It's A Saturday Morning Bonus Podcast For 02-22-25

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Episode Transcript

Speaker 1 (00:00):
The Michael Berry Show.

Speaker 2 (00:01):
Welcome to the Saturday Podcast. Honor to have you here.
Last week we brought you Thomas Soul, who I love
and adore and think you can learn a lot from
as I have. This week we're bringing you his mentor
another of my favorites, Milton Friedman. Friedman was one of
the most influential economists of the twentieth century, known for

(00:23):
a very fierce advocacy of free markets, limited government intervention,
and monetarism. He won the Nobel Prize back when it
still mattered in nineteen seventy six for in the category
of Economic Sciences for his work on consumption analysis, monetary history,

(00:44):
and stabilization policy. And they're pretty dense and pretty thick,
but it's good reading. This is a speech in which
he debunks labor unions and explains the right to work,
which is why we have states that don't require you
to join a union. They are known as right to
work states.

Speaker 3 (01:05):
And i'll present to you doctor Milton Friedman, Thank you

(01:27):
very much.

Speaker 4 (01:29):
The subject that was put out for tonight's talk is
the subject of who protects the worker?

Speaker 3 (01:40):
If you were to have a gallip.

Speaker 4 (01:41):
Pole go around and ask people that question, or if
someone were to go around and ask people in this
audience the question of who protects the worker, I strongly
suspect that you would get one out of three possible answers.
Some people would say, of course, the unions that protect

(02:01):
the worker. Some other people would tend to say, oh, no,
it's more important the government that protects the worker. And
I suspect most people would say it's nobody who protects
the worker. Now, all three answers are under some circumstances correct,

(02:24):
but all three answers are misleading. They cannot really be
the right answer. One obvious bit of evidence that they
cannot be the right answer, that there's something missing from
that sequence of three answers is the history of the

(02:47):
United States over the past two hundred years. Over that period,
if we at least take the first one hundred and
fifty years period from seventeen seven tventy six to nineteen
fourteen or thereabouts, it could not very well have been
unions that were protecting the worker, since there were almost

(03:11):
no unions. Even craft unions developed fairly early, but even
by nineteen fourteen, there must have been a very very
tiny fraction of all workers in the United States that
were members of Union. It could not have been the
government that was protecting the worker because over that period

(03:36):
government was very small. Total spending by the federal government
over that period never amounted to more than three percent
of the national income, except for the period of the
Great Wars of the Civil War and before that, of course,
the War of eighteen twelve. But during ordinary times federal

(03:59):
spending out of the three percent, state and local spending
amounted to about twice that much, mostly for schools. So
it could not conceivably have been the government that was
protecting the worker. Moreover, not only was spending low, but
there was very little government involvement in the economy in
any way, and it could not have been nobody who

(04:20):
was protecting the worker, because that was a period of
enormous progress for the ordinary worker. If we take that period,
it was a period which saw the growth and development
of the United States from a backward.

Speaker 3 (04:34):
Area, but even from the very beginning.

Speaker 4 (04:37):
Adam Smith, in his great book The Wealth of Nations,
published in seventeen seventy six, remarks about the conditions in America,
and he says that although America is at the time
much less populous and much less wealthy than Great Britain.

(04:59):
The worker in America is more expensive because they were
at the time, as he argued, fewer workers relative to
the demand for them. Over the period from seventeen seventy
six on, the average, conditions of the ordinary worker in

(05:20):
the United States improved enormously. In the latter half of
the nineteenth century. You had millions on millions of people
of penniless immigrants come to this country. My parents came
during that period. Probably the parents or grandparents of many
of the people in this room came.

Speaker 3 (05:39):
During that period. Why did they come.

Speaker 4 (05:43):
They came in order to improve their lives and to
make a better life for their children and their grandchildren,
and they succeeded. It would be very hard to find
a century in human history in any country anywhere during
which the ordinary man, the ordinary worker, the man who
came to this shore from abroad, or the people who

(06:04):
were here and grew up here. Would be hard to
find a century in which the worker achieved a greater increase,
a more widespread increase in his standard of life, in
his level of living. So neither of three of these
three answers can possibly be the right answer. For a
large part of American history. Before trying to go on

(06:29):
to what the correct answer, in my opinion, is, to
the question, I would like to consider with you each
of the answers that people give and see where they
are right and where they are not, and why they
are right and why they are not. Let's start with
the unions, because that gets the most publicity and the

(06:51):
most attention and is the most misunderstood, in my opinion,
of the three answers. Now, unions do protect some workers.
Unions protect two classes of workers, those of their members
who are employed, and the union officials who run the unions.

