firms. (Yes, small business gets some State benefits too, but see Roderick Long’s response here. Also see C. L. Dickenson’s “Free Men for Better Job Performance” here and here.)

Concerns about working conditions sound “left wing” but that’s only because libertarians have neglected the issue, without good reason in my view. (It was not always so. Nineteenth-century liberals explicitly appealed to working people and condemned the State-derived power of “capital.”) Too many contemporary libertarians mistakenly think that since sound economic theory tells us that poor working conditions can’t endure in an advanced competitive market, workers have nothing to worry about in a “capitalist” country like the United States. The problem with the argument is that “capitalism” doesn’t equal “free market,” and we haven’t had a free market—not even close. In fact, the economy we live in is far more the product of government-business collusion—going back to the beginning—than economic freedom.

Where the progressives and state socialists go wrong is in thinking that weak worker bargaining power is inherent in the market itself. It is not. It is the result of State privilege. Therefore the solution is not further government intervention, as the progressives want, but repeal of privileges, subsidies, licenses and the rest of the sources of political advantage that protect the well-connected at the expense of the rest of us.

People typically become libertarians because they favor individualism and abhor seeing themselves and others abused. Unfortunately, nonlibertarians don’t know this. They think libertarians are simply pro-business (and anti-labor). We can set the record straight by acknowledging that government-business collusion hurts working people.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.