"Moreover, as employers are forced to pay low-skilled workers a higher wage, they are less likely to hire such workers. Citing a study by Michigan State University's David Neumark, Horowitz writes that a living wage set at 50 percent above the minimum wage increases the average wage for workers in the bottom tenth on the pay scale by 3.5 percent. However, the same wage increase reduces the...
Video: Ep. 8 - Who Protects the Worker [6/7]. Milton Friedman's Free to Choose (1980)
"Naturally, workers are concerned about wages, fringe benefits, and job security. Many people feel vulnerable, at the mercy of the 'system.' One response has been the development of a variety of unions, professional organizations, and other groups dedicated to looking after the interests of members. There is evidence that working people have made significant progress over the past two centuries.
In the United States, each succeeding generation has enjoyed a higher standard of living than the previous generations. What accounts for this improvement -- unions? The government? Or is there an alternative explanation? Unions claim to have raised wages of all workers - members and nonmembers - through their collective bargaining efforts. But analyses reveal that whereas some unions have raised wage levels of their own members, these increases have come at the expense of nonunion workers. Unions have also suggested that their concerns center on the lowest paid workers in our society. But Dr. Friedman points out that the most successful unions are those whose members are highly skilled workers. The airline pilots union is a notable example. Union efforts to secure wage increases for unskilled laborers have not been notably successful.
Some have argued that workers have gained great benefits from actions of the government. But many governmental actions have had negative effects. Rules and regulations have increased employers' costs and reduced demand for workers. In particular, minimum wage laws have reduced the amount of unskilled labor employed. Milton Friedman points out that one unfortunate, and quite unintended, consequence of minimum wage legislation has been to worsen the employment position of young blacks, including many unskilled laborers whom employers cannot afford to train at high minimum wage rates. In the final analysis, the best protection for the worker is neither unions nor government. Rather, it is the existence of other employers willing to compete for services of skilled individuals."
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