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Even in Great Britain, where labor unions have long been far strongerthan in the United States, most workers are not members of laborunions.. In a study entitled The Airline Pilots, Geor

LABOR UNIONSOne of the most egregious misuses of language is the use of

"labor" as if it were synonymous with "labor unions"—as inreports that "labor opposes" such and such a proposed law or thatthe legislative program of "labor" is such and such That is adouble error In the first place, more than three out of four work-ers in the United States are not members of labor unions Even

in Great Britain, where labor unions have long been far strongerthan in the United States, most workers are not members of laborunions In the second place, it is an error to identify the interests

of a "labor union" with the interests of its members There is aconnection, and a close connection, for most unions most of the

ti me However, there are enough cases of union officials acting

to benefit themselves at the expense of their members, both inlegal ways and by misuse and misappropriation of union funds, towarn against the automatic equating of the interests of "laborunions" with the interests of "labor union members," let alonewith the interests of labor as a whole

This misuse of language is both a cause and an effect of a eral tendency to overestimate the influence and role of laborunions Union actions are visible and newsworthy They oftengenerate front-page headlines and full-scale coverage on thenightly TV programs "The higgling and bargaining of the mar-ket"—as Adam Smith termed it—whereby the wages of mostworkers in the United States are determined is far less visible,draws less attention, and its importance is as a result greatly un-derestimated

gen-The misuse of language contributes also to the belief that laborunions are a product of modern industrial development They arenothing of the kind On the contrary, they are a throwback to apreindustrial period, to the guilds that were the characteristicform of organization of both merchants and craftsmen in thecities and city-states that grew out of the feudal period Indeed,the modern labor union can be traced back even further, nearly2,500 years to an agreement reached among medical men inGreece

Hippocrates, universally regarded as the father of modernmedicine, was born around 460 B.C. on the island of Cos, one ofthe Greek islands only a few miles away from the coast of AsiaMinor At the time it was a thriving island, and already a medicalcenter After studying medicine on Cos, Hippocrates traveledwidely, developing a great reputation as a physician, particularlyfor his ability to end plagues and epidemics After a time he re-turned to Cos, where he established, or took charge of, a medicalschool and healing center He taught all who wished to learn—

so long as they paid the fees His center became famous out the Greek world, attracting students, patients, and physiciansfrom far and wide

through-When Hippocrates died at the age of 104, or so legend has it,Cos was full of medical people, his students and disciples Com-petition for patients was fierce and, not surprisingly, a concertedmovement apparently developed to do something about it—inmodern terminology, to "rationalize" the discipline in order toeliminate "unfair competition."

Accordingly, some twenty years or so after Hippocrates died—again, as legend has it—the medical people got together andconstructed a code of conduct They named it the HippocraticOath after their old teacher and master Thereafter, on the island

of Cos and increasingly throughout the rest of the world, everynewly trained physician, before he could start practice, was re-quired to subscribe to that oath That custom continues today aspart of the graduation ceremony of most medical schools in theUnited States

Like most professional codes, business trade agreements, andlabor union contracts, the Hippocratic Oath was full of fine idealsfor protecting the patient: "I will use my power to help the sick

to the best of my ability and judgment Whenever I go into

a house, I will go to help the sick and never with the intention ofdoing harm or injury ." and so on

But it also contains a few sleepers Consider this one: "I willhand on precepts, lectures and all other learning to my sons, tothose of my teachers and to those pupils duly apprenticed andsworn, and to none others." Today we would call that the prelude

to a closed shop

Or listen to this one referring to patients suffering from theagonizing disease of kidney or bladder stones: "I will not cut,even for the stone, but I will leave such procedures to the practi-tioners of that craft," 1 a nice market-sharing agreement betweenphysicians and surgeons.

