Why have people been so fixated on income inequality lately? Is it really a matter of “the 1%” versus “the 99%”? How do things like occupational licensing, energy use, and regulation tie in to this? How do these things stack the deck against poor people?
Freedom on Trial is our new courtroom drama that takes viewers into the heart of the everyday issues that arise when an employer’s desire to hire more employees runs into the barrier of minimum wage laws, and when the government’s plans to “solve” income inequality only makes things worse.
The quote Trevor paraphrases near the beginning of the show was a bit of wisdom from Anatole France: “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”
Aaron Powell: Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I’m Aaron Powell.
Trevor Burrus: And I’m Trevor Burrus. Joining us today is Ryan Young. He’s a fellow at the Competitive Enterprise Institute. He focuses on regulatory and monetary policy and financial regulation. Welcome to Free Thoughts, Ryan.
Ryan Young: Thanks for having me.
Aaron Powell: Income inequality has been something that’s been with humanity for, let’s just call it, quite a long time. It’s nothing new, but it does seem to be something new in the public consciousness. The specifics of income inequality and the 1% versus the 99% rhetoric seems to be the hot new topic. So, before we get into I guess discussing what inequality is, how to think about it and what if anything we should do about it, why do people seem so fixated on it now?
Ryan Young: One of the reasons might be aesthetics, the 1% versus the 99%. I would prefer people to get along with each other. So instead of saying the 1% versus the 99% when people talk about ratios instead of actual flesh and blood human beings. Why not talk about people instead of ratios? And that’s, if anything, the inequality debate just simply needs to be reframed, talk about people not ratios.
Trevor Burrus: Have we seen inequality go up? It seems like at the very least, the returns that the “1%” get on their investment such as Steve Jobs. He benefited greatly from a worldwide economy as opposed to millionaires and billionaires of days past who may not have had people they’re trying to sell iPhones to. So, have the rich gotten richer regardless of whether or not the poor have gotten poorer?
Ryan Young: The answer is yes. The rich have gotten richer. But the more important thing, again, people not ratios, the poor have also gotten much richer. So, Steve Jobs made his fortune and Bill Gates and all the others made their fortunes by making other people better off. And almost all those people were worse off than themselves. They might not have been billionaires or even millionaires. They still benefited from the iPhone or the PC and all these other products that they use to make themselves better off. It’s mutually beneficial. It’s not a bad thing.
Aaron Powell: So does that—a lot of the anti‐income inequality rhetoric and the “we need to do something about this,” it seems like—so is this true that it depends at least in large part on thinking about the economy as zero sum?
Ryan Young: A lot of people do think that way. It’s not actually the case in real life, but yes, a lot of people do think that way. I mean economists call it the zero sum fallacy and rightfully so.
Trevor Burrus: Why is it a fallacy?
Ryan Young: The reason is that when people agree—when consenting adults agree to make a deal with each other, well, they consent. The only reason either one agrees to the deal is that because both parties think that they’ll both be better off. Otherwise, they wouldn’t do it.
Aaron Powell: Well, but doesn’t that—I mean the—so the person—our friends on the left would say, “Of course.” You know, like if I go and accept, say, a job that pays a minuscule amount, I had a choice and I thought in the moment that I accepted it that I’m better off than if I didn’t accept it because I need that money to put food on the table. But my choice is happening within the context of a larger system, a larger economy, a larger social structure such that I didn’t necessarily have that much of a choice. Like you can still be USD employer or the capitalist classes could still be exploiting me via the structure of the system without holding a gun to my head and making me accept, you know, the individual choices about accepting or rejecting employment or accepting or rejecting buying health insurance or whatever else.
Ryan Young: Cato just put out a series of videos which I would encourage our listeners to watch. And in the third one, towards the end, one of the lawyers asked an excellent question that speaks exactly to the point that you’re making. And this is not for beta, but how does preventing young men from getting his first steady job prevent income inequality? If your goal is to level the level of incomes, how does that help anybody?
Trevor Burrus: Well, those videos which are a part of the libertarians.org project.
Aaron Powell: Freedom on trial.
Trevor Burrus: Freedom on trial. But Aaron’s question is more about the context of the choice. It reminds me of the—who I believe is from some French person. We can put that in the show notes, but something along the lines of the law that’s magisterial equality prohibits both the rich and the poor from sleeping under bridges. But the question of whether or not the poor have choices—the rich have more choices that the poor may not have. So when they’re taking a job that’s $3 an hour or $4 an hour or 50 cents an hour, there may only be jobs that are 50 cents an hour. So, maybe we should do something to fix that and give them jobs that are $15 an hour.
