Minimum Wage

The State is No Friend of the Worker

Smashing the corporate state to free markets and workers

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The election season is upon us, and we're hearing the usual political promises about raising wages. Democrats pledge to raise the minimum wage and assure equal pay for equal work for men and women. Republicans usually oppose those things, but their explanations are typically lame. ("The burden on small business would be increased too much.") Some Republicans endorse raising the minimum wage because they think opposition will cost them elections. There's a principled stand.

In addressing this issue, we who believe in freeing the market from privilege as well as from regulation and taxes should be careful not to imply that we have free markets today. When we declare our opposition to minimum-wage or equal-pay-for-equal-work legislation, we must at the same time emphasize that the reigning corporate state compromises the market process in fundamental ways, usually to the detriment of workers. Therefore, not only should no new interference with the market be approved, but all existing interference should be repealed forthwith. If you omit that second part, you'll sound like an apologist for the corporatist status quo. Why would you want to do that?

The fact is that no politician, bureaucrat, economist, or pundit can say what anyone's labor is worth. That can only be fairly determined through the unadulterated competitive market process. Perhaps ironically (considering libertarians' individualism), it's a determination we make collectively and continuously as we enter the market and demonstrate our preferences for various kinds of services through our buying and abstaining.

If the market is free of competition-inhibiting government privileges and restrictions, we may assume that wages will roughly approximate worth according to the market participants' subjective valuations. This process isn't perfect; for one thing, preferences change and wage and price adjustments take time. Moreover, racial, ethnic, and sexual prejudice could result, for a time, in wage discrimination. (See Roderick Long's excellent discussion of the wage gap, "Platonic Productivity.")

The surest way to eliminate wage discrimination is to keep government from impeding the competitive process with such devices as occupational licensing, permits, minimum product standards, so-called intellectual property, zoning, and other land-use restrictions. All government barriers to self-employment — and these can take implicit forms, such as patents and raising the cost of living through inflation, or burdening entrepreneurs with protectionist regulation — make workers vulnerable to exploitation. Being able to tell a boss, "Take this job and shove it," because alternatives, including self-employment, are available, is an effective way to establish the true market value of one's labor in the marketplace. With the collapsing price of what Kevin Carson calls the "technologies of abundance" (think of information technology and digital machine tools), sophisticated small-scale enterprise — and the independence it represents — is more feasible than ever.

One thinker who understood how the worth of labor is determined in the market was the radical libertarian English writer Thomas Hodgskin (1787–1869). Hodgskin is often misunderstood. Wikipedia calls him a "socialist writer on political economy, critic of capitalism and defender of free trade and early trade unions." To the modern ear that will sound odd: a socialist critic of capitalism who defended free trade and unions.

Hodgskin is usually labeled a Ricardian socialist, but Hodgskin criticized David Ricardo while lauding Adam Smith. Moreover, socialism didn't always mean what it means today. In earlier times, socialist was an umbrella term identifying those who thought workers were denied their full just reward under the prevailing political economy. The remedy for this injustice varied with particular socialists. Some advocated state control of the means of production; others wanted collective control without the state; and still others — Benjamin R. Tucker most prominently — favored private ownership and free competition under laissez-faire.

What these self-styled socialists had in common was their conviction that capitalism, which was understood as a political economy of privilege for employers, cheated workers of their proper reward. By this definition, even an adherent of subjectivist and marginalist Austrian economics could have qualified as a socialist. (See my article "Austrian Exploitation Theory.")

By the way, Hodgskin used the word capitalist disparagingly before Karl Marx ever wrote about capitalism. As George H. Smith notes, Marx called the laissez-faireist Hodgskin "one of the most important modern English economists." It was not the first time the author of Capitalcomplimented radical pro-market liberals. He credited class theory to French liberal historians. (Marx then proceeded to mangle their libertarian theory.)