Hippocrates, we conjecture, must turn in his grave when a newclass of medical men takes that oath He is supposed to havetaught everyone who demonstrated the interest and paid his tui-tion He would presumably have objected strongly to the kind ofrestrictive practices that physicians all over the world haveadopted from that time to this in order to protect themselvesagainst competition

The American Medical Association is seldom regarded as alabor union And it is much more than the ordinary labor union

It renders important services to its members and to the medicalprofession as a whole However, it is also a labor union, and inour judgment has been one of the most successful unions in thecountry For decades it kept down the number of physicians, kept

up the costs of medical care, and prevented competition with

"duly apprenticed and sworn" physicians by people from outsidethe profession—all, of course, in the name of helping the patient

At this point in this book, it hardly needs repeating that theleaders of medicine have been sincere in their belief that restrict-ing entry into medicine would help the patient By this time weare familiar with the capacity that all of us have to believe thatwhat is in our interest is in the social interest

As government has come to play a larger role in medicine, and

to finance a larger share of medical costs, the power of the can Medical Association has declined Another monopolisticgroup, government bureaucrats, has been replacing it We believethat this result has been brought on partly by the actions oforganized medicine itself

Ameri-These developments in medicine are important and may havefar-reaching implications for the kind and cost of health care thatwill be available to us in the future However, this chapter isabout labor, not medicine, so we shall refer only to those aspects

of medical economics that illustrate principles applicable to alllabor union activity We shall put to one side other important,

and fascinating, questions about current developments in theorganization of health care.

Who Benefits?

Physicians are among the most highly paid workers in theUnited States That status is not exceptional for persons who havebenefited from labor unions Despite the image often conveyedthat labor unions protect low-paid workers against exploitation

by employers, the reality is very different The unions that havebeen most successful invariably cover workers who are in occupa-tions that require skill and would be relatively highly paid with

or without unions These unions simply make high pay stillhigher

For example, airline pilots in the United States received anannual salary, for a three-day week, that averaged $50,000 a year

in 1976 and has risen considerably since In a study entitled The

Airline Pilots, George Hopkins writes, "Today's incredibly high

pilot salaries result less from the responsibility pilots bear or thetechnical skill they possess than from the protected position theyhave achieved through a union." 2

The oldest traditional unions in the United States are the craftunions—carpenters, plumbers, plasterers, and the like—againworkers who are highly skilled and highly paid More recently,the fastest growing unions—and indeed almost the only ones thathave grown at all—are unions of government workers, includingschoolteachers, policemen, sanitation workers, and every othervariety of government employee The municipal unions in NewYork City have demonstrated their strength by helping to bringthat city to the verge of bankruptcy

Schoolteachers and municipal employees illustrate a generalprinciple that is clearly exemplified in Great Britain Theirunions do not deal directly with the taxpayers who pay theirmembers' salaries They deal with government officials Thelooser the connection between taxpayers and the officials theunions deal with, the greater the tendency for officials andthe unions to gang up at the expense of the taxpayer—another ex-ample of what happens when some people spend other people's

money on still other people That is why municipal unions arestronger in large cities such as New York than in small cities, whyunions of schoolteachers have become more powerful as controlover the conduct of schools and over educational expenditureshas become more centralized, further removed from the localcommunity.

In Great Britain the government has nationalized many moreindustries than in the United States—including coal mining,public utilities, telephones, hospitals And labor unions in Britainhave generally been strongest, and labor problems most serious,

in the nationalized industries The same principle is reflected inthe strength of the U.S postal unions

Given that members of strong unions are highly paid, theobvious question is: are they highly paid because their unionsare strong, or are their unions strong because they are highlypaid? Defenders of the unions claim that the high pay of theirmembers is a tribute to the strength of union organization, andthat if only all workers were members of unions, all workerswould be highly paid

The situation is, however, much more complex Unions ofhighly skilled workers have unquestionably been able to raisethe wages of their members; however, people who would in anyevent be highly paid are in a favorable position to form strongunions Moreover, the ability of unions to raise the wages ofsome workers does not mean that universal unionism could raisethe wages of all workers On the contrary, and this is a funda-

mental source of misunderstanding, the gains that strong unions

win for their members are primarily at the expense of other workers.

The key to understanding the situation is the most elementaryprinciple of economics: the law of demand—the higher the price

of anything, the less of it people will be willing to buy Makelabor of any kind more expensive and the number of jobs of thatkind will be fewer Make carpenters more expensive, and fewerhouses than otherwise will be built, and those houses that are builtwill tend to use materials and methods requiring less carpentry.Raise the wage of airline pilots, and air travel will become moreexpensive Fewer people will fly, and there will be fewer jobs for

airline pilots Alternatively, reduce the number of carpenters orpilots, and they will command higher wages Keep down the num-ber of physicians, and they will be able to charge higher fees.

