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  • Writer's pictureMartin Schmalzried

Free market mechanisms at the service of the Left

Left wing politics has often been seen in opposition to “free markets”, with policies that directly contradict what liberal political thinkers promote: directly intervening in the economy, artificially dictating prices and wages via various policies… But are “free market” mechanisms really that far from Left wing policies? In this article, I intend to examine one specific “free market” mechanism, that of a “free” labour market, to show how true liberalisation of the labour market could help achieve some of the Left wing’s policy objectives: more equality, better pay for workers etc.

What is the problem with the labour market as it stands? Left wing politicians denounce, among other things, worker exploitation (low wages, tough working conditions), unequal pay (especially between women and men) and extreme wage gaps between the top executives and workers.

But where do these problems come from? And this is where it’s interesting to examine “free market” theory and why it was never applied to the labour market. The Left wing politicians have manipulated the labour market via policies on minimum wage, paid holiday, working hours, while the Right wing politicians have failed to secure the conditions for a truly “free” labour market to exist.

What are these conditions? “Free market” advocates put a lot of emphasis on the concept of “freedom”. Each actor in a market has to be completely free of his/her choices, otherwise we cannot talk about a “free” market. And the labour market is certainly not free. Workers cannot be deemed to make choices freely, especially the poorer workers, since their life (livelihood) is on the line. No job, no pay, no food and shelter… So in a sense, some actors are more “free” than others on the labour market and can thus impose their choices to others.

This is why many liberal political thinkers are in favour of a Universal Basic Income: to make sure that the balance of power or the degree of freedom and free choice are more “equal” in the labour market, thus edging closer to the “free market” ideal.

How would a truly “free” labour market function? Let’s see from a few practical examples of offer and demand on the labour market: there are a certain amount of jobs or tasks that some people need to have done (the demand) and a certain number of people offering their skills to carry out those jobs or tasks. At present, the demand has managed to have its way and dictate conditions thanks, as we have seen, to the fact that finding a job is an absolute necessity in order to survive for workers, but also via a steady unemployment rate which permanently tips the equilibrium between the offer and demand.

Ask any kid what their “dream job” would be, none of them or a very tiny number will ever say that they would like to be a cleaning lady/man or a garbage collector. Yet those jobs/tasks need to be done and are certainly not trivial (anyone living through a breakdown of garbage collection services realizes just how important they are…) So how do you convince workers that don’t want to do a certain task to do it anyway, and for a measly pay no less? By blackmail: “either you accept this job, or you will live in utter misery while I find someone else willing to do it, given the rate of unemployment it shouldn’t be hard to do”.

Thus a truly “free” labour market presupposes that a worker can afford to say “no thanks” to a job offer. Unemployment benefits enable precisely that, and have been criticized for that exact reason. If people receive unemployment benefits and those benefits are nearly as high as an “entry level” job, then why would they even consider working if they can get nearly the same amount of money for “doing nothing”.

Small note: the very definition of “work” is problematic since many people on unemployment benefits who are supposedly doing “nothing”, actually do work, just not under the definition of work as our economic system recognizes it. For instance, if these unemployed workers look after their grand-kids, they are “not working” under the official definition of work. However, if they went to work at a child daycare centre, that would be considered as “work”. The same applies to everything: mowing the lawn of their friends? Not work. Mowing the lawn on behalf of a gardening company? Work. It basically only depends if money changed hands and if that transaction was recorded officially in the economy (that would not include any undeclared transactions like mowing the lawn for a neighbour and being paid cash). However, regardless of whether the work has been officially recognized, it did create economic value, just outside of the scope of the official economic system. Take an unemployed person who decides to cut down a tree in the woods and build a shack. He/she has created economic value as the shack could now be sold for money. In any case, this is to break the stereotypes surrounding people on unemployment benefits. Sure, some of them really do “nothing”, but many work, just not in an officially recognized way.

Coming back to unemployment benefits and the disincentive they represent to work, it should be noted that many people under unemployment benefits nevertheless experience various difficulties: some of them actively seek a job but cannot find one, which causes extreme psychological pain (postulating for dozens of jobs, going for job interviews and being rejected constantly). Even for those that do not seek actively, the social pressure they face from their surrounding environment and lower self-esteem from being on unemployment benefits takes a toll on their psychological and physical well-being.

Now let’s examine what a truly “free” labour market would look like, under an unconditional Universal Basic Income (UBI) which allows everyone to live in decent conditions. Under such a scheme, the labour market would indeed finally fulfil the liberal ideals of “freedom”. Some would argue that people would choose to do nothing. That is a poor judgement of human nature however (see my article about Universal Basic Income).

In a labour market with UBI, salaries would simply increase for jobs that no one wants to do until someone agrees to do them. So for instance, garbage collectors would likely be paid very high wages. Such a labour market would balance itself based on an extra factor on top of offer/demand: the willingness of people to carry out certain tasks/jobs. Jobs for which there are a low number of skilled workers would still be paid high wages, but jobs which no one wants to do would also be paid high wages. Some people might choose to collect garbage for a few months or years to amass enough money to follow their passion, regardless of whether there is a need or demand for it. A nd of course, everybody would still be working since their salary would add up to their UBI, enabling them to meet more than just their basic needs.

And so we have it, under UBI, market forces would help achieve what the Left wing traditionally implements through government policies: women would boycott jobs which pays them lower wages then men, workers would not accept jobs with poor working conditions since they would prefer to stay under UBI… We might even see other side effects of UBI: workers boycotting unethical companies like Monsanto or Philip Morris since they wouldn’t have to worry that not accepting a job offer from those companies would put in peril their survival. The salaries of such jobs might have to rise to such an extent to convince people to work for unethical purposes that those companies would not be profitable…

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