As a libertarian champion of labor against state-privileged capital, Hodgskin had much to say about how just wages should be determined. In his 1825 book, Labor Defended Against the Claims of Capital, he first noted that many goods are the product of joint efforts, which would seem to make it difficult to reward individual workers properly. He wrote,

Though the defective nature of the claims of capital may now be satisfactorily proved, the question as to the wages of labour is by no means decided. Political economists, indeed, who have insisted very strongly on the necessity of giving security to property, and have ably demonstrated how much that security promotes general happiness, will not hesitate to agree with me when I say that whatever labour produces ought to belong to it. They have always embraced the maxim of permitting those to "reap who sow," and they have maintained that the labour of a man's body and the work of his hands are to be considered as exclusively his own. I take it for granted, therefore, that they will henceforth maintain that the whole produce of labour ought to belong to the labourer. But though this, as a general proposition, is quite evident, and quite true, there is a difficulty, in its practical application, which no individual can surmount. There is no principle or rule, as far as I know, for dividing the produce of joint labour among the different individuals who concur in production, but the judgment of the individuals themselves; that judgment depending on the value men may set on different species of labour can never be known, nor can any rule be given for its application by any single person. As well might a man say what others shall hate or what they shall like.

Whatever division of labour exists, and the further it is carried the more evident does this truth become, scarcely any individual completes of himself any species of produce. Almost any product of art and skill is the result of joint and combined labour. So dependent is man on man, and so much does this dependence increase as society advances, that hardly any labour of any single individual, however much it may contribute to the whole produce of society, is of the least value but as forming a part of the great social task. In the manufacture of a piece of cloth, the spinner, the weaver, the bleacher and the dyer are all different persons. All of them except the first is dependent for his supply of materials on him, and of what use would his thread be unless the others took it from him, and each performed that part of the task which is necessary to complete the cloth? Wherever the spinner purchases the cotton or wool, the price which he can obtain for his thread, over and above what he paid for the raw material, is the reward of his labour. But it is quite plain that the sum the weaver will be disposed to give for the thread will depend on his view of its utility. Wherever the division of labour is introduced, therefore, the judgment of other men intervenes before the labourer can realise his earnings, and there is no longer any thing which we can call the natural reward of individual labour. Each labourer produces only some part of a whole, and each part having no value or utility of itself, there is nothing on which the labourer can seize, and say: "This is my product, this will I keep to myself." Between the commencement of any joint operation, such as that of making cloth, and the division of its product among the different persons whose combined exertions have produced it, the judgment of men must intervene several times, and the question is, how much of this joint product should go to each of the individuals whose united labourers produce it?

Observe Hodgskin's Austrian-style subjectivism: How much someone is willing to pay for a product "will depend on his view of its utility." (The way this fits with his labor theory of value is an interesting matter that we cannot take up today.)

How then does he propose that the wage problem be solved? Here's how:

I know no way of deciding this but by leaving it to be settled by the unfettered judgments of the labourers themselves. If all kinds of labour were perfectly free, if no unfounded prejudice invested some parts, and perhaps the least useful, of the social task with great honour, while other parts are very improperly branded with disgrace, there would be no difficulty on this point, and the wages of individual labour would be justly settled by what Dr Smith calls the "higgling of the market."

Thus free competition among industrious individuals, who ultimately are trying to serve consumers, is the only way to reveal the worth of labor services and products. This is both just and efficient. There is no way for a legislator or bureaucrat to divine the correct minimum wage or to decide if "equal work" is being paid equally. Only the free market process can discover this information.

"Unfortunately," Hodgskin added, "labour is not, in general, free." What keeps it from being free? The state, which serves special interests.

Hodgskin emphasized that labor includes "mental exertion":

Far be it, therefore, from the manual labourer, while he claims the reward due to his own productive powers, to deny its appropriate reward to any other species of labour, whether it be of the head or the hands. The labour and skill of the contriver, or of the man who arranges and adapts a whole, are as necessary as the labour and skill of him who executes only a part, and they must be paid accordingly.

Perhaps Marx should have read his Hodgskin more closely, and those who would legislate the level of wages today should read him for the first time. (I've also written about Hodgskin hereand here.) So-called progressives who look to the state to set wages do a disservice to those who fare worst in the corporate state, because while progressives work on behalf of measures that must price marginal workers out of the market, truly radical reforms are overlooked.

Rather than empowering our rulers further, let's empower individuals by freeing the market.