A successful union reduces the number of jobs available of thekind it controls As a result, some people who would like to getsuch jobs at the union wage cannot do so They are forced to lookelsewhere A greater supply of workers for other jobs drives downthe wages paid for those jobs Universal unionization would notalter the situation It could mean higher wages for the personswho get jobs, along with more unemployment for others Morelikely, it would mean strong unions and weak unions, with mem-bers of the strong unions getting higher wages, as they do now,

at the expense of members of weak unions

Union leaders always talk about getting higher wages at theexpense of profits That is impossible: profits simply aren't bigenough About 80 percent of the total national income of theUnited States currently goes to pay the wages, salaries, andfringe benefits of workers More than half of the rest goes to payrent and interest on loans Corporate profits—which is whatunion leaders always point to—total less than 10 percent ofnational income And that is before taxes After taxes, corporateprofits are something like 6 percent of the national income.That hardly provides much leeway to finance higher wages, even

if all profits were absorbed And that would kill the goose thatlays the golden eggs The small margin of profit provides theincentive for investment in factories and machines, and for devel-oping new products and methods This investment, these inno-vations, have, over the years, raised the productivity of theworker and provided the wherewithal for higher and higherwages

Higher wages to one group of workers must come primarilyfrom other workers Nearly thirty years ago one of us estimatedthat on the average about 10 to 15 percent of the workers in thiscountry had been able through unions or their equivalent, such asthe American Medical Association, to raise their wages 10 to 15percent above what they otherwise would have been, at the cost

of reducing the wages earned by the other 85 to 90 percent bysome 4 percent below what they otherwise would have been

More recent studies indicate that this remains roughly the order

of magnitude of the effect of unions.' Higher wages for high-paidworkers, lower wages for low-paid workers

All of us, including the highly unionized, have indirectly beenharmed as consumers by the effect of high union wages on theprices of consumer goods Houses are unnecessarily expensivefor everyone, including the carpenters Workers have been pre-vented by unions from using their skills to produce the mosthighly valued items; they have been forced to resort to activitieswhere their productivity is less The total basket of goods avail-able to all of us is smaller than it would have been

The Source of Union Power

How can unions raise the wages of their members? What is thebasic source of their power? The answer is: the ability to keepdown the number of jobs available, or equivalently, to keep downthe number of persons available for a class of jobs Unions havebeen able to keep down the number of jobs by enforcing a highwage rate, generally with assistance from government They havebeen able to keep down the number of persons available, pri-marily through licensure, again with government aid They haveoccasionally gained power by colluding with employers to enforce

a monopoly of the product their members help to produce

Enforcing a high wage rate If, somehow or other, a union can

assure that no contractor will pay less than, say, $15 an hour for

a plumber or a carpenter, that will reduce the number of jobs thatwill be offered Of course, it will also increase the number ofpersons who would like to get jobs

Suppose for the moment that the high wage rate can be forced There must then be some way to ration the limited num-ber of lucrative jobs among the persons seeking them Numerousdevices have been adopted: nepotism—to keep the jobs in thefamily; seniority and apprenticeship rules; featherbedding—tospread the work around; and simple corruption The stakes arehigh, so the devices used are a sensitive matter in union affairs.Some unions will not permit seniority provisions to be discussed

en-in open meeten-ings because that always leads to fistfights

Kick-backs to union officials to secure preference for jobs are a mon form of corruption The heavily criticized racial discrimina-tion by unions is still another device for rationing jobs If there

com-is a surplus of applicants for a limited number of jobs to berationed, any device to select the ones who get the jobs is bound

to be arbitrary Appeals to prejudice and similar irrational siderations often have great support among the "ins" as a way

con-of deciding whom to keep out Racial and religious tion have entered also into admissions to medical schools and forthe same reason: a surplus of acceptable applicants and the need

discrimina-to ration places among them

To return to the wage rate, how can a union enforce a highwage rate? One way is violence or the threat of violence: threat-ening to destroy the property of employers, or to beat them up

if they employ nonunion workers or if they pay union membersless than the union-specified rate; or to beat up workers, ordestroy their property, if they agree to work for a lower wage.That is the reason union wage arrangements and negotiationshave so often been accompanied by violence