(07:19):
But if you're going to look at this as a
general answer, you have to recognize that only about one
fifth of all the workers in the United States are
members of trade unions, and many of those are members
of wholly ineffective trade unions, of trade unions that have

(07:41):
had very little effect on the wages of their members
of the working conditions of their members. It's very interesting
to consider the actual experience of unions and compare it
with the talk about unions and emanates from union leaders,
union headquot and defenders of unions. If you listen to

(08:04):
the talk, you will get the impression that unions exist
to protect the workers who are way down on the
income scale. The talk is always about the necessity of
protecting or helping the low skilled workers against exploitation by employers.

(08:27):
But suppose I were to ask you which are the
strongest unions in the United States. Which unions in the
United States are strongest in the sense of having been
most successful in raising the wage rates the earnings of
their members.

Speaker 3 (08:45):
The answer is very soon clear and very definite.

Speaker 4 (08:48):
Probably the single most successful union in the United States
from this point of view is the Airline Pilots Union. Now,
this is a union whose members typically reset salaries or
wages somewhere around fifty two hundred thousand dollars. They are
hardly the poor, deprived, exploited workers of union literature.

Speaker 3 (09:12):
They have been very successful.

Speaker 4 (09:14):
Because they have been able to have a very strongly
organized union, which is and they have, for reasons which
I will come to later, been in a position to
limit entry into the union and into the occupation. In
my opinion, the next strongest union in the United States
is an organization that the people in this room will
not regard as a union, but that's what it is.

Speaker 3 (09:38):
In my opinion.

Speaker 4 (09:38):
The next strongest union in the United States has been
the American Medical Association. Now, the American Medical Association is
not a traditional union, but it is a union from
an economic point of view. It is an organization of
people pursuing a particular trade which has tried to control

(10:03):
the practice of medicine in such a way as to
improve the conditions of its members. If you ask a
union leader what is the function of a union, he
will agree with you, and he will emphasize and rightling
that the first and primary function of a union is
to improve the working conditions of its members. Well, from

(10:26):
this point of view, the American Medical Association is on
the whole done very well. Again, let me emphasize, I
do not mean in any way to be invidious. I
am not criticizing the airline pilots. I am not criticizing

(10:47):
the members of the American Medical Association. I am only
trying to understand and analyze the situation. Adam Smith, in
that great book on the Wealth of Nations, brought home
to all of us that the way in which the
world runs as mostly by people seeking to pursue their
self interest.

Speaker 3 (11:06):
And there's nothing wrong with that. That's the way in
which we run.

Speaker 4 (11:10):
And he pointed out that in the right kind of
a structure and the right kind of a world, people
in pursuing their own self interests, would also promote the
general interest. So I'm not complaining or criticizing at the moment,
but only analyzing. If there's any fault to be found,
it is not to be. The fault is not to

(11:31):
be found with the members of the Pilots Union or
the members of the AMA, but with the rest of us.

Speaker 3 (11:38):
For letting them get away with it.

Speaker 4 (11:43):
Now, the third strongest groups of unions are undoubtedly the
craft unions, the carpenters, the plumbers, the plasterers and the like.
And they again are a group that have always been
been extremely high paid, that have always been among the

(12:04):
elite of the working community. And finally, as my fourth class,
and this is a newly developing class, the strongest unions
have in recent years, in the past decade in particular
become the municipal unions, the unions who have played a
considerable part in reducing New York City to its present

(12:27):
state of bankruptcy. The garbage workers' unions, the school teachers' unions,
all of the.

Speaker 3 (12:37):
Unions of municipal employees.

Speaker 4 (12:41):
Now, these municipal unions, of course, are illustrate a very
important general case that we will expand more.

Speaker 3 (12:49):
Why are they so strong.

Speaker 4 (12:53):
Because the people who arrange employment with them are not
the people who pay their salaries. It's the taxpayers of
New York who pay the salaries of the people, but
it's the officials of New York City who make the
deals with the unions. Now that illustrates a general principle
which has reached its most extreme form in Great Britain.

Speaker 3 (13:18):
Unions are much stronger in.

Speaker 4 (13:19):
Great Britain than they are in the United States. And
one of the major reasons they are stronger is because
the government of Great Britain has nationalized a great many
more industries. In particular, coal mining, railroads, elected public utilities,
telephones are all nationalized industries, and the worst labor problems

(13:41):
in Britain have almost invariably been in those industries which
are nationalized by the government. Just as in the New
York City and other municipal cases, the growing role of
government has tended to expand the importance in the role

(14:01):
of the unions. One of the strong unions in the
United States, for the same reason are the postal workers' unions,
and so we go down the line. But the most
important thing about all of these is that the strong
unions tend to be among the high paid workers. Now
you have to ask yourself, are they high paid because

(14:24):
they are strong unions or are they strong unions because
they are high paid. It's the very important distinction, and
the fundamental answer is the people who are in a
high paid position are in far better position to have
a strong union, and the strong unions then reinforce their position,

(14:48):
So both things are true. Part of their high paid
in position today derives from their union existence, the existence
of strong unions.

