Keating: Freedom to Work
by Maryann O. Keating, Ph.D.
Consider the desperate job searches of a youth with limited skills in need of job training, a professional between jobs, or a worker constrained by location and personal responsibilities. Opportunities for flexible finite employment contracts enable individuals to freely negotiate wages, benefits and conditions of employment.
In 1981, legal historian Tibor Machan argued that national goals were undermining workers’ natural rights. His objection was not to safety regulations or laws banning force or fraud, but rather to labor law justified in terms of benefits to the nation as a whole rather than individual workers.
Laws targeting national goals (maximizing Gross National Product), demographics, income distribution, wage-based tax revenue, etc., assume that collective goals are more important than the unmeasurable interests of individuals. Then, it is not the costs and benefits for particular individuals that matter but whether there is a net benefit accruing to society as a whole.
Unnecessary obstacles for seeking legal employment should be eliminated.
At times, it is necessary to trade off personal liberty for national goals. However, in the U.S., individuals have been free to participate in the labor market or not. Throughout our careers, we resign, insist on acceptable working conditions and pursue multiple options. Unless force or fraud is involved, the insertion of third-party goals is superfluous, distortionary or, more importantly, a violation of individual rights to contract.
Minimum-wage laws and regulations concerning paid leave and hours worked are designed to protect workers. However, carving out and enforcing appropriate exceptions to large-scale mandates is difficult. Large firms may be able to finesse tradeoffs and tolerate the risk of litigation, but an individual in need of a job cannot.
According to the Federal Trade Commission (FTC), nearly one in five U.S. workers (about 30 million people) are subject to noncompete clauses. Conflicting rulings prolong uncertainty over the FTC’s potential ban on such agreements. A one-size-fits-all ban does not assist those workers willing to sign a noncompete clause for increased compensation.
Occupational licensing is required when clients cannot assess professional quality. As of 2019, 22 percent of all employed in the U.S. had at least one occupational license. A review is needed to evaluate whether certain licenses protect clients or merely restrict entry.
The National Labor Relations Board safeguards employees’ rights to organize and seek better working conditions. However, the relationship between employer and employee can be unique and is not always adversarial. Increasing employment options precludes neither collective bargaining nor private unions. However, standardized contracts and apprenticeships grow organically. Providing Information about contracts and prevailing wages is a direct means of increasing workers’ strength in negotiating contracts. Government has a role in providing this information.
Incentives, supposedly in the national interest, distort labor demand and supply. For example, government incentives to increase labor supply, when successful, actually reduce wage rates and, on the other hand, increasing income transfers decreases labor supply.
Incentives, such as the earned income tax credit (EITC) are designed to encourage labor force participation, increase tax revenue, and reduce dependency. They are ineffective when additional wage income significantly affects EITC eligibility. Overall lower tax rates on wages are the better choice.
If a past stigma reduced women’s labor force participation and incentivized married men to over-engage, incentives designed to equalize male and female compensation may result in greater or less than optimal participation for one partner or both. Individual choice, based on specialization and the willingness to participate in high or low-paying careers, is preferable to attempts to equalize compensation between family members or occupations.
Does the state have a legitimate role in trying to finesse family formation with labor participation incentives? Pro-family policies, which shift compensation between workers, are divisive considering that most households do not include young children. Families are essential to the nation, but government attempts to strengthen them often fail. Aid to Families with Dependent Children, for example, disrupted families and resulted in unintended social outcomes.
Survey respondents accurately believe that Social Security benefits increase with labor supply; however, they somewhat overestimate the link for the income of dependents. This misconception may be in the national interest but not that of the individual. A retirement program resulting in the accumulation of individually owned assets, on the other hand, offers career flexibility and strength in negotiating wages.
Living-wage proposals misrepresent how Americans actually work. The nurse and ROTC reservist down the street supplement income by working weekends. Others drive for Uber and clean offices at night. Teens gain confidence and others survive and maintain skills by mowing lawns, substitute teaching, free-lance editing and delivering pizza.
The U.S. Department of Labor reported in July 2024 that 8.4 million persons held multiple jobs, 5.2 percent of all employed persons. In 2023, 34.9 million employees worked exclusively part-time averaging approximately 22 hours a week.
Unfortunately, the current regulatory framework restricts organizations from providing benefits to independent contractors. Otherwise, an independent contractor might negotiate an existing childcare program or a universal savings account in return and opt out of a health plan that duplicates one earned by another household member.
Employment flexibility does not imply tolerance for tax evasion. An Upjohn study estimated that the percentage of those with a primary job but failing to report “informal work” income varied from 8 percent for those who clocked 15 hours a week or less part time to 0.4 percent for those clocking more than 15 hours.
It is time to restore the priority and freedom for all those seeking to work legally. This is true even when personal decisions do not directly advance a nation’s quantifiable interests.
For most people, jobs are a necessary and honorable means, not an end. Government programs artificially incentivizing labor force participation are unnecessary. What is required are more employment options. Many types of employment arrangements are freely chosen, valued, and relied on to earn and supplement income.
Maryann O. Keating, Ph.D., a resident of South Bend and an adjunct scholar of the Indiana Policy Review Foundation, is co-author of “Microeconomics for Public Managers,” Wiley/Blackwell.
Comments...