An easier way is to get the government to help That is thereason union headquarters are clustered around Capitol Hill inWashington, why they devote so much money and attention topolitics In his study of the airline pilots' union, Hopkins notes that

"the union secured enough federal protective legislation to makethe professional airline pilots practically a ward of the state." 4

A major form of government assistance to construction unions

is the Davis-Bacon Act, a federal law that requires all contractorswho work on a contract in excess of $2,000 to which the U.S.government or the District of Columbia is a party to pay wagerates no less than those "prevailing for the corresponding classes

of laborers and mechanics" in the neighborhood in question, as

"determined by the Secretary of Labor." In practice the

"pre-vailing" rates have been ruled to be union wage rates in "anoverwhelming proportion of wage determinations regard-less of area or type of construction." 5 The reach of the act hasbeen extended by the incorporation of its prevailing wage require-ment in numerous other laws for federally assisted projects, and

by similar laws in thirty-five states (as of 1971) covering state

construction expenditures.' The effect of these acts is that thegovernment enforces union wage rates for much of constructionactivity.

Even the use of violence implicitly involves government port A generally favorable public attitude toward labor unionshas led the authorities to tolerate behavior in the course of labordisputes that they would never tolerate under other circum-stances If someone's car gets overturned in the course of a labordispute, or if plant, store, or home windows get smashed, or ifpeople even get beaten up and seriously injured, the perpetratorsare less likely to pay a fine, let alone go to jail, than if the sameincident occurred under other circumstances

sup-Another set of government measures enforcing wage rates areminimum wage laws These laws are defended as a way to helplow-income people In fact, they hurt low-income people Thesource of pressure for them is demonstrated by the people whotestify before Congress in favor of a higher minimum wage.They are not representatives of the poor people They aremostly representatives of organized labor, of the AFL-CIO andother labor organizations No member of their unions works for

a wage anywhere close to the legal minimum Despite all therhetoric about helping the poor, they favor an ever higher mini-mum wage as a way to protect the members of their unions fromcompetition

The minimum wage law requires employers to discriminateagainst persons with low skills No one describes it that way, butthat is in fact what it is Take a poorly educated teenager with

little skill whose services are worth, say, only $2.00 an hour He

or she might be eager to work for that wage in order to acquiregreater skills that would permit a better job The law says thatsuch a person may be hired only if the employer is willing to payhim or her (in 1979) $2.90 an hour Unless an employer is will-

ing to add 90 cents in charity to the $2.00 that the person's

services are worth, the teenager will not be employed It has ways been a mystery to us why a young person is better off unem-

al-ployed from a job that would pay $2.90 an hour than emal-ployed

at a job that does pay $2.00 an hour

The high rate of unemployment among teenagers, and

espe-cially black teenagers, is both a scandal and a serious source ofsocial unrest Yet it is largely a result of minimum wage laws.

At the end of World War II the minimum wage was 40 cents anhour Wartime inflation had made that so low in real terms as to

be unimportant The minimum wage was then raised sharply to

75 cents in 1950, to $1.00 in 1956. In the early fifties the ployment rate for teenagers averaged 10 percent compared withabout 4percent for all workers—moderately higher, as one wouldexpect for a group just entering the labor force The unemploy-ment rates for white and black teenagers were roughly equal.After minimum wage rates were raised sharply, the unemploy-ment rate shot up for both white and black teenagers Even moresignificant, an unemployment gap opened between the rates forwhite and black teenagers Currently, the unemployment rateruns around 15 to 20 percent for white teenagers; 35 to 45 per-cent for black teenagers.' We regard the minimum wage rate asone of the most, if not the most, antiblack laws on the statutebooks The government first provides schools in which manyyoung people, disproportionately black, are educated so poorlythat they do not have the skills that would enable them to getgood wages It then penalizes them a second time by preventingthem from offering to work for low wages as a means of induc-ing employers to give them on-the-job training All this is in thename of helping the poor

unem-Restricting numbers An alternative to enforcing a wage rate is

to restrict directly the number who may pursue an occupation.That technique is particularly attractive when there are manyemployers—so that enforcing a wage rate is difficult Medicine

is an excellent example, since much of the activity of organizedmedicine has been directed toward restricting the number of phy-sicians in practice

