Asheville – The Cato Institute is building a book online, and, at press time, it has posted the first eight chapters. The guide for public policy, Empowering the New American Worker: Market-Based Solutions for Today’s Workforce, represents contributions from several Cato scholars. In the introduction, Scott Lincicome argues that, to date, the government has offered rhetoric and proposals “heavy on government intervention.” The low-hanging fruit that he suggested harvesting would be “the laundry list of current federal, state, and local policies that enrich politically powerful interest groups but in the process disempower and tax most American workers, while breeding broader economic sclerosis along the way…. Neither a major new government program nor a fundamental rethinking of free-market capitalism is needed—in fact, much the opposite.”
Jeffrey Miron and Pedro Aldighieri wax philosophical, but make a plea for meaningful employment. They point out that real gross domestic product per capita (RGDPpc) has increased. People in America today enjoy a better quality of life than people throughout most of history, even if they are not receiving pecuniary compensation for their labor. In a healthy economy, people should be adding value, which, in free markets, should get around to “lifting all boats.”
Ryan Bourne and Brad Subramaniam note, “Most labor regulations tend to assume an adversarial relationship between workers and management… The practical effect is not merely needless tension between workers and their employers but also a watering down of both workers’ freedom to contract their labor and employers’ flexibility to run their enterprises. This constrains jobs from reflecting the particular wants, needs, and circumstances of employees and employers.”
Labor laws often backfire. Age discrimination laws tend to decrease the number of elderly persons hired because, in managing the risks of lawsuits, “it is more difficult to prove discrimination in the hiring process than after termination.” Minimum wage laws cause employers to hire fewer people, cut hours worked, consolidate jobs for unskilled workers, and raise prices that marginalize society’s poorest. Predictive scheduling laws incentivize employers to err on the side of underscheduling. Furthermore, ban the box laws force employers to “resort to other proxies, such as screening for race or ethnicity, to reduce the risk of hiring a former inmate.”
Floating about is, “a proposed Protecting the Right to Organize Act [that] would abolish state right-to-work laws and attempt to redefine gig workers and independent contractors as employees.” Unions take the voice away from those holding minority opinions and, in some places, require those not wishing to join to pay dues, anyway. By setting minimum wages, the unions make the choice for employers on how much they will have to spend on capital improvements, research, and development, and even affect product quality and pricing.
Neal McCluskey argues market distortions are saddling a lot of kids with huge debt for going to overpriced colleges to get worthless degrees. College prices are up at publicly funded institutions. Access to “free money” from the government has encouraged colleges to offer greater non-academic amenities for students and staff, and this has started a cycle leading to hyperinflation in tuition costs. While tuition has soared, scores on college proficiency tests have dropped, around ten points in some categories—over the past five or ten years. Making matters worse, a lot of jobs, some for licensing purposes, require new hires to have degrees when people have been working in those positions without degrees for years.
Chris Edwards says, “The good news is that experts usually find that the costs of licensing are higher than the benefits. The bad news, however, is that state legislatures often ignore the experts.” He notes that nationwide, from 1950 to 2021, the number of jobs requiring a license increased from 5% of the total to 22%. This is problematic because in 2017, “lower-income occupational licenses required, on average, nearly a year of education or experience, one exam, and more than $260 in fees.” This disincentivizes the poor and people seeking a source of supplemental income and chills entrepreneurship in general. In return, an analysis of 21 million home service gigs arranged through an online platform concluded licensing was not providing financial advantages for the workers, the purchasers, or the platform.
While licensing requirements may appear arbitrary, they are often little more than protection rackets lobbied by incumbent industries seeking to stymie lateral market entry. Edwards suggests states should perform cost-benefit analyses on their licensing requirements. They can also eliminate licenses that aren’t required for health and safety. If that is too much to ask, they can at least compare their list of licensed professions to those of other states and eliminate the ones that others seem to be fine without.
Ilana Blumsack and Scott Lincicome say government policies disincentivize gig work, and legislatures are working to make it even harder. Many gig workers find their jobs very profitable and enjoy the flexibility independent contracting affords, but the government views them as victims. The Protecting the Right to Organize Act would, among other things, turn independent contractors into employees, subjecting their employers to the costs of compliance with labor laws. One of these would be the employer mandate of Obamacare, even though “over 90% of independent workers have health insurance, and roughly two-thirds have a retirement savings account.” Multiple studies concluded Uber would be on the hook for about $3.6 billion as a consequence. Many smaller businesses would likely fold. Beginning this year, tax reporting just got more complicated for independent contractors. One new law requires the reporting of online sales, even if they are for personal property sold at a loss.
Chris Edwards considers home-based businesses to be low-cost incubators. They require no commuting, can allow more time with family, can provide valuable neighborhood services, and can test-market products before investing too much, which is important because of the high failure rate of startups. The Small Business Administration estimates that about half of the 30 million businesses in the country are home-based. Zoning laws are one major impediment to operating a business out of one’s home, even though many home businesses impose no nuisances on the neighbors. Going through a rezoning process, on top of getting a business license, however, can be too much for those who most need to use their homes for work to navigate or afford.
Finally, for the time being, Ilana Blumsack and Scott Lincicome discuss laws that prevent people who have served their time from re-establishing themselves as contributing members of society. Reforms would include issuing automatic expungements for qualified cases, repealing ban-the-box laws, and decoupling criminal records and license applications in situations where the risks of recidivating while unemployed would outweigh those of being in the workplace.