Speaker 3 (14:57):
But they have been able to have strong unions.

Speaker 4 (15:00):
Because they are highly skilled people, relatively few in number,
and therefore far more effective in being able to organize
in such a way as to raise their pay. Because
you must recognize that the only way in which any
group of workers through union organization can increase the amount

(15:26):
of its pay is to make sure that there are
fewer jobs available. There is no way in which a
union can simultaneously increase the number.

Speaker 3 (15:38):
Of jobs and the pay. The law of economics, the law.

Speaker 4 (15:43):
Of demand in economics is inescapable you can't get out
of it. Raise the price of anything, and fewer people
will want to buy it. Make labor more expensive in
any area. Make carpenters more expensive, the number of jobs
available for carpenters will be less. Make physicians more expensive.

(16:06):
The number of jobs available for physicians will be less.

Speaker 3 (16:09):
Make airline pilots more expensive.

Speaker 4 (16:12):
The number of jobs available for airplane pilots will be fewer.
As a result, the gains of the group of workers
I've been talking about are other union workers are at
the expense.

Speaker 3 (16:27):
The union workers gain at the expense of other workers.

Speaker 4 (16:33):
The only way, as I say, in which they can
get a higher pay is by arranging things so that
they're end up being fewer jobs.

Speaker 3 (16:39):
And that means that other people who.

Speaker 4 (16:41):
Might be perfectly competent, who might be perfectly available for
such jobs, are denied their job those jobs.

Speaker 3 (16:52):
As consumer. Not only.

Speaker 4 (16:55):
So, the effect of the higher pay of unions is
lower pay for all other work. I once made the
estimate this was twenty odd years ago, but since there
have been a number of studies that have confirmed this
judgment that on the average about ten to fifteen percent
of the workers in this country had been able through
a union organization to raise the level of their pay

(17:18):
by something like ten to fifteen percent.

Speaker 3 (17:21):
That this had been at the cost.

Speaker 4 (17:24):
Of a roughly four percent reduction in the wages earned
by the other eighty five percent. So the effect has
been to raise the pay of high paid workers and
lower the pay of low paid workers. And of course,
as consumers, all workers pay for this, because the effect

(17:47):
of this higher pay on the one hand and fewer
jobs than the other is to make it more expensive
to produce all consumer goods, to make the allocation of labor,
the distribution of labor less efficient, to mean that our
still of life, if everybody is a little lower, houses
are more expensive for everybody. Union leaders, of course, talk

(18:10):
about taking higher wages out of profits. And if I
were to be talking to a group of union leaders,
or if there are union people in this audience, they
will reproach me by saying, why do you insist it
comes with the other workers? Why can't it come out
of those greedy profit seeking employers. Yeah, of course they're

(18:30):
greedy and profit seeking, so are we all, so are
the workers.

Speaker 3 (18:35):
Do you know somebody in this world who is not greedy?

Speaker 4 (18:38):
Well, of course, I'm not greedy, but everybody else that's different.
But the point is that you cannot get something out
of nothing. I'm sure you've all heard the old story
about John D. Rockefeller, wealthy man around the very wealthy man,
one of the wealthiest men in the country. People would

(19:00):
come up to him and tell him how inequitable it
is that he should have so much money and other
people should have less. And he would say to him, well,
suppose we took all the wealth I have, would you
like to have the share that would be available for you?
And they'd say yes, and he'd take out a dime
and give.

Speaker 2 (19:18):
It to him.

Speaker 4 (19:20):
That was roughly the amount that would be available if
you took his wealth and spread it all over all
the people of the country.

Speaker 3 (19:28):
In the same way. Suppose you just look at the numbers.

Speaker 4 (19:31):
Out of the total national income today, roughly eighty percent
goes to the payment of employees directly or indirectly in
the form of fringe benefits the national These are the
statistics of the national income statisticians. Roughly eighty percent of
the national income now goes for the payment of workers.

(19:54):
Of the remaining twenty percent, something over half of that
goes for the payment of rents, rent on land, rent
on property, and so on, or for the payment of
interest on loans. Profits of corporations. They are the people
who it's always supposed you can squeeze the money out
of profits, and corporate of corporations amount to less than

(20:19):
ten percent of the national income.

Speaker 3 (20:22):
That's profit before tax.

Speaker 4 (20:25):
If you take off the taxes they pay, profits after
tax amount to something like six percent.

Speaker 3 (20:30):
Of the national income.