Success in restricting numbers, as in enforcing a wage rate,generally requires the assistance of the government In medicinethe key has been the licensure of physicians—that is, the require-ment that in order for any individual to "practice medicine," hemust be licensed by the state Needless to say, only physiciansare likely to be regarded as competent to judge the qualifications

of potential physicians, so licensing boards in the various states

(in the United States licensure is under the jurisdiction of thestate, not the federal government) are typically composed wholly

of physicians or dominated by physicians, who in turn have erally been members of the AMA

gen-The boards, or the state legislatures, have specified conditionsfor the granting of licenses that in effect give the AMA the power

to influence the number of persons admitted to practice Theyhave required lengthy training, almost always graduation from an

"approved" school, generally internship in an "approved" pital By no accident, the list of "approved" schools and hospitals

hos-is generally identical with the lhos-ist hos-issued by the Council onMedical Education and Hospitals of the American Medical Asso-ciation No school can be established or, if established, long con-tinue unless it can get the approval of the AMA Council on Medi-cal Education That has at times required limiting the number ofpersons admitted in accordance with the council's advice

Striking evidence of the power of organized medicine to restrictentry was provided during the depression of the 1930s when theeconomic pressure was particularly great Despite a flood ofhighly trained refugees from Germany and Austria—at the timecenters of advanced medicine—the number of foreign-trainedphysicians admitted to practice in the United States in the fiveyears after Hitler came to power was no larger than in the pre-ceding five years.'

Licensure is widely used to restrict entry, particularly for pations like medicine that have many individual practitionersdealing with a large number of individual customers As in medi-cine, the boards that administer the licensure provisions are com-posed primarily of members of the occupation licensed—whetherthey be dentists, lawyers, cosmetologists, airline pilots, plumbers,

occu-or moccu-orticians There is no occupation so remote that an attempthas not been made to restrict its practice by licensure According

to the chairman of the Federal Trade Commission: "At a recentsession of one state legislature, occupational groups advancedbills to license themselves as auctioneers, well-diggers, home im-provement contractors, pet groomers, electrologists, sex thera-pists, data processors, appraisers, and TV repairers Hawaiilicenses tattoo artists New Hampshire licenses lightning-rod sales-

men." ' The justification offered is always the same: to protectthe consumer However, the reason is demonstrated by observingwho lobbies at the state legislature for the imposition or strength-ening of licensure The lobbyists are invariably representatives

of the occupation in question rather than of the customers Trueenough, plumbers presumably know better than anyone else whattheir customers need to be protected against However, it is hard

to regard altruistic concern for their customers as the primarymotive behind their determined efforts to get legal power to de-cide who may be a plumber

To reinforce the restriction on numbers, organized tional groups persistently strive to have the practice of theiroccupation legally defined as broadly as possible in order to in-crease the demand for the services of licensed practitioners.One effect of restricting entry into occupations through licen-sure is to create new disciplines: in medicine, osteopathy andchiropractic are examples Each of these, in turn, has resorted tolicensure to try to restrict its numbers The AMA has engaged inextensive litigation charging chiropractors and osteopaths withthe unlicensed practice of medicine, in an attempt to restrict them

occupa-to as narrow an area as possible Chiropracoccupa-tors and osteopaths inturn charge other practitioners with the unlicensed practice ofchiropractic and osteopathy

A recent development in health care, arising partly out of new,sophisticated portable equipment, has been the development ofservices in various communities to bring prompt aid in emergen-cies These services are sometimes organized by the city or a cityagency, sometimes by a strictly private enterprise, and aremanned primarily by paramedics rather than licensed physicians.Joe Dolphin, the owner of one such private enterprise organi-zation attached to a fire department in southern California, de-scribed its effectiveness as follows:

In one district of California that we serve, which is a county which

is populated to the extent of five hundred and eighty thousand people,before the introduction of paramedics, less than one percent of thepatients that suffered a cardiac arrest where their heart stopped livedthrough their hospital stay and were released from the hospital Withthe introduction of paramedics, just in the first six months of opera-

tion, twenty-three percent of the people whose heart stops are cessfully resurrected and are released from the hospital and go back

suc-to productive work in society.

