ABSTRACT
This chapter is concerned with the implications of labor rights and power for the economy. The conventional economic wisdom on labor rights and power was plainly and clearly stated by George Stigler with regard to government legislation of a minimum wage that is above what the market would generate in the absence of such legislation. The key to the successful implementation of labor standards is the correction of one serious product market imperfection: the costliness of obtaining information on labor standards, which make it impossible for consumers to choose the product—labor standards bundle consistent with their preferences. According to Richard 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.
