[jmherbener]

You are correct to point out that entrepreneurs cannot pay wages in excess of a worker’s marginal revenue product and therefore, legally mandated benefits to workers require entrepreneurs to lower non-legally mandated benefits. Workers are actually made worse-off in the bargain since they cannot obtain their preferred compensation package from entrepreneurs. Moreover, in an unhampered market, if an entrepreneur hires workers under difficult working conditions, say coal mining or standing in security lines, then he may be required to skew his total compensation package toward wages instead of other benefits in his effort to satisfy the preferences of his workers (if workers have a preference for non-difficult working conditions).

You might suggest to your friends to read William Hutt’s book on collective bargaining.

https://mises.org/sites/default/files/The%20Theory%20of%20Collective%20Bargaining_2.pdf