America Works: Thoughts on an Exceptional U.S. Labor Market

CHAPTER 6. Regulating the Unregulated Market

 CHAPTER 6  REGULATING THE UNREGULATED MARKET • The boss walks into your office and yells, “You’re fired!” Why? Because Donald Trump’s television show inspired her. Legal or illegal? • Management restructures the pension plan so that you get less and top management gets more. Legal or illegal? • Your supervisor gives you one last assignment before sending your job to Bangalore: train your replacement. Legal or illegal? • Changes at your workplace endanger safety. You protest. The firm fires you and hires temps to take your job. Legal or illegal? Most Americans believe that unfair actions like these are illegal. The United States has the full panoply of labor regulations of an advanced economy. Labor law regulates wages and hours and other aspects of labor contracts and protects the right of workers to form unions and negotiate with employers collectively. Employment law outlaws discrimination on the basis of race, gender, ethnicity, religion, or disability. Tax and spending policies provide Social Security , disability insurance, unemployment insurance, and workers’ compensation. In the 1970s and 1980s, Congress enacted laws on occupational health and safety, private pensions, and the employment of the disabled. Regulations protecting labor fill law texts and give employment to tens of thousands of lawyers. Still, the U.S. regulatory system ranks at the bottom of the pack in protecting workers’ rights at work and in ameliorating inequality in labor market outcomes. The United States operates under an employment at will doctrine in which the firm owns the job. This 93 means that it is legal for your boss to fire you because Trump inspired her, to change its benefit plan in ways that harm you, to order you to train your replacement, and to fire you for protesting dangers at the workplace. The United States has few inspectors or regulators administering wage and hours legislation or occupational health and safety regulations. It lacks the works councils that the European Union uses to protect rights at workplaces or the “internal responsibility” committees that Canada uses to help enforce labor laws. The exceptional way for U.S. workers to enforce their rights is through court proceedings. You think the firm has violated your legal rights? Get a lawyer and sue. Will your lawsuit succeed? A lawsuit or the threat of a suit can work to enforce the law in some situations. In other situations, it burdens employers but does little to help workers. The Success of Equal Employment One great success of the United States in regulating the labor market is in equal employment. Before Title VII of the 1964 Civil Rights Act outlawed employment discrimination in the job market, some states had equal employment acts that penalized discrimination, but most blacks lived in the southern states, where discrimination was the norm. Firms advertised jobs for whites or men only, refused to hire blacks or women for some jobs, or promoted white men over better-qualified workers from other groups without any legal consequences. Few corporate recruiters visited the historically black colleges and universities where most black students studied. As a result, black college graduates taught in segregated schools or provided professional services in the black community or worked for the government. The earnings of blacks were about 60 percent of those of whites, a ratio comparable to what it was in Reconstruction days. The Civil Rights Act was initially designed to outlaw discrimination against blacks, but a southern congressman opposed to the bill insisted that women be covered as well. The inclusion of women was meant to mock the bill since women’s “natural place” was in the home and discriminating against them in the job market was America Works 94 part of the natural order of economic life. The Civil Rights Act was followed by President Johnson’s Executive Order 11246 (1969), which required firms with federal contracts to take “affirmative action ” to remedy the low numbers of persons in protected groups whom they employed. Analysts and policymakers did not expect the act to have an immediate effect on the economic position of blacks, but the earnings and occupational attainment of black workers did begin rising relative to those of white workers from the mid-1960s through the early 1970s. The number of national corporate recruiters interviewing on black college campuses jumped. Realizing that they could get jobs in the large firms, black students shifted their majors from education and social service to business administration and...