Speaker 4 (20:32):
Well, there isn't much leeway there to raise wages. Then
you can realize also that every time you go in
and try to extract from that small amount to add
to the amount received as wages, you are reducing the
incentive for capital formation, which has been the major source

(20:56):
of increased productivity.

Speaker 3 (20:58):
Why is it that the ordinary worker.

Speaker 4 (21:00):
Of the United States has been able to get an
ever higher income until the last few years when that
potentially higher income has been extracted off and diverted down
to Washington. But over two hundred years, the worker was
always able to get a higher income because people had
an incentive to put up factories and machines and invest

(21:22):
money and enable the worker to be more productive. So
there is essentially no possibility. This is not something that's
a question of ideology, it's a question of arithmetic. There
just is no large sum which can be tapped by
the so called unions. Now, the question is what is

(21:43):
the source of power of the strong unions?

Speaker 3 (21:45):
Where does it come from?

Speaker 4 (21:49):
Most people, in talking about how unions get their way,
are inclined to focus their emphasis on strikes, which are
very newsworthy, or on feather betting, which is also very
new worthy worthy, or on seniority rules or apprenticeship arrangements.

Speaker 3 (22:11):
And the like. These are not the important things.

Speaker 4 (22:15):
The fundamental source of power of a union is power,
however obtained to force a higher wage rate. If somehow
or other, and I'll come back in a moment to
how they can do it. If somehow or other, a
union can put employers in the position where they cannot

(22:36):
or will not offer less than a certain wage rate,
they can make them offer a higher wage rate. That's
the fundamental source of power. And all of these other
devices we're talking about are ways in which you ration.

Speaker 3 (22:51):
The limited number of.

Speaker 4 (22:52):
Jobs available at that high wage rate among the people
who seek it. If you succeed in saying that no
contractor is going to pay less than eight dollars an
hour for a plumber or a carpenter. That reduces the
number of jobs available. It also increases the number of
people who would like to get that job. But now,

(23:14):
let's suppose for a moment you can enforce that wagering
somehow or other. There has to be a device for
deciding who shall get the job. That's the role of
seniority arrangements. That's the role of apprenticeship arrangements. That's the
role of feather bedding to find a way to allocate
and distribute the graving. It's also, i may say, the

(23:38):
source of the kind of discriminatory policies.

Speaker 3 (23:42):
That unions have followed.

Speaker 4 (23:44):
There has probably been few sources, few more important sources
of racial discrimination in the United States against discrimination against
minority groups than discrimination by skilled craft unions.

Speaker 3 (24:01):
And that's because if you.

Speaker 4 (24:03):
Are going to have a limited number of jobs and
you're going to ration them, you have to have some
way to ration them, and irrelevant considerations and appealings to
prejudice are a way in which you can get support
for certain kinds of rationing.

Speaker 3 (24:20):
It's an interestingly.

Speaker 4 (24:21):
Phenomenon before the Civil War, during the period of slavery,
the fraction of carpenters, plumbers, and so on who were blacks,
especially in the South, was very high. Forty or fifty
years later, after slavery had been abolished, the fraction of carpenters, plumbers,

(24:47):
and so on who were blacks was smaller than it
had been before. Why because successful trade unions limiting the
number of jobs had to find a way to ration
those limited and this was a way of rationing it
which would enable their members to be loyal and to
stick by it, and that the time could get support

(25:08):
from the rest of the community. So the real power
is to force higher wages. Now, how can they do it? Well,
one of the obvious ways they do it is by
threatening to beat up employers who pay a lower wage,
or threatening to beat up or actually beating up workers

(25:31):
who offer to work for a lower wage. And that's
why the union wage arrangements and negotiations have so often
been accompanied by violence. That's a device for enforcing a
higher wage. But an easier way to do it, and
a way which is sort of more respectable, is to get.

Speaker 3 (25:53):
Government to help you out.

Speaker 4 (25:56):
The AMA has been able to do it by having
a government licensing of physicians so that nobody can become
a physician unless he is licensed to be a physician
by a government licensing board. Now they ask you, who
do you suppose is competent to decide who should be
a physician?

Speaker 3 (26:18):
Only other physicians.

Speaker 4 (26:20):
So the membership of licensing boards of medical groups is
always composed of physicians, and that has in fact been
a key element in the restriction of entry into medicine
and in keeping the number of physicians to a lower
level than it otherwise would have been. This happens to

(26:41):
be a subject in which I once did an enormous
amount of work. I wrote a book some thirty y
odd years ago on Incomes from Independent Professional Practice, in
which I examined in great detail the practices of the
American Medical Association, American Dental Association, and other organizations. And

(27:03):
I decided at that time that the effect of limitation
of entry into medicine had been to keep down the
number of physicians and to increase the average income of
physicians at that time by something between seventeen to thirty percent.
Now the recent figures would probably be in the same direction.