Ryan Young: Then the question becomes does the minimum wage or similar policies—do those actually do anything to fix that problem? I think the answer is no.
Trevor Burrus: We will get to minimum wage in a bit. I think we were going to kind of walk through because there are two papers that you have co‐authored with your colleague, Ian Murray, about Income Inequality. One of them which you call People Not Ratios discusses the difference—the fact that you think that the inequality debate is somewhat askew, which you already alluded to because it’s focusing on relative ratios rather than absolute poverty. Why is it important to make that distinction?
Ryan Young: Because I think everyone of every political persuasion is concerned about helping the worst off. Everyone has the same goal. The question is how do you go about it? And I think a lot of folks are so focused on inequality. They see a difference between a rich man’s income and a poor man’s income that that’s all they care about. They don’t even care about how was the poor man doing, how can you help him out, how can you make people’s incomes rise over time. Those are questions that to a large extent are not being asked. I think that is a major flaw in the debate and I think we need to reframe the debate to ask how are people doing as opposed to what is the ratio between CEOs and the median worker’s income.
Trevor Burrus: In that paper, you also discussed the writings of someone who recently brought income inequality to the discussion, Thomas Piketty, a French economist. What did Piketty say about income inequality and what’s wrong with what he said?
Ryan Young: Well, that is a very rich topic. I’ll try to keep it brief.
Trevor Burrus: Oh, no. You can go in‐depth if you want.
Aaron Powell: It’s what we do in these parts.
Trevor Burrus: Yeah. So, in on this side of Cato, we go in‐depth. So, if you want to really hash it out, go for it.
Ryan Young: Okay. Again, I’ll try to keep it brief, but also noted, Piketty’s general story is that in the battle days back when monarchy was the dominant form of government, you had very high inequality which means essentially that the nobility held almost all of the wealth and everyone else had nearly nothing. They lived at subsistence level. After the world wars in the 20th century, death and destruction made things more equal. Fortunes were brought down even though very few people were actually made better off. In the post‐war years, equality has grown again and it continues to grow today and actually Piketty argues that as of about 2010 or so, income inequality is roughly where it was right before World War I. So, they called that a U‐shaped curve because the dominant measure used for income inequality is called the Gini coefficient. It ranges from 0 to 1. In The Belle Époque Europe before, say, the French revolution or so, it was very close to 1, about 0.85, which meant that the nobles had everything and everyone else had nearly nothing. That’s not fair.
Then the revolution happened and then, of course, the 19th century wealth explosion happened. You had the world wars and the flattening which describes the U shape that Piketty describes. And then lately—yes, that’s about the 1950’s and 1960’s. You’ve seen growing income inequality. Now, the trouble is question that we want to answer, is it inequality or is it how do we make human beings better off? I think the debate is being framed in precisely the wrong way and that’s because people are focused on inequality instead of people.
Aaron Powell: So, one of the counters to that would be to say, of course, the poor today, say, the poor of the United States, even if their relative position compared to the wealthy is the same as it was in the early 20th century or the 1500s or, you know, like however bad we might want to believe it is that—of course, their lives are quite a lot better than the peasants were or poor people living in industrial revolution England, but the amount of money that you have, the amount of stuff that you can buy is not the only thing that matters for the quality of your life that, you know, we should care about when we care about people. Then at some level, basic inequality which isn’t just monetary but often then transfers into power and dignity and respect within a society, that that sort of inequality does degrade a person’s quality of life, that it is harmful to see that there are other people who have so much more than you do. And so, yes, we don’t want to impoverish everybody to flatten the income distribution, but caring about people means caring about them in a holistic sense and not just how much money they can bring in.
Ryan Young: That is probably the best and the hardest question you could ask about the inequality debate at all because it really ties into how do people feel about it, how do they talk about inequality? Everyone wants to keep up with the Jones’s. If your neighbor gets a new car, maybe you want one for yourself. And that kind of sentiment is—well, that’s part of what makes us human. That’s both a good thing and a bad thing. It incentivizes us to create wealth and to do business with others and create mutual benefits. At the same time, if the fellow next door has something more than you, well, you get a little bit jealous and that often is the case for that people make for bad public policies.
