By Anthony de Jasay
At one time or another, most of you have seen in the street the warning
sign "Danger: Men at Work." None of you have seen a danger sign
warning "Danger: Collective Choice at Work." This is probably a great
mistake, for collective choice has an immense destructive potential, ranging
from corrosion to explosion, and the fiction that the social contract makes it
all right and all benign is at best a half truth and at least a half lie. The
present article looks at what tends to happen when collective choice is at work
where men are at work and are paid wages for it.
The knee jerk understanding of collective choice is "democracy,"
where its rough-and-ready meaning is one-man, one-vote majority rule
circumscribed by constitutional limits on what the majority may and may not do,
with these limits being fixed by the majority itself in some higher,
constitutional incarnation. The gaps between this ideal and the ways it works
out in practice are well known.1 In any case, the democratic ideal is only a very special case of the
form collective choice may take. In its general form, it is the solution of a
"game" by which the decisions of some members of society are accepted
by most or all as binding. The former rule and gain the outcomes they seek, the
latter are ruled by habit, passive acquiescence, the threat of raw power or, at
the limit, because of defeat in war or insurrection. Each of these
"games" may be formalized, and its solution reached at the lowest cost,
for society is persuaded to adopt a rule of choice-making (e.g. "the
dictator's word shall have the force of law," or "majority vote by
secret ballot shall be decisive").
All this looks very abstract and far removed from the prosaic contingencies
of industrial relations, the labour market and the scandalous malfunction of
the contemporary economy on far too many a countries where unemployment ranges
from 8 to 25 per cent of the active population. In fact, however, the way from
abstract generalization to prosaic misery is short and direct. The French code
of labour law currently runs to 3,200 pages. Its rate of growth, if that is the
right word to use about the number of its pages, puts to shame the rate of
growth of the economy. It promises a spurt of expansion in 2013, when the
"historic" negotiations between the Patronat (the employers'
association) and the labour unions about reforming the labour market, that have
been going nowhere for three months, will have reached their deadline and the
government will step in with fresh legislation. Meanwhile, unemployment has
passed the 10 per cent mark and deems inexorably headed for 11 per cent by
mid-2013.
Unemployment has a number of major causes and each of these is in its turn
caused by many minor ones. Over shadowing all, especially in France but also in
Spain and Italy, is the modern labour law.
A French employer can terminate a labour contract of indefinite duration
for a number of obvious and fairly even-handed reasons, but not because he
judges it to serve his own best interest (e.g. because he wants to replace him
by a more suitable candidate). The widest category authorizing him to dismiss
an employee is "economic redundancy." Unsurprisingly, the law is
unable to define "economic" without much ambiguity. The employee can
seek juridical remedy from the courts, arguing that his dismissal was not
economically necessary. The courts, massively encouraged by the media and the
government, with the latter being threatened with protest strikes and attacks
in the legislative chamber, often disallow the dismissal because they judge the
economic justification not strong enough. The employer may be forced to
reinstate the employee because its business is not loss making, or because,
though running at a loss, it is the subsidiary of a multinational group that it
is not running at a loss. The ringside public is greatly excited and puts
forward a remarkable version of the science of economics, for instance that the
employer can well afford to retain the employee because its sales are more than
sufficient to pay the wages. The employer, if it is a public company, is often
accused of seeking to cut its payroll to please the stock market, a place well
known to be a temple of greed and sin. For redundancies of more than 9 persons,
the employer must propose a "social plan" that may include offers of
alternative employment, vocational training and severance payments over and
above the legal minimum. The government may not approve the "social
plan" and the matter may finally end in the courts after a fight that may
take years.
The obstacles in the path of redundancy, including union and government
opposition, bad public relations and a protracted court fight, may in most
cases be bought off by generous severance payments that in some celebrated
cases have reached two or more years of salary.
The rational employer will under these circumstances only hire an
additional employee if the latter's expected marginal product over a given
period is greater than his wages and payroll taxes for the period plus
probability-weighted cost of overcoming the legal and institutional job
protection, should the necessity for closing down the job arise. The employer,
a busy manager, may not actually make this detailed and pseudo-precise
calculation, but will simply conclude that he would just as well not face the
job protection by the unions backed by the state and the media, should the need
arise to cancel the job he is considering creating today. He will instead just
stay put, not create the new job or fill it with a fixed-term employee whose
contract automatically terminates in a short while. The net result is a rise in
temporary employees, fairly high job security for the "ins" who are
on indefinite contracts, and a very bleak outlook for the "outs," particularly
the young. Unemployment of 10 per cent or more is becoming the standard,
blithely blamed on the "crisis," the banks, the
"speculators" and the Chinese. In France, the "Anglo-Saxon"
liberal globalisers will be found even more blameworthy.
The French case gives a special edge to the malignant role of collective
choice in the workplace. French labour unions have a negligible membership
outside the public service providers, such as the tax offices and the state
railways. They are maintained by mostly covert state subsidies. The influence
and the salaries of the union hierarchy depend, not on the service they render
to their members, but on the image they manage to project as the frontline
defenders of the working class. They proclaim branch- or industry-wide
collective bargaining, the security of employment and payroll-financed social
services as sacred taboos and are ready to incite their members to strike
action whose cost they do not even indirectly bear. In terms of collective
choice, they are the rulers, the wage-earners are the ruled who persist in
believing, despite the mounting evidence to the contrary, that the
decision-making rules work to their advantage, and the unemployed who are the
helpless victims of it all. In the "historic dialogue" now going on
between the Patronat and the unions, the government in an oblique and
apologetic manner is asking the unions to give up some job security in exchange
for some job creation. These negotiations are making no noticeable headway and
should end presently by the government taking over. Everybody's incentives will
remain exactly the same as before.
Hope, such as it is, lies in the gradual return of individual choices into
the play, and their intrusion into what is now the reserved domain of
collective choice. Collective bargaining, for one, must lose its sacrosanct
monopoly and so must the exclusive right of unions to represent workers and be
accepted as their sole agent. Labour law must cease to be the expression of
what collective choice deems to work in its favour, such as the recruiting of
allies and the harvesting of votes, and must instead find its bases in what the
parties directly concerned can most easily accept. It would be wonderful indeed
if the trimming of collective choice would lead to the re-discovery of the
freedom of contract.
Footnotes
1. Editor's note: These ideas have been explored in some detail by Jasay
himself in the following works: Social Contract, Free Ride: A Study of
the Public Goods Problem (Oxford: Clarendon Press, 1989); The
State (Indianapolis: Liberty Fund, 1998); Justice and its
Surroundings (Indianapolis: Liberty Fund, 2002); Political
Philosophy, Clearly. Essays on Freedom and Fairness, Property and Equalities,
edited and with an Introduction by Harmut Kliemt (Indianapolis: Liberty Fund,
2010); Political Economy, Concisely. Essays on Policy that does not
Work and Markets that Do, edited and with an Introduction by Harmut Kliemt
(Indianapolis: Liberty Fund, 2010).
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