I am going to Paris this weekend, because the OECD invited me to present on law and technology. A visit to the city of lights should be a delight, but sadly it looks like mine will be darkened by national strikes. Unions are trying to pressure the Socialist government to drop mild reforms to French labor laws that would make it somewhat less expensive to discharge workers. Currently, workers who are not on short-term contracts have close to life tenure. The absurdity of this regime was underscored just this week, when a French labor tribunal held that a bank wrongly discharged a worker who had caused it billions of dollars of losses through illegal trades!
The sturm und drang about moving France ever so incrementally toward a free market shows the continuing importance of a nation’s founding principles. Our revolution and Constitution embedded principles of classical liberalism in the DNA of America. In contrast, the French Revolution created an enduring political norm demanding substantive equality, not merely equality under law. It is worth looking at the consequences of these different principles, because the renewed focus on inequality in the United States is fundamentally an attempt to make our core political concern be equality rather than liberty.
There are riots in France every time the government tries to liberalize the sclerotic French labor market to make the country as a whole more competitive. That (considerable) part of the population which benefits from the legal privileges it currently enjoys is either unable or unwilling to grasp that, in a market, the protections of some are the obstacles of others. As ever, such privileges set one part of the population against another.
The new report of the Congressional Budget Office, showing substantial job losses from the Obama administration’s proposed hike of the minimum wage to $10.10 has changed the tenor of the debate in Washington. A nonpartisan, professional agency’s considered opinion is hard to ignore, although White House and congressional spinners are trying to deflect its findings. Our national conversation has suddenly deepened and it is now harder for politicians to claim credit for a free lunch. We need more such institutions to inject accurate information into the fact free zone that is our nation’s capital.
The Congressional Budget Office, begun in 1974, is staffed by professional economists, not political appointees. To be sure, its director is appointed by House and Senate leaders, but the norm now is to appoint an economist of independent academic stature, not a political hack. Four factors make the CBO a credible organization. First, it has no actual power to implement policy and thus is less likely to shape its agenda to fit the usual imperatives of bureaucratic aggrandizement and personal ambition. Second, its mandate is broad in scope: an agency with a narrower reporting focus, as for instance on a particular policy, is more likely to be captured by those in the field on which it is reporting. Third, its staff and its director have professional reputations to maintain and thus incentives to avoid politically driven and result oriented analysis. Finally, their reputations are made and maintained in the field of economics, a path breaking social science in its capacity to use quantitative methods to analyze the past and predict the future. There is an objective basis for their work.
The CBO’s report on the minimum wage noted other costs that have not been as widely reported. An increase in minimum wage to $10.10 would also create not insubstantial price increases.