Trevor Burrus: Are we being too dismissive though in that sense? Because if we’re focusing on the well‐being of people, are we being too dismissive of inequality. You brought up the Gini coefficient of the Ancien regime in France, for example, as 0.85 and how that was bad. But why was that Gini coefficient bad? What sorts of inequality are bad in the way that we should care about them more and use policies to try and fix it?
Ryan Young: The reason isn’t so much the measure of the Gini coefficient. Like you said, it was 0.85 in pre‐revolutionary France. In most of the U.S., the measure is somewhere around 0.4, 0.5. It varies from state to state. The measure that I think we need to talk about is how people are doing and that’s what we need to do by having a conversation like we’re doing today. But also like every day people need to have with each other, as in “How are you doing? Are you doing better off than your parents? Are you better off than your grandparents? Are your children going to be better off than you?” And the answer to all of those questions for most people is yes. So, how do we continue that trajectory? How do we make more people better off? I think people are making or asking the wrong questions and I think we need to reframe the debate.
Aaron Powell: I’m curious. As we’re talking about this, I’m wondering if—so obviously if we’re having the debate the wrong way and we’re putting too much attention on these relative versus absolute measures, it can lead us to bad policies which can hurt people. So the minimum wage being an example of a policy that can be well‐meaning, but can do a lot of harm. But at the same time, it seems like framing the debate the wrong way could also be hurting people merely by convincing them that they’re being hurt. So, if we’re constantly saying, “Look at these people who are screwing you over and you’re—” you know, they’re only rich because you are poor and they’re, you know, they’re getting rich off of your back. You’re going to inculcate resentment. You’re going to convince people that they’re worse off than they really are and you’re going to convince people to judge the quality of their lives by measures that I think we agree or not as important. So whether Bill Gates has more money than I am is not the best way to measure how well my life is going either from an economist standpoint or just subjectively from my standpoint. But if someone is telling me that, you know, this guy is the problem, then I’m going to start seeing—I mean start seeing my life as worse than it really is.
Ryan Young: That’s a common problem. I think the question that all of us are asking is how can we make folks lives better? And I think one of the biggest answers to that question is actually occupational licensing. For example, roughly one‐third of people need the government’s permission to get up and go to work in the morning. I don’t think that’s right. If I needed brain surgery or something like that, I would not want to go to an uncertified surgeon. Point well taken. But at the same time, if you want to arrange flowers or decorate a room or you name it, a lot of times, folks need to get the government’s permission that they need to get a license and a lot of times the folks who grant the license are the incumbents in business who have a vested interest in keeping out competitors and limiting the competition. And, well, if you look at why workforce participation is at a near 50 or low, that’s a big reason why. And I think that does a lot to widen not just the ratio of income inequality, but it also does a lot to keep poor people down.
Trevor Burrus: A lot of people might probably heard about—if they listen to Free Thoughts, they’ve heard us talk about occupational licensing and—but identifying it as one of the causes of income inequality might seem like a stretch. It’s a bad thing. We have too many license industries, but I mean really is it that big of drain on poor people’s ability to move ahead in life? Or is it just sort of a marginal contribution?
Ryan Young: I think it’s rather more than a marginal contribution. If you have an idea and you have a decent work ethic, you should be able to start your own business. That’s it. There’s not much more to it than that. Why are folks getting in your way?
Trevor Burrus: But it seems also especially for poor people, if you look at—we were talking about thousands of hours for some of these professions, correct? And a lot of these people don’t have—
Aaron Powell: Thousands of hours to get the license.
Trevor Burrus: To get the license, yeah, in addition to however much money it costs. And so, that’s pretty daunting to someone making—
Ryan Young: Yeah. In fact—
Trevor Burrus: –a barista who wants to become a hairdresser, for example.
Ryan Young: That’s a good question. In fact, in one of my papers that you guys mentioned. There’s an African hair‐braider, Benta Diaw. She immigrated to the Seattle area and started—she became an American and she became an entrepreneur. That’s wonderful. And when she started her own hair‐braiding business, turns out that she needed roughly 1600 hours of cosmetology licensing. And when you look at the content of what the courses and the classes took, she does not do hair-braiding—or sorry. She doesn’t do hair‐dyeing. She doesn’t do styling. She doesn’t do anything else. All she does is braiding. So not only would she have to spend roughly three quarters of a working year—that’s 9 months of full‐time work that she will not be able to spend actually making money and providing for her family, that she would have to spend on things that are worse than useless because those are services that she does not provide. And again, the people granting the licenses are her direct competitors. So you can see why that is, shall we say, unfair stacking the deck against poor people.
