Sorry, But a Job Isn't An Instrument for Social Justice

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In the U.S. labor market today a battle is being waged over the purpose of a job. One might think the point of a job is that the employer needs tasks completed and is willing to pay someone to perform said tasks. However, a fierce challenge is being mounted to such an idea and the outcome is currently uncertain.

According to Obamacare, jobs are supposed to be a vehicle for providing health insurance. According to a push for paid sick leave around the country, jobs also exist to help support workers even when they do not work. According to those pushing for a living wage, or at least a higher minimum wage, jobs exist to provide employees with a sufficient income to live somewhat comfortably.

The latest push to transform jobs from the sale of labor into an instrument for social justice has come in the form of calls for employers to guarantee schedules farther in advance and to conform those schedules to the lives of their workers.

In this world, it would no longer matter if a restaurant is busiest at the most common lunch and dinner hours. Instead, if an employee needed to work in the afternoons to fit work between a morning of college classes and when her kids get out of school, the employer should try to accommodate her.

While I have sympathy for hourly workers who are sent home shortly after arriving at work because staffing needs have changed, the free market can handle the case of extreme scheduling abuses. Employers who continually mistreat employees in such a manner will find their good workers leaving and remaining employees demanding higher pay to compensate for the costs imposed by the uncertain work schedule.

Jobs were never meant to be social service delivery vehicles. Health insurance only became a job benefit during World War II when wage controls imposed by the government led employers to compete on the basis of benefits offered instead of wages. If health insurance had remained a privately purchased product such as auto, home, or life insurance, the problem of health insurance portability would never have arisen. After all, you don't lose your car insurance when you change jobs.

Contrary to what many people believe, employers are not sitting on large piles of money for which they have no purpose. Corporate cash holding have only risen from 10 percent of annual revenues to 13 percent, and much of that money is trapped overseas because of the U.S.'s stiff 35 percent profit repatriation tax. Adding all these benefits and improvements to jobs and working conditions raises the cost of doing business, particularly the cost of hiring workers. That has three inevitable outcomes: it holds down wages, slows hiring, and raises prices.

Making labor more expensive to use is not going to help the millions of unemployed get jobs. Further, because businesses look at the total cost of employee compensations, when all these non-wage costs rise, wages are reduced in order to compensate. Thus, sick leave, health insurance cost increases, or anything else employers are forced to pay for related to their employees leads to a smaller budget for actual wages.

The Federal Reserve tracks both hourly earnings and total compensation costs. From 2001 to 2013, hourly earnings rose by 38.5% while total compensation costs increased by 39.8%. Both moved up pretty steadily across the entire time period. That means that benefits (the difference between hourly earnings and total compensation costs) must have risen by something greater than 40% over those twelve years (since it pulled up the average increase). The money that went to pay for those more expensive benefits would have gone to wages otherwise.

Also, because some of the cost increase is passed on to consumers in the form of higher prices, workers do not gain as much as they think from these added benefits. While improved schedules, health insurance, or paid sick leave all raise the workers complete compensation package, effectively making them better paid, the higher prices simply take right back most of
those gains.

Jobs are meant to be somebody selling their labor to a business which needs that labor to perform a task. The worker does this in order to get paid, believing the pay is worth more (due to what that pay could buy) than the leisure time the work replaced. Today, worker rights advocates are trying to make jobs into something that exist to serve workers. Employers are increasingly expected or required to provide a range of benefits to workers and to pay them enough to live on regardless of the value of the work performed. This will not work.

An obvious explanation for the slow recovery of the job market following our most recent recession is that all these changes have made labor more expensive and, thus, less demanded by employers. Extra employee-paid benefits are great if you have a job. Labor advocates who keep pushing up the total compensation cost of employees might want to consider the plight of the unemployed before continuing to burden employers with costs that they should not have to bear.

Over time and on average workers will be paid what they are worth. Forcing employers to add more benefits to compensation packages will simply force employers to reallocate their labor budgets so that more goes to benefits and less is paid as wages. Workers may think they are gaining benefits but they will really be worse off because not all employees will value their new
benefits as much as they cost the employer.

For example, paid sick leave will cause healthy workers to be worse off. Similarly, Obamacare is bad for healthy workers at the same time as it is good for sicklier ones. Flexible schedules and paid family leave hurt those without those needs. Guaranteed work hours will hurt everyone by forcing the labor budget to be spread over more hours worked.

Being paid in money allows each worker to decide for herself how to allocate that pay among the things she values most. Each time employers add a benefit to the pay packages a few workers who stand to gain the most will win while most workers will be worse off because their pay will be reduced to pay for all the new benefits. Added benefits do not raise total compensation, only
change cash pay into something with only one use (medical care, sick leave, etc.).

Workers may think they are winning concessions from their employers, but they are really just reducing their own ability to spend their money in the manner that suits them best. If workers win more of these benefit battles, they will find it a hollow victory in the end.


Jeffrey Dorfman is a professor of economics at the University of Georgia, and the author of the e-book, Ending the Era of the Free Lunch

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