Government Intervention into Labor Relations

The Department of Labor has announced new regulations redefining the classification of workers who will be entitled by law to overtime compensation and the salary levels below which workers must be reclassified.  As with all such interventions by government, there are issues to be taken with this one on many levels.

First is the existence of a Department of Labor which is tasked with regulating labor relations within our economy.  Nowhere in the enumerated powers of the US Constitution is the government granted the power to create such laws and regulations.  We claim to have a “free marketplace”, but it is only lip service; in fact it is, by the definition of Fascism economics, a Fascist marketplace.  As Ayn Rand put it, “…a system in which the government does not nationalize the means of production, but assumes total control over the economy is fascism.”  This is the very description of the direction our government has been heading for decades, and is only picking up steam with such encroachments into business practices such as this.

Second, as with most, if not all, governmental encroachments into labor matters, the opposite end of what is desired is what is achieved.  For example, consider Milton Friedman’s excoriating of the idea of a minimum wage (which is making the headlines nowadays):  “Minimum wage laws are about as clear a case as one can find of a measure of the effects of which are precisely the opposite of those intended by the men of good will who support it.  Many proponents of minimum wage laws…hope, by outlawing wage rates below some specified level, to reduce poverty.  In fact, insofar as minimum wage laws have any effect at all, their effect is clearly to increase poverty…The effect of the minimum wage is therefore to make unemployment higher than it otherwise would be.”

 The consequences of this latest regulation will be no different from what Friedman stated about the effect of the minimum wage.  Are there occupations where individuals are being taken advantage of by companies that this regulation is intended to help?  Most definitely.  However the solution is not the heavy hand of government interference, but rather the power of the marketplace.  When enough people refuse to perform certain kinds of jobs for the wages offered, companies will be forced to raise the salaries and/or benefit packages to attract the quality of employees they seek.  As one who has earned professional certifications in the field of compensation I can attest that market forces are extremely forceful in determining compensation levels.

In Jesus’ parable of the workers in the vineyard, those who worked all day were paid the same wages as those who only worked a small portion of the day.  When they complained because they had worked longer than the others, the owner said “Didn’t you agree to work for a denarius?  Take your pay and go.”  If we accept a position in exchange for a certain amount of compensation, then that is our decision; it is we who made the agreement and if we don’t like it, then either don’t accept the offer or stay in that position while seeking better employment.  I have done this more than once in my career.  It is not the function of government to improve our situation in life; it can only make life more difficult when it goes beyond the purpose for which it was created.

-May 20, 2016