(27:24):
Of course, if you talk to physicians, they'll say why.
The reason we're in favor of licensing is in order
to have a very high quality of medical practice. But
then if you look at the rules they have followed,
some of them have no relationship whatsoever to quality of
medical practice. After you had Nazi Germany takeover, and you

(27:45):
had in Germany the Nazi regime, and there was an
attempt by Jewish physicians and other groups, persecuted groups from
Germany to come in the United States, all of a sudden,
the Medical Associaciation started to require that people be citizens
of the United States in order to practice medicine, in

(28:07):
order to be licensed. Now, it's a very nice thing
to have people citizens of the United States, But will
you tell me the relationship between that and the ability
to practice medicine. I could go on at great length. Again,
I'm not criticizing people. I don't mean to say that people.
The physicians aren't sincere when they say this. Of course
they are sincere. That doesn't mean they aren't wrong, that

(28:33):
doesn't mean that they aren't rationalizing in the name of
improving quality a great desire to improve their economic status. Now,
during the Great Depression, they were opening a buckboard. By that,
the Medical Association says, we have to keep down the
number of physicians in order to keep up their incomes,
because otherwise, if they have low incomes, they will be

(28:57):
tempted to engage in unethical practice. Now, if anybody has
ever been able to establish any correlation between the level
of income and the state of personal ethics, I would
like to see that evidence, and so would you. And
of course, licensures use much more broadly. I mentioned the

(29:18):
medical example because it seems best justified, and it is
in a way, it's it's harder to argue against than
almost anything else.

Speaker 3 (29:27):
But you go down the line.

Speaker 4 (29:28):
Have you ever looked at the number of licensing arrangements
you have to be in in almost every state. I
don't know about Pennsylvania, but I'm sure you have to
get a state license to be a barber, and in
most states, in order to get that license, you have
to supposedly have taken courses on the on the biology
of hair, and on care of skin and all sorts

(29:52):
of things.

Speaker 3 (29:54):
And the course.

Speaker 4 (29:54):
Again, who is it who licenses of barbers? It's not
the customers, plumbers licensed plumbers.

Speaker 3 (30:03):
And if you really want to know the real function.

Speaker 4 (30:05):
Of licensure, of licensing all these occupations, all you have
to do is go and see who goes down to
the state legislature to lobby in favor of licensing.

Speaker 3 (30:16):
Now, if the real true function of.

Speaker 4 (30:18):
Licensing is to protect consumers, you'd expect consumers to.

Speaker 3 (30:21):
Be licensed to be lobbying for licensure.

Speaker 4 (30:25):
But you will discover that it's always the plumbers, or
the beauticians, or the morticians, or anything you can name.
There isn't an occupation you can name which hasn't been
down at the state House trying to get licensure. Now,
of course you might say that the plumbers no better
than anybody else, why the customers need protection, But I

(30:50):
sit down very much that that's why they're down at
the state House. They are down there because they want
to be protected against quote unfair unquote competition. Now you
know what unfair competition is. It's anybody who charges less
than you do. So licensing by government has been a

(31:13):
major way in which unions have been able to be strengthened.
That's very important for the pilot's union, it's very important
for the medical union, it's important for many craft workers.
A second set of governmental laws that have been greatly
promoting union strength have been the Davis Bacon Walsh Heeley laws. Now,
these are laws under which any person who has a

(31:37):
contract with the US government. The Davis Bacon has to
do with construction, Walsh Heeley has to do with other
kinds of activities. Anybody who has a contract with the
government must pay quote prevailing wages. Prevailing wages are wages
as determined by the Labor Department of the US government,

(31:58):
and by some strange chance preventing wages always turn out
to be the highest union wages in a very wide area.
And the result of this has been that, in effect,
the government enters in as a partner to enforce trade
union wage restrictions and in this way, to enforce a

(32:20):
restriction in the number of jobs available. Another governmental measure
is minimum wage laws. You'll notice that the people who
are currently lobbying in Washington for higher minimum wages are
not low income workers. It's the f All Cil and

(32:41):
the other high income unions, unions whose members all receive
much higher income than the minimum wage. Now, of course,
they say that the reason they're lobbying for arise in
minimum wages to protect the poor workers at the bottom
and keep them from being squeezed.

Speaker 3 (32:58):
But of course, that's talk. The fact is.

Speaker 4 (33:02):
That they want to rise in minimum wage to protect
themselves from the competition of other workers. The minimum wage
rate has the effect of denying jobs to people. It
has the effect of reducing the opportunities available. The reason
we have such enormously high unemployment rate among teenagers, and

(33:23):
particularly black teenagers, is because.

