European-style labor market regulation, here we come!

Ask the man on the street to define a recession and he won’t say that it’s a period of negative economic growth for two consecutive quarters, he’ll say it’s when people lose their jobs. This makes sense because that’s the negative affect he’s most likely to feel. Due to nominal rigidity, he won’t face a wage cut in the way a company will see a decline in profits. He will see the consequences of economic growth, but it won’t stand out in his mind in the way a sudden job loss will. Plus, he will tend to take personal credit for the raises he gets, never saying “this is a product of general economic conditions unrelated to anything I have done,” as he will if he gets laid off.

The result of this is what Bryan Caplan calls make-work bias, the tendency to equate economic growth with job creation. The man on the street knows the reductio-ad absurdum of this, paying people to dig and refill holes or destroying labor-saving technology is bad, but still believes in the idea at the margin. So he wants the government to make it harder for firms to lay-off workers. Because he doesn’t understand how wages and prices are set in a market economy, he thinks the government can just move them one way or another with no consequence for supply and demand. Economically literate people know that when you raise the price of something, people buy less of it, making it harder to fire workers effectively raises the price of their labor, leading companies to purchase less labor.

What happens when you take that bias and add it to this?


Or consider U-Haul’s decision to refuse to hire workers who smoke. Smoking is unhealthy, but what business is it of your employer? And what happens when they start forcing their pseudo-scientific Gaia crap down your throat, as WeWork did?*

(As an aside, it’s often said that religious believers have a special privilege, objections to homosexuality based on religious grounds are protected up to a point, while objections based on secular-rational grounds have no protections. But there’s a flip side to this, we’re protected more from religious stuff. If WeWork tried to only expense kosher food, its non-Orthodox Jewish employees would have a pretty solid religious discrimination claim. You have no such protection from Gaianism.)

WeWork did implode and #GetWokeGoBroke is a thing, but you shouldn’t overestimate it. WeWork was involved in the cuthroat business of real estate. You can get away with a lot more if you’re in the government, non-profit, monopolistic, or oligopolistic sectors of the economy.

Politics is ultimately about policy, but is driven by respect. You vote ideally for those you respect and who respect you, but often for those who you feel to disrespect you the least. And you want to punish those groups who disrespect you and reward those groups who respect you. I saw this myself a few months ago when I was arguing with a small group of people about why, I said, we should legalize insider trading. They all acted like that was the dumbest thing they had ever heard. The argument went nowhere because they weren’t really interested in the arguments about why it’s more economically efficient for it to be legal or illegal. It boiled down to this: they didn’t respect stockbrokers, so they supported whatever restrictions were on the table, as a matter of principle.**

If economically literate people want to combat the threat of European-style labor market regulation, they need to understand the underlying problem which is that the wage earner doesn’t feel a lot of respect from management. That’s one of the few things that unites the bulk of the red tribe and the blue tribe. Energy needs to be focused on convincing management that they should voluntarily refrain from policies which display a lack of respect for the wage-earner. If they don’t want to do that and labor market regs come, well, I’m not going to support it, but I not going to get my sign and join a protest against it either, like I would for things like housing deregulation or taxing imputed rent. I just don’t have enough respect for employers to do so…

*Lest any libertarian object that no one is forcing them to work there, normal people, those without access to the bank of Daddy, can’t afford to jump from employer to employer based on things like that. Not only because of the instability but because it’s a negative signal to future employers when work history is erratic. So if they decide to accept a job on the understanding that the company would let them expense meals, and then suddenly find that benefit is taken away from them, they have a right to complain.

**I’m not immune to the logic of this myself. When I see a proposed restriction on social media companies my first thought is “well, the Reddit UI might get a little crappier, does that matter in the grand scope of things? I don’t think so.”

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