Sunday, November 22, 2015

Economics Sundays 1: TANSTAAFM

The title acronym is shamelessly stolen from Robert A. Heinlein; his aphorism was that There Ain't No Such Thing As A Free Lunch, but it's just as true that There Ain't No Such Thing As A Free Market. All markets are unfree, and what we have to decide is how regulated they ought to be.

But what makes a market unfree? The big one is coercion; no compulsory market can be free. That means there's no free market in healthcare, no free market in jobs, and so on and so forth. Let's look at the job market.

In the USA, employers routinely impose working conditions that would be criminal in Europe. There is no right to paid time off. No right to sick leave. Statutory provisions that are seen in Europe as merely the natural order of things, in America are viewed as benefits, provided grudgingly if at all. How can the US labour market get away with this?

The first problem is one of oversupply. There are, for each job in the USA, multiple people who would happily do it given the opportunity. This means there's no real incentive to retain your employees by treating them well; if they quit, you've got three more people to choose from right now.

Then there's the problem of lack of meaningful alternatives. In Europe, being jobless is unpleasant, but at least since the mid twentieth century has been supported to the extent that quitting is an option should an employer act abusively. This is not the case in the USA; out here, if you're quitting, it's because you've got an offer elsewhere. Simply refusing to accept derisory offers is not an option, because the USA does virtually nothing to keep the jobless from starving. Employers know this. They know that you need your paycheck more than you need your dignity as a human being, and they ruthlessly exploit that. When all you have to beat is "starving under a bridge", minimal effort is all you need.

There are two big ways the USA could improve this. They'd work best together, but either one would be a big step forward. First, most coercive, would be mandating higher minimum wages, mandatory minimum amounts of paid time off, mandating the separation of sick leave from voluntary leave (if I'm in bed with the flu, I'm not on vacation!) and so on. Naturally, businesses would howl at this. The other approach is one that gives the employers incentives to be nice for their own interests: massively increased support for the jobless. Workers are in oversupply in the USA, and daren't quit because of that. With the current social safety net of "I dunno, go begging to a church or something", quitting an abusive job isn't an option. If we provide a basic living for the jobless, even if it sucks, people will have the courage to refuse to accept abusive employment. Companies will see exoduses of employees disgusted by their treatment, and will find themselves forced to offer incentives to attract new applicants.

The job market can't be free. It can, however, be regulated in a way that puts power in both sides of the employer/employee relationship.

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