Speaker 3 (33:29):
It is illegal to hire.

Speaker 4 (33:30):
Anybody whose skills are not sufficient to be worth the
minimum wage rate. The minimum wage law is a law
requiring employers to discriminate against low skilled people. That's not
the way anybody will describe it, but that is in
fact what it is. Here's a person who has low skills.

(33:53):
He's only worth two dollars an hour, and he'd be
delighted to work for two dollars an hour because that's
the only way he's going to acquire better skills and
enable himself to get prepared for a better job. He's
a fifteen, sixteen, seventeen, eighteen, nineteen year old person, for example,
handicamped person, person who has poor education. Illegal for you

(34:15):
to hire him unless you are willing to give him charity,
because you can only hire him if you pay him
two dollars and thirty five cents. It's always been a
mystery a minute, why a young man is better off
unemployed at two thirty five an hour then employed at
two dollars an hour. Can you explain that to me?
Ask mister Meanie, he'll explain it to you. Finally, a

(34:40):
major factor strengthening unions, a factor which is changing, is
a general attitude of the public which has been willing
to tolerate in this area behavior which you would not
tolerate elsewhere. If in the course of a labor dispute,
somebody's car is overturned, it's very likely, very high unlikely.

(35:01):
Then anybody's going to go to jail or get punished
or have to pay for that. If you or I
go down the street and smash in windows of cars
or turn them over, we'll get put in jail and
we'll have to compensate the victims. But if this happens
in the course of a labor dispute, much less likely
to happen. And that's because the public at large has
felt that somehow that was a noble activity and should

(35:22):
be protected. As I say, I believe that position is
changing now. A final source of power has sometimes been
collusion between the unions on the one hand and the
employers on the other to monopolize not labor but the product.
We have anti trust laws in this country which make

(35:44):
it illegal for people to get together for employers to
get together on price fixing agreements, and some unions have
been strong by offering in effect their services to employers
as a way to hold up prices and fix them
in a way that is legal and does gets around
the Anti Trust Act. The most important historical case of

(36:07):
that was back in the nineteen thirties when John L.
Lewis used his coal Miners' union as a way to
enforce with the aid and consent and agreement of the
coal miners, a high price on coal. He was perfectly
willing to see the number of members of his union
go down and in return to compensate those who remain

(36:30):
by sharing with the employers that returns from monopolizing the
coal industry. Another very important case of this has been
the Teamster's Union, which in various places has produced monopolistic
situation in brewery and beer by enforcing fixed prices.

Speaker 3 (36:48):
On beer through union activity. Well, now are enough for unions,
What about government here? Again? Government protects some.

Speaker 4 (37:02):
And I've already mentioned some of the measures whereby they do.
All of these measures which strengthen unions, such as the
Walsh Heeley Davis Baconey, such as licensing, such as minimum
wage laws, are all governmental measures which do protect some
workers by strengthening the unions. Again, the high paid workers,

(37:25):
not the low paid ones. In addition, the government also
protects government workers. You know, it's interesting to consider. Let
me ask you what you suppose. What do you suppose
is the richest county in the United States. What do
you suppose as a county that has the highest per
capit income. Well, now, most people would say, well, that

(37:46):
may be maybe that's Westchester County, the high income county
around near New York. Or maybe that's DuPage County north
of Chicago, where the wealthy people live around Chicago. Or
maybe it's one of the counties in Connecticut, the bedroom
community for the executives of New York. All of those

(38:07):
are high wage counties, but that isn't the highest county
in the country. The highest income county in the country
is the county in Virginia adjacent to the District of Columbia,
which is a bedroom community for government employees.

Speaker 3 (38:25):
That's the highest income county in the country.

Speaker 4 (38:29):
There is an article in the Wall Street Journal just
within the last week from which I cannot resist quoting
something said the Wall Street Journal In this article about
the federal civil Service. As the civil service regulations have
ballooned to fill twenty one volume, some five feet thick,
government managers have found it increasingly difficult to fire employers employees.

(38:54):
At the same time, promotions and merit increases have become
almost automatic. The result is a bureaucracy nearly devoid of
incentive and largely beyond anyone's control. Of the one million
persons eligible last year for merit raises, only six hundred
did not receive them. No, I have no reason to

(39:16):
suppose that those a lot of those million workers didn't
deserve merit increases. But do you really think the nine
hundred and ninety nine thousand, four hundred of them deserved
merit increases. If so, you've had better experience with federal
employees than I have had. The Wall Street Journal goes on,

(39:39):
almost no one is fired. Less than one percent of
federal workers lost their job last year. Life is pleasant
in the bureaucracy. The average annual salary is fifteen three
hundred and forty three dollars, and most employees are due
to get a seven point zero five percent rais in October. Well,

(40:02):
that's a group of workers whom the government protects. The
states and cities, of course offer other examples, but once
again you should ask at who's expense, and the answer
is obvious. At the expense of people in the main
who have lower incomes. It's at the expense of the taxpayer.
It's because of this that forty percent of the income

(40:24):
of the American people today goes to pay for the
costs of government at state.