Trevor Burrus: Yeah. Ask anyone to take 9 months off to get prepared for something of not working and trying to get a better job and that’s usually supposed to be something like school, but as you said, the requirements didn’t even relate. But only rich people would really be able to afford or be able to take 9 months off to prepare themselves for a new career.
Ryan Young: That’s right. It’s stacking the deck. That’s what occupational licensing is.
Aaron Powell: So when people on the—typically is the very far left like your—the same people who protest in Seattle against WTO meetings and those sorts of folks. When they—
Trevor Burrus: You’re showing your age. People don’t remember that as much.
Aaron Powell: Because they don’t do that anymore?
Aaron Powell: I’m pretty old.
Trevor Burrus: That was a pretty long time ago. That was the year The Matrix came out, Aaron, and X‐Men 1, so that’s how old it is.
Aaron Powell: College age kids who have dogs and lived together in houses that they rent like the hippy sorts. But when they protest, those kinds of people when they are protesting—I’ll use the now horribly clichéd libertarian go‐to example for basically everything which is Uber. And when they’re protesting Uber which typically their protest are at least the, you know, the issue that they’re objecting to is an Uber is operating without some sort of license or regulatory permission or something else that the taxi companies operate under. Their objection is that this will hurt working class people to allow it because it’s not—it’s not just that there’s a cost associated with the licensing, but the licensing if you allow someone to come in without the license, then that person is going to be cheaper or they’re going to flood the market with labor or products and that in turn is going to hurt the established people which we tend to portray as, you know, these politically connected corporations, but are often, you know, say, relatively low income taxi drivers who have, you know—came to this country and have been driving for 30 years and are now going to be put out of work by this upstart Uber that’s not following the laws. And so, is there—you know, the occupational licensing, getting rid of it would also come with costs and in a lot of cases, these licensing schemes are in place in relatively low income professions like hair‐braiders. And so, should we be concerned about the people who would be harmed by getting rid of licensing and various sorts?
Ryan Young: Well, that hardly sounds like a horrible fate for consumers, which again are the ultimate point of production. People don’t live to produce. They live to consume. But almost every Uber driver I’ve talked to has said, and a lot of them have also and still do, work as taxi drivers with the licenses and the medallions and the other occupational license requirements that every city has. They prefer the Uber and the Lift model. And I think that’s not just good for consumers, it’s good for the drivers. They can set their own hours. They don’t have to answer to awful bosses or corrupt bureaucrats. They can do what they want. And I think that is something that everybody likes, or nearly everybody likes.
Trevor Burrus: Let’s go back to the minimum wage which we brought up earlier in the episode to get sort of into the nitty‐gritty of it. It’s a very popular topic. It’s brought up consistently by particularly the left saying that we need to raise the minimum wage. Hilary has said it many times. Bernie Sanders had said it. It’s sort of part of the catechism of the left. You kind of have to believe it in order to be a liberal in America, modern America.
Aaron Powell: That’s why it was a mini scandal when her leaked email showed that she or at least her senior people were not fans of raising the minimum wage.
Trevor Burrus: Well, they thought $15 was too high. They thought $10. So, this might show that it’s merely rhetoric that they might understand that we can’t solve this “problem” by just mandating that people get paid more. But people seem to think so. So why is the minimum wage so attractive to people? And what’s wrong with thinking that we can solve problems with it?
Ryan Young: I think it’s because a lot of people think that it’s free lunch. You look at a proposed minimum wage increase, the federal rate is currently $7.25. There are lots of proposals to put it to $10.10. There’s the fight for $15. You name the level and someone has proposed it. Usually about two‐thirds of people will support it. It’s very, very popular and like I said, the reason us that people think it’s a free lunch. So, what I’ve been doing along with trying to reframe the inequality debate is also trying to reframe the minimum wage debate. There are trade‐offs. I’m actually agnostic on whether or not to raise the minimum wage or whether to do away with it all together. I just want people to acknowledge that it has trade‐offs. For example, a lot of your jobs will have on‐the‐job perks, maybe you get a free lunch if you work at a restaurant, maybe you’ll get free parking if you work at a shopping mall where other people have to pay, and on and on and on down the line, annual bonuses, you name it.
