I think before we take that step we should explore an improvement in labor laws that make it less undesirable to enter into full time employment agreements.
Yes, but it's still a race to the bottom. To make it "less undesirable" for an employer to hire a full time employee simply means reduced compensation, benefits and protections for said employees. "We won't hire you on a full time basis because we need the flexibility to lay you off whenever we want and we want to pay you less and offer you fewer benefits."
Do we really need to make employment as unpleasant and stressful as it can possibly become before we accept the fact that some kind of basic safety net is needed?
> Do we really need to make employment as unpleasant and stressful
That's a large oversimplification. Employment is stressful because the business world is stressful.
By entering into a contract with an employer, the employer is not only giving you a salary, but some sort of assurance that you'll be buffered from the market because the employer has larger cash reserves to ride out market fluctuations.
Nobody can stop you from freelancing, which gives you ultimate freedom, but also doesn't insulate you from market conditions. By making it more difficult to fire you, the employer has to reduce compensation, benefits, and protections because the overall value proposition has shifted, since the employer now is far less flexible in dealing with market situations.
> Employment is stressful because the business world is stressful.
The business world has always been stressful; my point is that current and upcoming market forces (i.e. automation) are adding onto that stress more and more.
Without figuring out some plan, people are in for a lot of misery as jobs are replaced with automation. It'll be a mistake to suggest we constantly reduce the requirements on employers to provide for fair compensation for work.
If today we are saying labour laws should be relaxed to allow employers to employ people full time with reduced compensation and benefits (which seems to be the response to the article), what is the next axe to fall? Lowering of minimum wage?
> The business world has always been stressful; my point is that current and upcoming market forces (i.e. automation) are adding onto that stress more and more.
My point is that the business world is becoming more and more stressful for businesses also, something you're not taking into account.
Automation and the elimination of certain markets affect businesses just as much as employees. When times become harder, the solution is not to increase worker rights, as that's what's happening in Europe.
If you're in a highly uncertain business environment as a business, AND it's incredibly difficult to adapt by letting employees, you start hiring temporary employees, and full time employees become a thing of the past.
And yes, lowering the minimum wage might be something you have to think about. There really isn't anything left to do when your labor is worth less than the minimum wage.
It's not exactly that there wouldn't be some kind of safety nets in Europe. It's more that those safety nets become traps for some people.
We don't need to and we should not make employment unpleasant and stressful. The point of this article was that the current system is increasingly making employment unpleasant and stressful, and this is largely due to the dichotomy of having either strongly protected, "permanent" jobs, or non-protected temp jobs. The more protected these permanent jobs become, the scarcer they get. Added regulation does not really help, it will just make even those temp jobs more scarce as companies (and even government organisations) get more and more careful about hiring because of the high stakes and big commitment you make with the hiring decision.
Years ago, when I was freshly married and we had our first children, I was on a string of temp jobs - all with the same employer. The company lost significant markets, there were layoffs; the local union guy publicly said "we should throw out those temp guys to protect the permanent jobs".
I did not like that, and I have somewhat distrusted the unions (including mine, of senior salaried employees) ever since (even if I'm a member). One of the things that makes life so stressful is that employment becomes a game, something where you think you should manipulate other people and some artificial criteria, and build relations and scheme, to keep your job.
It would be less stressful just to have what you call "race to the bottom" and actually have a system where you try to do your job well and if there's need for that job, then do it.
With "southern countries" you mean Italy or Greece, for instance. I know, I know - you are right and I wonder why you're downvoted because what you say is not silly nor offensive.
However, there the labour laws are in fact more rigid than in the "socialist" North European welfare states which have, in many ways, more of a market economy. For instance, the policymakers in Mediterranean countries have wanted to discourage laying off employees by increasing the burden to employers about laid-off staff: you have to pay a year's salary or more to a permanent employee who is laid off.
And, in the end not very surprisingly, particularly the youth unemployment is exceptionally high in Greece, Spain, Italy and Portugal.
What is stupid that in North Europe, the unions, such as Finland's SAK, want to have the same as in Italy. I guess there is no other plausible explanation than populism and short-term power grab by politicians who don't really care what their policies actually mean with all their side effects.
Maybe people ought to be less greedy or alternatively we ought to collectively put greedy shifty people ought of business by replacing them with businesses that suck less.
This would be more effective if done in an organized fashion.