This article originally appeared at the Future of Freedom Foundation.

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  1. Smashing the corporate state to free markets and workers

    That has been tried, that has failed. It has failed rather spectacularly.

    1. What difference, at this point, does it make?

  2. I know no way of deciding this but by leaving it to be settled by the unfettered judgments of the labourers themselves.

    Tell that to the assholes shrieking “War on women!” and and hammering the issue of pay sameness laws in their campaign ads.

  3. Perhaps ironically (considering libertarians’ individualism), it’s a determination we make collectively

    I believe Sheldon is confusing collective action with several action.

    1. More likely you are reading too much into his words while ignoring his thoughts. His meaning is quite clear.

      1. When I try and read Sheldons thoughts, all I get is a dial tone.

        1. I think you’re getting Sheldon mixed up with Suderman.

  4. my co-worker’s mother makes $71 /hr on the laptop . She has been unemployed for 9 months but last month her payment was $17334 just working on the laptop for a few hours. published here

    —————-http://shorx.com/onlineatm

    1. That’s because she’s Worth it!

  5. This article has everything! Why, all the right words have been used…..like Red Meat for a hungry dog.

    “Smashing” – yeah, let’s smash it!

    “The Corporate State” – wow, I hate the State!

    “Free Markets” – creaming my pants right about now!

    “Workers” – wait, I’ll have to think about this because I am John Galt. Those workers are just human capital who have not measured up. What? you tell me I won’t have any employees cheap to work my schemes if I don’t profess love for workers? And, if I can’t convince them to vote and think against their own interests, I’ll be sunk? OK, OK, I love workers.

    Thanks, Reason writers, for the perfect story and perfect words. A few more mentions of “the state” and I’d be in Libertarian Heaven!

    1. You haven’t gone far enough with your analysis. Behind the capitalist conspiracy there’s the lizard people pulling the wires behind the scenes.

      1. hey dont use up ally our good conspiracy therioes. youre goingt o need them in a few days to explain whys uch obviously brilliant ideaa of yours get less than 1percent of the vote.

        1. They simple took the back seat to more pressing issues, like whether gays should be allowed to get permission slips from the state to call themselves married.

        2. Flaming Ballsack|10.26.14 @ 9:54AM|#
          “hey dont use up ally”

          And ASSHOLE gets help he so desperately needs.

      2. “the lizard people pulling the wires behind the scenes.”

        Doesn’t need much analyzing – everyone know the Koch’s are buying the words here…called “pulling the strings” by some…

        1. Yet sadly they haven’t gotten around to purging your useless screeds…

        2. craiginmass|10.26.14 @ 2:03PM|#
          …”everyone know the Koch’s are buying the words here…called “pulling the strings” by some..”

          Hey, ASSHOLE, more stupidity and lies!

        3. DUCK HEADINASS !!!!!

          LIBERTARIAN BOTTLE KIDS !!!!

          http://www.youtube.com/watch?v=tLMbu8y8xAE

    2. BURN those straw men, craig!

    3. craiginmass|10.26.14 @ 9:45AM|#
      “This article has everything!”

      Hi, ASSHOLE! More stupidity? Oh, goody!

    4. headinass. I hope when things get bad enough from all the statist policies that you endorse, all the “Wage Slaves” as you like to call them, bust down the door to your McMansion in western Massachusetts, and give you the Hell you deserve. /end rant

  6. Where the fuck do these fucking fuck TROLLS keep fucking coming from?

    1. Slate, Huffington Post, Real Clear Politics.

    2. Trolls? I’d like to know what the Russian Prime Minister is doing promoting more oligarchy here?

      1. craiginmass|10.26.14 @ 2:02PM|#
        “Trolls?”

        Yes, ASSHOLE!

  7. Dream on, Sheldon. You think these CEOs and bought off politicians are going to go for a system where workers control what they makes and how much they get paid for it? Pul-leeze.

    1. american socialist|10.26.14 @ 11:54AM|#
      “Dream on, Sheldon.”

      Hi, dipshit! Heapin’ helpin’ of more lies from the left!