When you raise the minimum wage especially at a place that has a lower prevailing wage, some of those on‐the‐job perks are going to go away because they’re trade‐offs. The minimum wage increases not free. It comes at a cost. And another point that I think a lot of people should—I think they would do well to understand is that I suppose those free perks, under the table stuff, while they’re not taxed, wages are taxed. So it’s a de facto tax increase on poor people. I don’t think that’s fair.
Trevor Burrus: Does the minimum wage just redistribute money from within a business though that seems to be maybe the acknowledged point of it that the CEO or the profit, the person is holding the profits of a McDonalds is going home with $180,000 a year and they’re paying their employees $7.25 an hour, so we’re going to have them pay them $10.25 an hour and then the person, the CEO is going to go home with $160,000 a year and that’s a good thing. We’ve lowered inequality. We’ve made people better off. And what’s $20,000 to the person making that much compared to the wage increase that the lower wage workers would get.
Ryan Young: It’s a good thing for the lower wage workers who do, in fact, find jobs and get hired. It’s a bad thing for the workers who never get hired in the first place who can’t find their jobs, who never get work experience, who don’t learn basic skills such as showing up on time or whether it’s specialized trade skills that you’re learn in whatever your first job is. It’s not fair to the poor. Minimum wages are—the trade‐offs are severe.
Aaron Powell: Can we measure that sort of stuff? I mean obviously we can measure it like within given businesses, you know, a city or a state enacts an increase in the minimum wage and we could see whether businesses let workers go, and we can track overall unemployment and overall unemployment among low skilled or low education workers. But these longer term trends about, you know, they’re not getting the experience that they would have otherwise gotten at entry level jobs, then that hurts them long‐term. Is there a way that we can demonstrate whether that’s actually happening empirically versus saying, you know, as free marketers, well, these are the things that we expect to have happened?
Ryan Young: Yes, there is but not with much precision, which is unfortunate, but that’s the way it goes. The predominant pro‐minimum wage studies by David Card and—I forgot the other fellow’s name, but they looked at fast food restaurants in New Jersey and found that rather than raising prices or cutting jobs, they simply cut into their margins, made the workers work harder instead of cutting wages which kind of is same thing as a pay cut, but they don’t go into that. But roughly 79% of Ph.D. economists believe that the minimum wage has a trade‐off which involves throwing people out of work. Again, it’s up to you to decide whether that’s a good thing or not, but it has trade‐offs and to quantify them I think roughly 3% of workers currently make minimum wage. But the opportunity costs that I’ve been talking about, the workers who never get hired, the workers who never gain experience, you cannot quantify that.
Trevor Burrus: It’s interesting you mentioned that only about 3% of workers make minimum wage, which itself I don’t think anyone really—no one disputes this basic fact with Hilary Clinton and Bernie Sanders don’t dispute this fact. With that very small section of the American worker, it seems like a weird thing to have as much discussion as we have on it as a way of fixing the world when it’s only going to—if it does anything, in fact, 3% of workers. And so, we can move on—there are some other things you discuss. Minimum wage gets a lot of attention but other things that could be fixed to help people get—more people maybe than just the 3% that make minimum wage. You write, for example, that affordable energy can help the poor how is energy being made affordable and how will that help the poor?
Ryan Young: Usually through regulation and that’s the trouble. How many folks want to regulate energy production? Well, they’re going to. That’s why we have an EPA and energy department. I’m not a fan of either, but—
Trevor Burrus: Could we quantify—like how much energy—how much money they add these regulations add to the price of energy?
Ryan Young: Well, let’s take one step back and then a step forward. The step back is thinking about people who live in absolute poverty. You’re talking about people who live in mud huts and who have to burn dung indoors for their heat and for their cooking. This is not a healthy way to live. It reduces life expectancy. In fact, this kind of energy poverty kills people. So, when you can transition to fossil fuels or this or that kind of clean energy, who knows what the future will bring us. Eager to see it myself. It’s rather better than the mud hut option. So, I would love to see more people be able to embrace that, which brings us well another step back to our people not ratios concept when it comes to inequality, make people better off. Don’t worry so much about the ratio between the rich and the poor.
