 Hi, I'm James. And I'm Anthony. And this is Words and Numbers. How you doing this weekend? Well, all right, James. Except I'm somewhat annoyed. I've run across several times in the past couple of weeks a video that claims that we have to thank the Fair Labor Standards Act, courtesy of Congress, for the end of the 40-hour work week and the end of child labor. Yeah, those are both really good things, right? I mean, nobody wants to work 100 hours and you don't want to work next to your four-year-old child as you do it. So thank God, Congress came along in 1930, 1938, right? And solved these tawdry economic and social problems for us. Right, right. So the story that you'll hear on this video is that, you know, of course it's the heartless corporate titans that want people to work 60, 70-hour weeks and want to employ children. And Congress put an end to all of that through the Fair Labor Standards Act. But this particular video, and we'll leave a link on it so you can look at it and form your own opinion. But the video paints Congress in the law as the saver, the bulwark against corporate greed. So they made a strong enough argument that I went and looked up the actual census data. And if you look up the data, you find a fascinating story. And it goes something like this. The Fair Labor Standards Act, of course, is passed in 1938. And if you look at the percentage of the workforce that was comprised of children, and census measures them, children 10 to 15 years old, back in the 1870s, it was about 6%. 6% of the workforce was composed of children. You get up to 1900, and it's still about 6%. And then a fascinating thing starts about 1900. It starts dropping. It's down to 4% by 1910, 3% by 1920. By 1930, the fraction of the workforce composed of children is about 1%. And this is 1930. This is almost a decade before the Fair Labor Standards Act was ever imposed. Alright, so if I'm hearing you correctly, and I think you're speaking slowly and in small enough words that even I can understand you, Congress rushed into the breach and solved the problem that had already been solved. Yeah, they ran to the front of the parade and took credit for something that the market had already done. So it seems with the Fair Labor Standards Act, right? These things were already in the water. People were already adjusting their behaviors. Things were already changing. And then here comes the government to say, and by the way, you must do what you've already been doing. Yeah, I think it's worth addressing the question, how is it that child labor in this example was falling precipitously and ended up going from 6% to 1% a full decade before the Fair Labor Standards Act? And the answer lies in the very entity that this video we're discussing vilifies. That is, the marketplace, employers. What had happened, of course, around about 1900 is we get the industrial revolution in full swing. And with the industrial revolution, we have factories, we have people working in factories. And of course, the common perception is that these were horrendous conditions. It was dangerous to work in factories and so forth, which compared to today is absolutely correct. But what people miss is that working in factories back in the 1900s was much safer than the alternative, which was working on the farms. That's what people had done largely before in the mines. And so what happens is with the industrial revolution, people are becoming more productive. And because they're becoming more productive, they're earning more money. And what happens if you need to feed your family? It is no longer necessary for the children to work because the parents are earning enough that the parent can buy him or herself support the family. Right. And you know, I think I can speak for most, if not all parents here. And I'm sure you would say the same thing. If my children had to work in order for the family to survive, I would encourage them to go out and work. Indeed, I might require it. If on the other hand, things weren't that dire and children didn't need to work to ensure our survival, it would be very difficult for me to imagine a set of circumstances under which I would require my children to go work, simply because I don't think they should have to. I don't want them to. I would rather they be getting an education. There are better ways for children to spend their time, not the least of which would be being children. Right. And I think it has ever been so. I don't think anybody but for necessity ever wanted their children to go off and work like dogs. And this is not something that's particular to the United States in the early 1900s. You see that today if you look across countries, countries that are more economically free, that is they put fewer restrictions on labor markets. These countries tend to have lower child labor rates. And it's not a rich country phenomenon if you look at just the poorest countries. The poorest countries that have more free labor markets tend to have lower child labor rates. It's the same phenomenon we experienced in the early 1900s in this country. Yeah, no, I've looked at this data too. And it seems quite clear to me that as a society's standard of living increases and improves, so too does the child labor rate decrease over time. Right. This seems to be utterly unmistakable, which tells me a lot not only about labor and child labor and standards