Speaker 3 (40:30):
Local, and federal levels.

Speaker 4 (40:33):
About twenty six percent at the federal level and about
fourteen percent at the state and local levels. What about
the match brooded and the much noted and numerous laws.
It range from workmen's compensation to child labor, minimum wages,
fair employment practices, commissions, affirmative action, hour and wage laws, OSHL.

(40:55):
And you pick out any other four letters from the alphabet,
and you'll have another one. Now, some of these measures
have had some effect, and sometimes they've had a favorable
effect on workers, but most of the favorable ones, for example,
workmen's compensation laws, child labor laws have been an embodiment

(41:19):
into law of practices that have already become widespread before
they became law, and most of them have simply extended
to certain fringe areas practices that have already developed independently.
Most of the rest of these measures benefit bureaucrats at
the expense of the rest of us, rather than benefiting

(41:41):
the workers. The OSHA has a very large bureaucracy and
an increasing one, but it hasn't been very effected in
improving a lot of workers and so on down the line. Now,
what about the third answer that nobody protects the workers? Again, Yeah,
that's true for some workers. But who there are two

(42:04):
classes of workers who are not protected by anybody. They
are those workers who have effectively only one possible employer.
And second, they are those workers who have no possible employers.
Who are those with only one possible employer. Well, obviously

(42:25):
that applies to all the workers in a country like
Russia or China or Cuba. If you have a totalitarian
government in which tatalitarian country in which the government is
the only employer er, then there is nobody who protects
the worker. He's at the complete mercy of that government

(42:46):
and the result has been perfectly clear. The ordinary worker
in these totalitarian countries is very badly off. His level
of living is low, his conditions of work are poor,
his freedom is limited. Some of the busses in those
countries do very well. The people in charge, the polit bureau,

(43:14):
the people at the top, and the bureaucracy.

Speaker 3 (43:17):
Some of them do extremely well.

Speaker 4 (43:18):
But the ordinary worker has nobody to protect him. In
our own society, it's very interesting. Again, you have a paradix,
like the union paradix. The people who have only one employer,
possible employer, tend to be very high paid people. The

(43:39):
classical example that we always used to give in our
economic courses was Babe Ruth. Babe Ruth, the Great home
Run King, was, as you know, the most popular and
the most widely known baseball player of his time. It
so happened that the Yankees had the largest stadium of

(44:02):
any of the baseball clubs at that time, and so
they were the only people They were the only people
who for whom Babe Ruth could work and really get
the full value of his work, because he could fill
the Yankee stadium, he could fill in, and he could
also fill any of the other stadiums, but the Yankees

(44:23):
had a great advantage over any other team in hiring
him because they had the biggest stadium. As a result,
he really only had one potential employer in the sense
that the next best was way down. That doesn't mean
he didn't do very well, but it meant that nobody
was protecting him except himself. He was protecting himself through
his skills, but it was a matter of bargaining with

(44:45):
the employer in.

Speaker 3 (44:46):
The same way today.

Speaker 4 (44:48):
Until recently, when you had a considerable degree of unionization
in the professional athletes, the baseball football players had only
one potential employer because the employers that arranged to get
an exception through the law, whereby you had essentially a
slave contract with a baseball or a football player. Once

(45:08):
he was signed up with one company, he couldn't really
negotiate to go and play with another team.

Speaker 3 (45:14):
And as a result, he had very little protection.

Speaker 4 (45:20):
Similarly, if I have a highly skilled man whose skills
are so great that only one company can use it.
He has other possibilities, but they're at a much lower level.
Nobody protects him. Who are the people in our society
who have no possible employer.

Speaker 3 (45:39):
In our society.

Speaker 4 (45:41):
Most of the people who have no possible employer are
the result of governmental measures.

Speaker 3 (45:47):
The minimum wages have been the.

Speaker 4 (45:50):
Most important factor that have created a large class of
people who have no possible employer. And the adverse effects
of the minimum wages have been greatly acerbated by the
poor education which is provided by the government. We start
out with having governmental schools in.

Speaker 3 (46:09):
Harlem that are terrible.