Trevor Burrus: The other one that often is discussed is this is sort of almost as much of a “cliché” on the right as the minimum wage is on the left and that is regulations. When the right says regulations, they usually say it with some sort of foreboding. Too many regulations, so much regulation, I think a lot of people don’t really understand what that means. This means there’s rules on things. How big a problem is regulatory impact on the economy and, in particular, the poor, the well‐being of the poor?
Ryan Young: It’s a very big problem. Anyone who follows politics knows that the federal government spends, I don’t know, 3.5 trillion dollars in change, the budget deficit a little less than a half a trillion, national debt about 18 trillion at this point. Nobody knows what the numbers are for regulation. And I think that is a huge hole in the news coverage that’s going on right now, whether it’s the presidential campaign or anything else. Very few people know that the total burden of just federal regulations are about 1.9 trillion dollars per year. State and local rules are extra. So, even if you’re just talking about the federal government, a lot of folks on the left and the right do like to complain about the size of government. Most of them don’t know that it’s half again as big as they think it is.
If you actually go through the code of federal regulations which is where they store all these things and—by the way, if you want, you can order one from the government printing office. They will email you or—sorry, they will mail you 237 volumes which total roughly 178,000 pages.
Trevor Burrus: I assume these big print pages were for people who need eyeglasses?
Ryan Young: So, when you’re typing up a manuscript for a book, usually you consider 250 words to be a page. The average federal register page is roughly 1000 words in small font, multicolumn type and you get about—
Trevor Burrus: Tolstoy‐y hard‐out kind of thing. This is a lot of words and a lot of pages.
Ryan Young: Yeah. And every day, you get about 300 pages more of them. In fact, this year’s federal register which is where new regulations get published among other things, it’s on pace to be almost 90,000 pages and that’s just for this year.
Trevor Burrus: Now people again might think, “Okay.” A lot of people don’t encounter these regulations directly in their lives. They don’t run a business or they don’t try and buy and sell land or other ways that you might interact with the regulation. So they might be wondering, “Okay.” So there’s a bunch of pages, but what’s—how does one of these regulations just pick one if you want—cost poor people jobs and opportunity?
Ryan Young: Well, for example, this year—I’m actually looking up the exact number right now—upwards of 500 regulations affect small businesses. And again if you really care, I can get you the exact number, but the number is in that ballpark and just—if you want to start a business, you want to create jobs, you want to create value for other people, it gets harder and harder every year. There are regulations for everything from, say, the size of holes in Swiss cheese to preventing collisions at sea, you name it.
Trevor Burrus: This sounds like a good thing, though, preventing collisions at sea. I’m just trying to figure out how someone is losing a job or money because of this.
Ryan Young: A lot of it is opportunity costs and a lot of that is what makes free market folks—it makes it difficult to make the case because of what we have to say is about opportunity costs. I mean if you really want to, I would encourage you to try to stand at a podium in front of a factory that was never built that builds a product that was never invented in front of workers who are never hired. It’s less concrete.
Trevor Burrus: The other things you described—there’s a few other things you discussed in the paper, which is the second one about possibilities for reform. You discussed a little bit about central banks. Are central banks helping the inequality problem? Or I guess more specifically are they hurting the poor?
Ryan Young: There’s not a lot that they can do to actively help. What they can do is prevent harm. So, if you’re a central banker, what you want to do is have an honest price system. You don’t want to have radical inflation. You don’t want to have radical deflation. What you want is a stable honest currency that people can rely on. So, all of us know that, for example, say, the price of computers goes down year after year. If you want a certain amount of computing power, it’s going to get cheaper, Moore’s law and all that. A lot of other commodities also go down in price over time. That’s fine. What you don’t want is monetary inflation or deflation. What you want is a stable amount of money chasing a stable amount of wealth or actually want growing wealth, so I spoke. But you want the amount of dollars to approximately match the amount of wealth. So there are a lot of ways to do that and the way to do that is to buy into this central bank to a set rule and there are a lot of good candidates out there. I don’t really care myself which one they choose so long as they do in fact bind themselves to a rule instead of the completely ad hoc policy that the fed has been following, not just under Chairman Yellen but also under Ben Bernanke and also under Mr. Greenspan for about the second half of his tenure.
The point isn’t so much what the rule is. It’s that a central bank needs to follow a rule and that way we can have honest prices which every entrepreneur and every investor who wants to think about the long‐term, not just about themselves but about their children and the grandchildren. They need that and at least the fed is not giving that to them right now.
