Do 'free' labour markets yield better jobs?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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From the point of view of an economist, the answer to this is “yes.”  Free labor markets do yield jobs that are, in the long run, as good as possible. 

A free labor market is one in which both the buyers of labor (employers) and the sellers (workers) are free to buy and sell under any terms that they wish.  There are, for example, no minimum wage laws that require employers to pay a base wage.  There are no union contracts that prevent employees from taking jobs that have pay and/or conditions that are not acceptable to the unions.  Only the forces of supply and demand determine how much labor will be bought and sold and the prices at which this will happen.

To economists, this type of labor market yields the best possible deal for the workers.  Employers will compete to hire the best workers and so they will pay the best possible wages for a given job.  However, employers will not be forced to pay excessively high prices for their workers.  This will mean that employers will be able to hire the maximum number of workers instead of having to hire fewer workers and pay them higher wages.  In the long run, these jobs will also be more likely to continue to exist because companies will not have a hard time competing with other companies that can pay lower wages. 

If labor markets were not free, some jobs might seem better in the short term.  Laws and/or union contracts might mandate better wages and conditions than could be obtained in a free market.  However, these restrictions on the market would (according to economists) result in fewer and less stable employment opportunities.

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