A Stitch in Haste

New York Times columnist Adam Cohen:

Mass layoffs produce big winners and losers. Most workers who remain are financially unscathed, even though their employer is struggling. Wages are actually expected to increase 3.5 percent in 2009. Those laid off are left with no salary and, because the job market is so brutal, risk losing their homes and being unable to put food on the table.
…
One way to reduce the need for layoffs would be to cut back on hours, spreading the available work among more employees. This was an idea that had considerable currency in the Great Depression. In 1933, the Senate passed a “30 Hour Bill” that would have barred from interstate commerce goods made by workers employed more than 30 hours a week. Its sponsor, Senator Hugo Black of Alabama, said the bill would create six million new jobs. It made no sense, he insisted, for some employees to work 70 hours a week “while others are driven into poverty and misery from unemployment.”

This is, of course, utter nonsense.

Ignore the strictly consequentialist (and therefore totally irrelevant) observation that “spreading the misery” could actually be worse for the economy — if most people are, as we are relentlessly told, living paycheck-to-paycheck and suddenly find their paychecks cut severely, then wouldn’t that lead to more delinquent mortgages, personal bankruptcies, etc., than mass layoffs would?

Focus instead on how Cohen falls into the trap of treating “employment” as a policy goal in and of itself. Cohen is forgetting that the purpose of “employment” is not simply to employ, but to produce goods and services that people are willing to purchase (or, in the case of government employment, to produce services that are legitimate functions of government in their own right).

Note also how Cohen abstracts away from what a job might or might not entail and treats “working” as a homogeneous, fungible good. Is “three employees working six hours each” always, or even often, the same as “two employees working nine hours each”? (And that’s even before the idea of shutting entire facilities: Is “three plants running at two-thirds capacity” ever the same as “two plants running at full capacity”?)

The function of an employer — private or public — is not to employ people for the sake of employing people or to pay wages for the sake of paying wages. Neither is their function to “spread the work around” when circumstances change. The function of an employer is to satisfy needs and wants, preferably in the most efficient way possible (i.e., whichever way maximizes private profits or minimizes public tax burdens).

If the best way (i.e., for the employer and therefore the economy) to respond to changing circumstances is to reduce staffing, then so be it. Those who view at-will employment as an intolerable risk have other options.

Incidentally, is Cohen not aware of what happened to the last economy that embraced the notion of a “job for life“? Would the French model really be an improvement for us?

Speaking of jobs for life:

In the case of unionized workers, the unions would have to agree. But as we are seeing with the United Automobile Workers union — which is offering to accept concessions as part of the Big Three auto companies’ plea for a federal bailout — many unions might prefer moderate pay cuts over job losses. For most nonunion workers, employers that want to avoid layoffs could act unilaterally to cut salaries.

Would this be the same UAW that created and defended to the end its so-called “jobs bank”? How did that idea work out, for Detroit and for the economy?

Kip’s Law: Every advocate of central planning always — always — envisions himself as the central planner.

Filed under: Capitalism, Kip's Law