of living, but about human nature and what parents want for their own families. Yeah, and we're talking here about child labor, but the Fair Labor Standards Act is, those who defend it say it brought not only an end to child labor, but also an end or the commencement of the 40-hour work week. And again, here the data don't support that argument. Again, looking at census data in early 1900s, the average work week was over 50 hours, and that started declining. You get into the 1920s, you're down to about 45 hours, you get to the early 1930s, and we cross the 40-hour mark. The average worker is actually working fewer than 40 hours already, and then by the time the Fair Labor Standards Act comes in in 1938, we're already at an average work week of around 37, 38 hours prior to the Fair Labor Standards Act. Yeah, so I mean the real question that emerges from something like this is why is it that people are so fast to give credit to government action for improving their lives, and so very reticent to give any of that same sort of credit to markets? And if we look at government on the one hand and markets on the other, it's typically the case that markets do more good than government and do maybe more importantly far less harm. So over time, what's really going on here? I think what's happening here, and there's a compelling argument that, well, the difference between markets and government is in the markets are motivated by greed, and government is motivated by altruism. And I don't think either one of those is correct, right? You'll get greedy people in government who are looking to amass power and money to themselves just as you will in the marketplace. You'll get altruistic people in the marketplace just like you will have in government. The difference comes in with competition. If you have an employer, and let's suppose, let's take an extreme case and assume that all employers are greedy, there are no altruistic employers. If you have greedy employers in a competitive scenario, what happens is I'm a greedy employer, I would love to work my workers 90 hours a week and pay them a pittance, and so would you because you're also a greedy employer. But here's the thing, there's only so many workers, and if I want workers in my factory as greedy as I am, I'm competing with you, I've got to offer them a slightly better deal, which means a little more pay, maybe a little fewer hours. And the more competition you get, the higher that pay goes and the lower the hours go. Yeah, and the better conditions get, generally speaking, right? So why do we consistently look to government to fix these problems? Because that's what happens. Right, I think it's, you know, our colleague Mike Munger has used this analogy before of unicorns and ringbows, and I think that's what it is, that we imagine somehow government is this magic wand, and all you have to do is say the magic words, reduce the work week to 40 hours, or reduce child labor to, you know, zero percent, whatever it is, and we imagine that once we say that, it all magically happens. And we're completely ignoring the human frailty, the human incentives involved in the people who actually comprise the government. Yeah, and you know, we've said this before under other circumstances and in other discussions. But really, I think it bears repeating because somebody may come along and hear us say these things and say, ah, these guys, they just think markets are great. And that's really not the case. Nor do we think that governments are horrible. What we really think when push comes to shove is that people are incentivized in markets to correct behavior that's not really working. Whereas when we take a look at how government operates, it might be the case that poor behaviors are just further incentivized there. Right, so one is not a panacea and the other, not a morass. But we do tend to realize that incentives matter. I don't know how many times we can say that probably every week or so. But incentives matter and people are utterly incentivized in a market and they are disincentivized with government. So with markets, you're likely to get pretty quick redress of grievances and problems over time will be diminished in government. It's not as easy. I'll throw it to you for the last word. Well, I think the Fair Labor Standards Act offers us an example that we need to keep in mind, which is when we see a problem, what we perceive to be a problem in the marketplace, our knee-jerk reaction should rather than be turning to the government and saying, fix this, do two things. First, look and ask yourself what incentives currently exist in the market that might be causing this problem. And then second, you might ask, is this problem actually getting better over time? That is maybe consumers, employers have already identified this and incentives have come into place to make this problem go away. And anything you might do on the government side could actually make it worse by curtailing that natural progression toward the better. That's all the time we've got for this week's Words and Numbers. But join us next Wednesday, round about 12 noon Eastern Time for another episode. Until then, check out all the great content at fee.org and at fee online on social media. And we'll catch you next week for something even more scintillating than the National Labor Standards Act. See you next week, James.