Corona: More Moral Hazards

The New York Times has an article about the new unemployment system, where many of the newly unemployed will receive more money than they did when working. The article stupidly claims:

Unemployment benefits are typically meant to keep people afloat but stay low enough to incentivize them to find a job. Now, when seeking work may be both fruitless and dangerous, the incentives have nearly reversed.

This is insane because there should be no need to “incentivize” workers to stay home instead of working: if their jobs are non-essential the lockdown will prevent them from working in any case. If it doesn’t, we want them to work. Plus, layoffs are generally not random. It is usually the lowest-performing workers who are laid off first. This is essentially a societal-scale reward for low performance. I could imagine serious morale problems occurring if high-performing workers watch their low-performing former colleagues enjoy the twin windfalls of no work and more money. That I could imagine it is no guarantee it will happen because people are often slow to respond to sudden changes in the incentive structure. Still, people often scratch their heads wondering why there is an insufficient work ethic among the lower classes. They say they value hard work, bourgeoisie values, all that crap. But if you look at what we as a society actually do, it reveals the fact that we actually don’t value all that stuff, if we did, we’d be attentive to how policies end up punishing it.

While this proposal was partly satirical, the following is entirely serious: if you are an employer about to make a decision on who to lay off, get your employees together, give them pieces of paper, and ask them to indicate privately if they’d like to be laid off or not. Collect all the pieces of paper and lay off the best worker who wants you to do so.



One thought on “Corona: More Moral Hazards

  1. Pingback: Tip-baiting: we see it too (well, some of us) – Alexander Turok

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