    2. “You think these CEOs and bought off politicians are going to go for a system where workers control what they makes and how much they get paid for it? Pul-leeze.”

      The same crony CEO’s, and politicians that benefit your lifestyle AMSOC. No wonder you hate the “Little People” just trying to advance themselves. God I hate trustafarian’s like you, Tony, and headinass.

  8. If you omit that second part, you’ll sound like an apologist for the corporatist status quo.

    What’s the matter, didn’t you like the other sweater I made you?

  9. My roomate’s aunt makes $71 /hour on the laptop . She has been out of a job for six months but last month her income was $12021 just working on the laptop for a few hours.
    You can try this out. ????? http://www.jobsfish.com

    1. And to think that with just a little more effort, she could’ve made $17334; now that‘s marginal value!

  10. In the USA (& possibly a few other countries) today, the labor movement, such as it is, is a rear-guard action undertaken very specifically to maintain the privilege of a dwindling few. They would not be interested in an anti-privilege labor movement. However, in much of the rest of the world, where the labor movement is still very much a going, and in some cases growing, thing, it might be possible to reorganize them along such lines.

  11. The surest way to eliminate wage discrimination is to keep government from impeding the competitive process with such devices as occupational licensing, permits, minimum product standards, so-called intellectual property, zoning, and other land-use restrictions.

    What total drivel. No we don’t need to make sure medical devices and pharmaceuticals are safe and effective “let the market decide” and sue them if they are at fault.

    Telectronics implanted 44000 people with bad pacemaker wires before the first person died and the company was forced out of business and they sold all the assets to St Jude Medical with no liability for 160 million – gee 4000 dollars each for somebody with a time bomb in their chest.

    We already have a problem with China stealing intellectual property in this era of easy duplication and reverse engineering so yeah getting rid of intellectual property makes perfect sense in a world of 100s of millions of dollars to develop new products.

    Want to see a place without zoning laws – just visit any third world country.

    Libertarians be as dumb as you can be.

  12. MarklinLA:

    Telectronics implanted 44000 people with bad pacemaker wires before the first person died and the company was forced out of business and they sold all the assets to St Jude Medical with no liability for 160 million – gee 4000 dollars each for somebody with a time bomb in their chest.

    I’m glad that we have the government to make sure that things that have happened like that never happen like that.

    1. Maybe you aren’t aware how lax things are at the FDA. The FDA doesn’t tell you how to test your products. They just tell you you need a controlled process. The usually only come in after a major fuck up and shut you down.

      The company was in charge of the testing and produced an obviously inadequate life test of the product. However, what if there were no tests?

      Look at the statin drugs a lot of the side effects were hidden from the FDA as aberrations so that doctors were unaware of them when thier patients started showing up with them.

      But hey, not that many people lives were ruined and the execs all got bonuses and the MDs who prescribed the drugs got all expenses paid trips to vacation spots to “learn” about the latest updates in cardiology (if they were big prescription writers).

      Yeah, I would trust the “free market”.

      1. The FDA doesn’t tell you how to test your products. They just tell you you need a controlled process. The usually only come in after a major fuck up and shut you down.

        Oh, that’s bullshit.

        True story: I once had a socialist friend complain how evil the pharmaceutical companies are. He had a friend with a disease, but the treatment wasn’t approved by the FDA. If the company gave him the drug, they’d have to use him as a data point in their research. However, he also had organ damage. Therefore, if they gave him the drug, and he died of organ failure, it may suggest that the drug caused organ failure, and they’d have to deal with it and the FDA, on top of everything else. So, they decided only to give the drug to people without organ failure. His friend ended up dying of the disease.

        Then, he complained that the drug had already been tested to such a degree that everyone was sure it would have cured him, and he would probably have been fine.

        I pointed out that here we have a situation where the FDA is keeping a drug off the market, a drug that “everyone” apparently knows pretty well is safe and effective, and the company doesn’t want to include him in the FDA tests because of a preexisting condition that, if he dies, might keep the drug off the market even longer for more people. Perhaps the FDA had some culpability in his friend’s death, I asked him. “NO!” he said, angrily. But he didn’t talk about it after that. I think I know why.

