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HomeEconomyAdam Smith Provided a Moral Foundation for Workers’ Freedoms

Adam Smith Provided a Moral Foundation for Workers’ Freedoms

There is abject silliness to occupational licensing requirements. Some people make colorable (though not undisputed) arguments for licensing high-skill, high-risk professions such as physicians. Most restrictions, though, do little besides benefitting established labor interests at the expense of workers and consumers. No public-policy or economic catastrophe will follow the repeal of licensing requirements for beauticians, bartenders, “temporary wrestler[s],” or many other regulated professions.

Adam Smith’s The Wealth of Nations eloquently raises the question of workforce restrictions, which conveys the very essence of free-market economics and natural-rights theory. “The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable,” Smith argues. “The patrimony of a poor man lies in the strength and dexterity of his hands; but to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbor, is a plain violation of this most sacred property.”

Property rights begin with the ownership of oneself. The individual’s bodily and mental autonomy (when left unmolested by the state) empowers him, through his labor, to create economic value for his fellows. Price signals – written by the market’s invisible hand – help the businessperson or laborer maximize his usefulness to others (and his profits).

In Smith’s conception, workforce specialization begets efficiency and prosperity. Each specialized worker exchanges his own products for those he cannot himself create. Individuals “find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbours, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for.” Thus, free, complex, and far-flung markets – bound together by webs of commerce – produce among their participants mutual reliance, collaboration, and wealth.

Moreover, since the rights to free association and contract necessarily involve at least two parties, workforce restrictions infringe also on the “just liberty” of would-be employers, Smith wrote. Employers – “whose interest it so much concerns” – can vet effectively their applicants’ qualifications. They do not require the government’s protection. Lawmakers’ pretensions to the contrary are “evidently as impertinent as [they are] oppressive.”

The impertinence and oppression of such paternalism seems still starker today, as many modern regulators reason that workers themselves require government to restrict their freedom to work when and how they see fit. These notions have become manifest in laws such as California’s infamous A.B. 5, which bars many would-be workers from contracting flexibly and independently with would-be employers. But these crackdowns on independent contractors merely serve special interests. Taxi drivers, for example, threatened by transportation-industry insurgents Uber and Lyft push heavily for legislation like this. Indeed, most independent workers prefer their lot to traditional employment. A 2021 Pew Research Center survey found, for example, that roughly four in five gig workers “rate their experiences in these jobs positively.”

Smith understood the special nature of labor interests’ relationship with government. He noted that “The government of towns corporate was altogether in the hands of traders and artificers.”

“Incorporated trades,” for example, would often precondition membership on the completion of a long apprenticeship. Trades would further limit the permitted number of apprentices any master could teach. “The silk weavers in London had scarce been incorporated a year when they enacted a byelaw restraining any master from having more than two apprentices at a time,” Smith writes. This labor protectionism shrunk the supply of tradesmen in the given field, thus inflating artificially their profits.

Emerging from Europe’s Dark Ages, guilds ­curated and preserved state-sponsored monopolies in their industries. Big Labor enforced price controls, output quotas, adherence designated supply chains, and much more. Guilds often stifled technological or methodological innovations whose resultant efficiencies might lower consumer prices. By subverting market forces, however, guilded industries often underperformed their unguilded competition. Eventually, the rising tides of capitalism and democratic political institutions lifted the boats of businesspeople and consumers – but drowned the guild system.

Contemporary Big Labor’s rent seeking – occupational licensing and anti-contractor measures among others – has the same moral defects as the guilds’ efforts of yore. “Guilds provided an organizational mechanism for groups of businessmen to negotiate with political elites for exclusive legal privileges that allowed them to reap monopoly rents,” writes Sheilagh Ogilvie, a professor of economic history at Cambridge University. “Guild members then used their guilds to redirect a share of these rents to political elites in return for support and enforcement.” Such cronyism mirrors the activities of many modern labor unions, particularly in the public sector.

Smith presents a pair of propositions. The moral proposition is that it is good for individuals to be free to work and contract as they choose. The economic proposition is that such freedom generates spectacular wealth. These undergird all market-driven prosperity, from the simplest everyday transactions to the most byzantine, opaque financial markets. To shape a more moral, richer, and more perfect America, policy makers must reject the regressive, medieval desires of Big Labor.