ABSTRACT
This chapter discusses the concerns the implications of labor rights and power for the economy: whether or not such leverage by labor can have persistent negative or positive effects on the firm specifically and more generally on the economy as a whole. According to Freeman, in spite of the cost-augmenting nature of labor standards, they can be introduced and even improved upon in a free market economy since effective labor rights and power are sustainable and even welfare maximizing when they generate economic results that are consistent with consumer preferences. The higher labor standards firm can survive if efficiency improvements, triggered and associated with improved labor standards, suffice to compensate for increased costs. In forcing companies to compete by increasing efficiency rather than by reducing labor standards, this, in turn, shifted resources to more efficient uses and allowed countries to protect and develop human resources-their most valuable assets.