Speaker 4 (46:14):
And for a variety of reasons, provide lousy education. So
we end up with people and dropouts from schools and
kids coming out from school who have no skills. And
then we say to them, and we say to employers, huh,
you can't remedy our defects by hiring these people and
teaching them, because we won't let you hire them unless

(46:35):
you're willing to pay them more than their worth. So
the effect of the double whammy of poor governmental educational
arrangements on the one hand and a minimum wage on
the other is to create a class of people who
have essentially in fact, no possible employer.

Speaker 3 (46:55):
Now let me turn. I believe that what I've.

Speaker 4 (47:00):
Just said about the case in which nobody protects people
shows the way to the right answer.

Speaker 3 (47:07):
Who protects the worker?

Speaker 4 (47:12):
Workers are protected by employers, not by his own employer,
because a man who has only one possible employer has
no protection. The employers who protect a worker are the
people who would like to hire him, but for whom
he doesn't work.

Speaker 3 (47:32):
The real protection that a worker.

Speaker 4 (47:34):
Gets is the existence of more than one possible employer.
That's what gives him freedom, That's what enables him to
get the full value of his services. It's competition. It's
a free market in which you have a diversity of
sources of employment, which provides the effective protection to the worker.

(47:55):
This is a very general feature of the free market,
applies in every area and in every direction. A worker
is protected from exploitation by his own employer by the
existence of alternative people from whom.

Speaker 3 (48:12):
He can go to work.

Speaker 4 (48:15):
The employer is protected from exploitation by his employee by
the existence of alternative people he can hire.

Speaker 3 (48:25):
Again.

Speaker 4 (48:26):
If I, as an employer, had only one man who
could do the job I needed to have done, I'd
be at his mercy. He could take every penny up
to the point where I went out of business. What
protects if I'm an employer, what it protects me is
that there's more than one person I can hire.

Speaker 3 (48:46):
The consumer in.

Speaker 4 (48:48):
His capacity as a purchaser of goods and purchaser of
goods and services, he's protected by the existence of alternative sellers.
Why do we have a lousy postal service because there's
only one place can buy it? Why do we have
terrible schools? Of course, there are some good schools. Here's
an example of a good auditorium. I don't know that

(49:09):
it's a good school. It's a marvelous auditorium. I suppose
it was paid for by the people who use it.

Speaker 3 (49:19):
Was it who paid for it? Did the people who
paid for it? And have a choice?

Speaker 4 (49:26):
Well, you can answer those questions yourself. They're too obvious
for me to spend any time on. But in general,
the reason why schooling is backwards and we have not
had the kind of technological advance in schooling. The reason
why SAT scores have been going down, an educational performance
has been going down, is because we don't have any

(49:48):
large number of alternative schools. So in every area, what
protects the worker, what protects the employer, what protects the
consumer is all the existence of variety and alternatives, And
of course, every group in our society that wants to

(50:11):
get a privileged position, tries to protect itself from competition
by others.

Speaker 3 (50:18):
The workers try to.

Speaker 4 (50:19):
Protect themselves from competition from other employees by forming unions,
getting government licensure, having arrangements under which they can limit
the number of people who can get certain kinds of jobs.
Producers try to get protection against competition by get by

(50:39):
having employers organizations, forming monopolies, cartels, or by getting the
government to impose tariffs or restrictions on imports, or to
give them special advantages of other kinds.

Speaker 3 (50:56):
So all of us, we are all of us the
same way.

Speaker 4 (51:00):
We want to avoid competition, and yet it is a
competition that effectively protects us in our various forms. It
protects the worker by providing alternative opportunities for employment. It
protects the employer by providing alternative employees. It protects the

(51:20):
consumer by providing alternative products.

Speaker 3 (51:25):
So the conclusion which I would suggest to you.

Speaker 4 (51:31):
Is that the real way to make sure that the
worker continues to be protected, that the gains in our
standards of life that we have had as workers over
the past hundred and fifty two hundred years continue. The
real way is to make sure that we preserve the
existence of competition and of free markets. Unions can and

(51:53):
dou serve many useful purposes, but they also can do
great harm if they interfere with competition and freedom of markets.
The same is true of organizations of employers. Employers' associations
can and do serve many useful purposes, provided there is
free entry. In all cases, we must try to preserve

(52:18):
freedom for alternatives.

Speaker 3 (52:21):
Try to preserve the freedom of.

Speaker 4 (52:23):
Workers to join or not to join a union, the
freedom of employers to contract with the union or not
to contract with the union, and to keep the government
neutral in this business. Let the government attend to the
things it ought to be attending to and.

Speaker 3 (52:38):
Not get involved.

Speaker 4 (52:41):
In establishing positions of privilege, either for workers on the
one hand or for employers on the other.

Speaker 3 (52:49):
Thank you.

Speaker 1 (52:52):
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(53:14):
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(53:38):
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(54:00):
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(54:26):
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