We think that's pretty amazing We think the facts speak for selves However, relating that to the medical community is sometimes very difficult They have ideas of their own.

them-More generally, jurisdictional disputes—what activities arereserved to what occupation—are among the most frequentsources of labor stoppages An amusing example was a reporterfor a radio station who came to interview one of us He empha-sized that the interview had to be short enough to fit on one side

of the cassette in his cassette recorder Turning over the cassettewas reserved to a member of the electricians' union If, he said,

he turned it over himself, the cassette would be erased when hereturned to the station, and the interview lost Exactly the samebehavior as the medical profession's opposition to paramedics,and motivated by the same objective: to increase the demandfor the services of a particular group

Collusion between unions and employers Unions have

some-ti mes gained power by helping business enterprises combine tofix prices or share markets, activities that are illegal for businessunder the antitrust laws

The most important historical case was in coal mining in the1930s The two Guffey coal acts were attempts to provide legalsupport for a price-fixing cartel of coal mine operators When, inthe mid-thirties, the first of the acts was declared unconstitutional,John L Lewis and the United Mine Workers that he headedstepped into the breach By calling strikes or work stoppageswhenever the amount of coal above the ground got so large as tothreaten to force down prices, Lewis controlled output and there-

by prices with the unspoken cooperation of the industry As thevice-president of a coal company put it in 1938, "They [theUnited Mine Workers] have done a lot to stabilize the bitumi-nous coal industry and have endeavored to have it operate on aprofitable basis, in fact though one dislikes to admit it their ef-forts along that line have in the main been a bit moreefficacious than the endeavors of coal operators them-selves."10

The gains were divided between the operators and the miners.The miners were granted high wage rates, which of course meantgreater mechanization and fewer miners employed Lewis recog-nized this effect explicitly and was more than prepared to acceptit—regarding higher wages for miners employed as ample com-pensation for a reduction in the number employed, providedthose employed were all members of his union.

The miners' union could play this role because unions areexempt from the Sherman Anti-Trust Act Unions that have takenadvantage of this exemption are better interpreted as enterprisesselling the services of cartelizing an industry than as labor organi-zations The Teamsters' Union is perhaps the most notable.There is a story, perhaps apocryphal, about David Beck, the head

of the Teamsters' Union before James Hoffa (both of whomultimately went to jail) When Beck was negotiating with brew-eries in the state of Washington about wages for drivers ofbrewery trucks, he was told that the wages he was asking werenot feasible because "eastern beer" would undercut local beer

He asked what the price of eastern beer would have to be to mit the wage he demanded A figure, X dollars a case, wasnamed, and he supposedly replied, "From now on, eastern beerwill be X dollars a case."

per-Labor unions can and often do provide useful services fortheir members—negotiating the terms of their employment, rep-resenting them with respect to grievances, giving them a feeling

of belonging and participating in a group activity, among others

As believers in freedom, we favor the fullest opportunity forvoluntary organization of labor unions to perform whateverservices their members wish, and are willing to pay for, pro-vided they respect the rights of others and refrain from usingforce

However, unions and comparable groups such as the sional associations have not relied on strictly voluntary activitiesand membership with respect to their major proclaimed objec-tive —improving the wages of their members They have suc-ceeded in getting government to grant them special privileges andimmunities, which have enabled them to benefit some of theirmembers and officials at the expense of other workers and all

profes-consumers In the main, the persons benefited have had decidedly

higher incomes than the persons harmed

GOVERNMENT

In addition to protecting union members, government has adopted

a host of laws intended to protect workers in general: laws thatprovide for workmen's compensation, prohibit child labor, setminimum wages and maximum hours of labor, establish com-missions to assure fair employment practices, promote affirmativeaction, establish the federal Office of Safety and Health Adminis-tration to regulate employment practices, and others too numer-ous to list

