Most history books tell a story something like this:
1. In the days before the minimum wage, unions, etc., life was terrible for workers because employers paid them whatever they felt like paying them.
2. But then government became more progressive, and changed the laws.
3. Life is now better for workers because employers' greed has been tamed.
I am careful to warn my students that this may be a slight exaggeration, but I assure them that many people roughly believe it. Still, after skewering this kind of nonsense, I often vaguely worry if I have descended into caricature.
It turns out that I worry too much. In a neat post, Mankiw confirms that the standard view is no caricature. In fact, some of the most powerful men in the country swear by it:
In today's Washington Post, Sen. Byron Dorgan and Rep. Sherrod Brown write about How Free Trade Hurts. Here is a telling passage:
At the turn of the 20th century, child labor was common; working conditions were often abysmal; there were no enforced workplace health, safety or environmental requirements; no unemployment insurance; and no workers' compensation. Workers were attacked and killed for the sole reason that they wanted to form a union; there was no 40-hour week, minimum wage, job security, overtime pay or virtually any other limit on the exploitation of employees. America was split dramatically between the haves and have-nots. It was a harsh work world for many: nasty, brutish and, too often, short. Worker activism, new laws and court decisions changed all that during the past century.
It's child's play to pick holes in this story. If it were right, then Bangladesh could wipe out poverty just by enforcing U.S. labor laws. Or as Mankiw explains:
I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.
Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.
The deeper lesson, though, is that you shouldn't accuse someone of caricature just because they're explaining an economic viewpoint that every decent economic scoffs at. It often happens that a "caricature" is as accurate as a photograph.