Aaron Powell: One of the other policies that at least in the minds of a lot of voters, they think will help the working class get more of a leg up but that you argue it hurts the poor is collective bargaining. How does collective bargaining make people on the bottom worse off? The arguments to that are actually pretty similar to the minimum wage. The crux of it is trade‐offs. So some workers actually do benefit. That is not in dispute. The trouble is that other people are hurt and that’s what I care about. For example, some workers might get a higher wage, better benefits, but other workers again are opportunity costs. You can’t quantify those things, but some workers never get hired. Some workers maybe they have to settle for lower paying jobs. Those people are hurt. What about them?
Trevor Burrus: What does the state of unionization look like in the country? Or have we seen a drop‐off in how many people are unionized that maybe parallel some of the lowering status of the poor?
Ryan Young: Unionization has dropped off quite a bit in the private sector. It’s now below 7%. In the public sector—because remember, governments can’t move away. They can’t escape from anybody. They’re captive. They’re closer to somewhere between a quarter and a third of all of their workers being unionized. That’s state, local and federal, although the level is lower at the federal level. So—
Trevor Burrus: Is that an important—is there a difference between—you mentioned the government can’t move away. Why is there a reason you might sort of think that private sector unionization has gone down? I mean some people might say it’s because of, say, NAFTA and foreign competition from trade and so we’ve kind of destroyed our auto manufacturing and our unions can’t keep up because they’re competing against people in other countries. But why is there that disparity? And is there something worse about public sector unions versus private unions?
Ryan Young: Well, seeing as since the passage of NAFTA in 1994, net employment has gone up by 21 million people. I think the job destruction argument falls flat. The reason for declining percentage of private sector unionized workers I think has to do with this capability. If workers and companies can get away from it, they will. And that’s why I think we have increased public sector unionization. They can’t get away.
Trevor Burrus: And, if we reform this, would you be in favor of prohibiting unionization or—you would say this would have the same kind of effect as minimum wage abolishing or getting rid of lowering minimum wage. Would this ultimately help the poor because some wages would go down but the amount of people who get jobs would offset it, is that the theory?
Ryan Young: I don’t think unionization helps the poor. That said, I am neutral on the issue. I think I take Mancur Olson, one of the old university of Maryland economist, who I think was a friend of Cato when he was alive. He said that unions couldn’t really exist without some form of government coercion on their behalf. So if unions can survive on their own, I’m all for it. Workers should be able to bargain collectively if they want to. There should not be laws hindering that nor should there be laws specifically favoring that either. That should be neutral, not opposed, not for, neutral.
Aaron Powell: So we as advocates of free markets have—I mean it’s important to have these discussions and we have these discussions a lot and watched these discussions happen around us in a much more one‐sided way. But what can we as libertarians, as fans of capitalism and markets, how can we get better at talking about these issues? What other ways that we have approached them or rhetorically in the past or they’re pretty common that you think are less helpful ways that might be more fruitful ways that might change hearts and minds more effectively?
Ryan Young: I think the best way is to tell stories about people, put names on faces and stories together. My background is in economics and I can talk to you all day about this or that statistic or this graph or that. But really, if you’re talking to folks, the best way to do it is to tell stories. It’s hard to do. And I think the main reason why is because of the opportunity costs that I’ve been talking about, you know, the factory that was never built, workers never hired, that we talked about earlier. It’s hard to do.
Trevor Burrus: It’s hard to find those people who haven’t left. So would you think that that is one of the inherent problems with trying to win this debate? Is that they can point to someone who got a raise, but it’s hard to find the person who didn’t get a job?
Ryan Young: I think that’s precisely it and I think one of the few examples that I’ve seen actually happened in—well, you guys know how Seattle recently raised their minimum wage to $15 an hour. Before the city of Seattle did that, the city of SeaTac, which has the Seattle‐Tacoma Airport and a small population but a large workforce did that, $15 an hour and, yeah, there were trade‐offs. People got fired. People lost their free parking. No more free meals. People stopped tipping them, and those kinds of stories need to be told and very few people are telling them. I think that is one of our biggest failures as a free market movement.
Aaron Powell: Thank you for listening. If you enjoyed today’s show, please take a moment to rate us on iTunes. Free Thoughts is produced by Evan Banks and Mark McDaniel. To learn more, find us on the web at www.libertarianism.org.