Some measures have had a favorable effect on conditions ofwork Most, like workmen's compensation and child labor laws,simply embodied in law practices that had already become com-mon in the private market, perhaps extending them somewhat

to fringe areas Others, you will not be surprised to learn, havebeen a mixed blessing They have provided a source of power forparticular unions or employers, and a source of jobs for bureau-crats, while reducing the opportunities and incomes of the ordi-nary worker OSHA is a prime example—a bureaucratic night-mare that has produced an outpouring of complaints on all sides

As a recent joke has it: How many Americans does it take toscrew in a light bulb? Answer: Five; one to screw in the bulb,four to fill out the environmental impact and OSHA reports.Government does protect one class of workers very well,namely, those employed by government

Montgomery County, Maryland, a half-hour's drive fromWashington, D.C., is the home of many senior civil servants Italso has the highest average family income of any county in theUnited States One out of every four employed persons in Mont-gomery County works for the federal government They havejob security and salaries linked to the cost of living At retire-ment they receive civil service pensions also linked to the cost ofliving and independent of Social Security Many manage toqualify for Social Security as well, becoming what are known asdouble dippers

Many, perhaps most, of their neighbors in Montgomery Countyalso have some connection with the federal government—as con-gressmen, lobbyists, top executives of corporations with govern-ment contracts Like other bedroom communities around Wash-ington, Montgomery County has been growing rapidly Govern-ment has become a highly dependable growth industry in recentdecades.

All civil servants, even at low levels, are well protected by thegovernment According to most studies, their salaries averagehigher than comparable private salaries and are protected againstinflation They get generous fringe benefits and have an almostincredible degree of job security

As a Wall Street Journal story put it:

As the [Civil Service] regulations have ballooned to fill 21 volumes some five feet thick, government managers have found it increasingly difficult to fire employees At the same time, promotions and merit pay raises have become almost automatic The result is a bureaucracy nearly devoid of incentives and largely beyond anyone's control .

Of the one million people eligible last year for merit raises, only

600 didn't receive them Almost no one is fired; less than 1% of eral workers lost their jobs last year.)1

fed-To cite one specific case, in January 1975 a typist in the vironmental Protection Agency was so consistently late for workthat her supervisor demanded she be fired It took nineteen months

En-to do it—and it takes a twenty-one-foot-long sheet En-to list thesteps that had to be gone through to satisfy all the rules and allthe management and union agreements

The process involved the employee's supervisor, the visor's deputy director and director, the director of personneloperations, the agency's branch chief, an employee relationsspecialist, a second employee relations specialist, a special office

super-of investigations, and the director super-of the super-office super-of investigations.Needless to say, this veritable telephone directory of officials waspaid for with taxpayers' money

At state and local levels the situation varies from place toplace In many states and in large cities such as New York,Chicago, and San Francisco, the situation is either the same as ormore extreme than in the federal government New York City

was brought to its present state of virtual bankruptcy largely byrapid increases in the wages of municipal employees and, perhapseven more, by the granting of generous pensions at early retire-ment ages In states with big cities, representatives of public em-ployees are often the major special interest group in the statelegislature.

NO ONETwo classes of workers are not protected by anyone: workers whohave only one possible employer, and workers who have no pos-sible employer

The individuals who effectively have only one possible ployer tend to be highly paid people whose skills are so rare andvaluable that only one employer is big enough or well enoughsituated to take full advantage of them

em-The standard textbook example when we studied economics

in the 1930s was the great baseball hero Babe Ruth The "Sultan

of Swat," as the home run king was nicknamed, was by far themost popular baseball player of his time He could fill anystadium in either of the major leagues The New York Yankeeshappened to have the largest stadium of any baseball club, so itcould afford to pay him more than any other club As a result,the Yankees were effectively his only possible employer Thatdoesn't mean, of course, that Babe Ruth didn't succeed in com-manding a high salary, but it did mean that he had no one toprotect him; he had to bargain with the Yankees, using thethreat of not playing for them as his only weapon

Individuals who have no choice among employers are mostlythe victims of government measures One class has already beenmentioned: those who are rendered unemployed by legal mini-mum wages As noted earlier, many of them are double victims

of government measures: poor schooling plus high minimumwages that prevent them from getting on-the-job training

Persons on relief or public assistance are in a somewhat similarposition It is to their advantage to take employment only if theycan earn enough to make up for the loss of their welfare or otherpublic assistance There may be no employer to whom their ser-