Nurses have now decided to follow the example of resident doctors, and reject the Government’s latest pay offer. The Royal College of Nursing announced this week that 91% of its members voted against accepting a 3.6% pay rise. Resident doctors were offered a 5.4% pay increase but went on strike for a 29% pay increase to ensure ‘full pay restoration’ to 2009 levels.
Both unions are demanding that their members receive ‘fair pay’. Yet as Friedrich Hayek once argued, the only meaningful sense in which we can even debate whether any wage is ‘just’ is by asking if it has been agreed in a free market without deception, fraud or violence. ‘Fair pay’ doesn’t exist; thus, the pleas of doctors and nurses can be rejected outright at the bar of justice.
These medical professionals ought to be honest about their true motive: they want higher pay because it is in their self-interest. Fine, but once this is acknowledged, it’s entirely proper that taxpayers defend their self-interest too and resist their pay increases.
The British Medical Association believes that £36,616 is not fair pay for a resident doctor in his or her first year. Implicit in the BMA’s argument is that a certain combination of hard work, training and stress should receive a certain level of pay: in 2009, it so happens, doctors’ pay exactly accorded with those three factors. Why that year has been picked out in particular I do not know and the BMA does not say either; I will not question it here. The real question is this: does justice plausibly demand people are paid at a level set by a combination of how much hard work, training and unpleasantness is in the job?
In a market economy wages are determined by supply and demand. Where there is a sudden shift in the number of people who want to be bakers, plumbers or accountants then wages fall, because the marginal revenue product for each goes down. When there is a sudden shift in the number of people who no longer want to be bakers, lawyers or labourers then wages increase, because the marginal revenue product of each remaining worker goes up. Price controls on labour result in either a shortage or surplus of labour. Over the long term, that diminishes the prosperity of all of us: the gains we may make in our own profession are eaten up by the losses in underprovided or excessively-priced services elsewhere. This is an iron law of social reality – a constant cause and effect relation – which few economists are going to deny.
‘Fair pay’, by contrast, dictates all labour must be price-controlled to ensure wages accord with the hard work, training and unpleasantness of the job – with inevitably disastrous results. Consider these two examples. Carpentry becomes popular and a good number of people want to enter the trade. Under free conditions, the total revenue of the trade is spread more thinly via a reduction in the wages of each carpenter. With ‘fair pay’, although a young carpenter would be willing to offer £15 an hour for his services, the amount of hard work, training and unpleasantness dictates it must be £20 an hour. (After all, the mere fact more people want to be carpenters doesn’t change any of these three factors per se.) The result is that no one will employ the new carpenter.
Due to the unpleasantness of working with rubbish and the hard physical work required in lifting bins, ‘fair pay’ might dictate binmen are paid £18 an hour for an otherwise simple job. However, what happens if many men choose to leave the job (perhaps to seek higher-paid work as carpenters)? Under free-market conditions, binmen would see their pay increase. The job is not any more unpleasant though, so ‘fair pay’ would dictate stopping a wage increase. The result? A shortage of binmen.
‘Fair pay’ across the whole economy would simply result in huge shortages of labour in some places and massive unemployment in others. Fair pay as dictated by hard work, training and unpleasantness is rarely if ever going to match the equilibrium price of labour in all markets, and workplace justice cannot plausibly be thought to require imposing such disastrous outcomes on the labour market. Clearly, as Hayek argued, justice in pay is constituted by freedom of contract alone. ‘Fair pay’ as a moral idea of distributive justice just doesn’t add up. The claims of doctors and nurses can be rejected for the phony moral premise on which they exist.
Freedom of contract between employers and employees can itself be established on the natural principle of human respect. This natural principle demands people are free to pursue their own happiness in their own way absent coercion. This ensures a proper harmony of our interests where no one is used as a tool to the desires of others. As the preceding has shown, upholding freedom of contract forms the fundamental basis for the prosperity of the people too. To some this total rejection of ‘fair pay’ may seem farfetched, but if you are still a sceptic, I would ask this: would you ever be morally comfortable in personally stopping a free contract between two adults in order to uphold ‘fair pay’, leaving one of the parties out of their desired job or unemployed? No. So why should the state doing it be any different?
An implication of following this natural principle of human respect is the Government must repeal the Trade Disputes Act 1906. This created the right to strike, which essentially ensures employers can never bring legal action against employees for breach of contract. Obviously, though, if you promised to work five days a week and then you strike instead, then you have breached the contract wilfully and should be liable to be fired. Of course, repealing the 1906 Act doesn’t stop people resigning en masse then renegotiating, but it does stop legalised breach of contract and forced bargaining.
Resident doctors and nurses are ultimately campaigning for their own self-interest – not any empty notions of ‘fair pay’ – and there is nothing wrong with that per se. However, Wes Streeting ought to reject their demands to protect the public’s interests from ever higher taxes and more borrowing. Crucially, resident doctors and nurses must all have their contracts renegotiated, with their right to strike stripped from them, to make sure they can’t hold the taxpayer to ransom once again. Nothing short of that will do.
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