        1. MarkinLA:

          The FDA doesn’t tell you how to test your products. They just tell you you need a controlled process. The usually only come in after a major fuck up and shut you down.

          You watch this and you tell me how lax the FDA is.

        2. Yes Bullshit is right. Your whole argument is bullshit. Those clinical trials are to determine if the drug should be put on the market. Giving it to unhealthy people would make it hard to determine what the side effects are so there is logic in it.

          I worked for device company. AT NO time do they ever tell us how to test the product. They don’t want the companies to try and push the liability on them when something goes wrong. Once the device passes the necessary clinical trials and can be sold they only care that our process is documented and monitored.

          In fact the companies were pushing Congress to make the FDA take the liability by creating a law that said once the FDA approved something they could no longer be sued. Luckily it didn’t go anywhere.

          1. Yeah, and all of medicine isn’t clinical devices.

            If you want to stay ignorant and pretend that the FDA just tells pharmaceutical companies to vaguely “use some controlled process”, then you don’t know what tou’re talking about. The FDA tells companies what kind of tests they want, how large the test groups need to be, what conditions satisfy considering a drug “effective”, and all of that goes into defining how long the drug stays off the market. For example, if a drug treats a condition that causes cysts in your liver after 10 years, and liver failure after 30 years, testing it to “prevent cysts” means 10 years, and to”prevent liver failure” takes 30. If you think the FDA just lets companies make the call, you don’t know what you’re talking about, and you should seriously watch that video I linked.

            1. There is a difference between the manufacturing process and clinical trials. There is a lot of statistical analysis done to determine sample sizes which have become pretty standard and the use of double blind studies is standard for every approval. The FDA reviews the results of the clinical trials and determines if they have met a threshold of efficacy and safety and it is not the same for every drug.

              A dangerous drug may still be approved in limited cases if it is the only available therapy – there is no one size fits all.

              Do you really think letting executives with stock options who are protected from criminal prosecution by the corporation to be the best decider of what drugs should be available to the public?

              1. Yeah, I know the ostensible purpose and more of the FDA. This is covered in the video, but basically:
                1. Frequently the FDA requirements for efficacy are so stringent, arbitrary, and sample sizes so demanding, that it makes developing certain drugs and treatments in feasible to develop
                2. The future of medicine already invokes custom tailored drugs so target/patient specific that the old “give 1000 people the same drug double blind with placebo” doesn’t even make sense anymore, but we all have to wait for the FDA to learn how to approve outside of that rubric.
                i could go on. Basically, the video is a 1.5 hour debate on the proposition “the FDA’s caution is hazardous to your health.” 4 very smart people. Going into the debate, the audience was mostly undecided, but favoring against the propositon. By the time it was over, the propositon had over 50% audience approval. You should definitely check it out, if you’re up to evaluating the FDA beyond reading its stated goals.

      2. So, obviously the answer to a failure of government control and oversight is more government control and oversight.

        Are you fucking retarded?

        1. No but you are if you think the answer to companies fucking up so some execs can cash out their options is to have less government oversight.

  13. The state may be no friend of the worker but I don’t recall too many employers who are unless they are forced to be.

    1. MarklinLA:

      The state may be no friend of the worker but I don’t recall too many employers who are unless they are forced to be.

      I had an employer give me a few hundred K in stock for working less than 2 years. What forced them to do that?

      Maybe you should stop working at McDonalds, or whatever, and try something else.

      1. So did I but they didn’t do it because they wanted to. They did it because the top execs were stealing from the shareholders and they wanted to make it look like a company wide incentive program. In 5 years the CEO got 100 million for really just being in the right place. The lowest level people got about 3000 dollars worth over that 5 years.

  14. my co-worker’s mother makes $71 /hr on the laptop . She has been unemployed for 9 months but last month her payment was $17334 just working on the laptop for a few hours. published here

    —————-http://shorx.com/onlineatm

  15. Can you have some spare time to sit back in your chair having your laptop with you and making some money online for some interesting online work said Jenny Francis in the party last nightsee more what is for you there to increase your pocket money??.

    http://shorx.com/clickforsurvey

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