The ability to lay people off whenever you want also has the benefit of employers feeling more confident in hiring people, as they can lay them off if required. It leads to more jobs and a more dynamic labour market as your job security is being able to find another job readily. By making it hard to fire Europe has also made it hard to hire.
If we can't predict the effects of basic, "simple" market regulations like these labor laws, what makes you think a complete overhaul of the system is going to be so much better?
If we ever do UBI, I predict there will be massive problems that no one was able to predict that will arise as soon as the system is in place and we'll be no better than when we started.
Why aren't politicians making easier to hire people part time? It would benefit not only the unemployed but also the employed that wants to trade part of their salary with more free time.
Not all capabilities are positive-value for the owner - being able to sell your kidneys means that people will have an incentive to extort you into giving up a kidney.
Also, letting people make the best decision for them isn't the same thing as the best rule for everyone to follow. Tragedy of the Commons is the best example for this - if everyone makes their best choice for how many fish to catch, the lake gets emptied.
I really ought to turn the above two points into a detailed blog post aimed at libertarians. (Libertarians make good points, too - generally they have better policies than the ones they critique. These processes are some of the biggest things that libertarians categorically ignore, though.)
In theory this is true. Is there major kidney related extortion in Iran, where kidney sales are legal? What similar extortion do you see in other similar markets?
Is there any reason to believe this is not a random, unsubstantiated fear?
It may shock you, but rules and welfare were invented by humans, for specific goals. If the goals are not fulfilled any more, it may be time to change the rules.
That phenomenon is called "welfare cliff", and it should be addressed if politicians wants to make part time jobs easier for both employers and employees.
The US qualifications may vary slightly form state to state but in California is is based on minimum income on a quarter basis over the past year. This threshold is pretty low but the benefits are minimal also. You can continue to work part time but the earnings are subtracted from the unemployment benefits so rarely a net gain.
The real problem with part time jobs is that they usually don't include health insurance benefits. It is cheaper for an employer to give one full time worker health insurance benefits instead of giving two part time workers health insurance benefits.
I think if the US had free national health insurance it would really change the landscape of part time jobs as more people would be open to it.
It's not hard to hire people part time. But that is also not the point that this article is making. The problem is that a whole generation of people in Europe is currently facing unemployment/underemployment and temporary job contracts which prevents them from making plans for the future like starting a family etc.
It is hard. There are incentives for employers to only hire full time (more people = more administrative work and less favorable numbers when computing taxes, etc). There are incentives for unemployed people to seek full time jobs and not part time jobs: You lose unemployment benefits when you do any type of job. The so called welfare cliff.
In at least one western European country part-time has the reputation of being about 2h less work than full-time, but 60% of the pay. Partly because they always demand you come in 4 days out of 5, sometimes all 5, and so traffic time is the same. Knowing that a LOT of people spend 1h+ each way, this means a part-time job effectively shortens your workday (time away from home) from 10h to 8h.
So you can extrapolate from that exactly how employers use part-time.
In Greece, with our austerity measures, part-time employment came as a requisite from our creditors, because it would turn our economy more competitive.
What really happened in an economy with 23% unemployment? Now anyone can hire you legally for as little as 100 euro per month and, since there are a million people out there looking for a job, can demand from you to work 12 hours per day for 5 or 6 days a week. Slavery does give a competitive edge to a business.
odd there was no attempt to present solutions or show if any of the countries were trying to find any.
Basic Income won't solve this mess unless you are willing to give up a lot to get it. As in it won't be free, some benefits will go by the wayside as BI will need to cover all your needs. I figure education will hit the block first, get a job while on BI to prove you can hold one then you can get schooling or more advanced trade skill training.
the problems with BI are many. politicians and such would have a difficult time establishing how much is enough because even those who wholly exist on a BI system would demand access or the ability to obtain certain items and goods. the danger is establishing by government edict a permanent underclass, appeased just enough to keep them from challenging the system.
likely to be better to incentivize hiring people by providing discounts/paybacks/guarantees to employers to get the people in place
In France at least, attempts to liberalise labor laws tend to cause riots. I don't know about Spain or Italy but they have famously sclerotic labor markets that never seem to get reformed. It's just not a priority of the voters.
Not sure what's going on with more liberalised countries like the Netherlands, but consider the massive influxes of people from continental Europe to the UK, which has relatively relaxed labor laws, and that may have something to do with it.
Also, note that most of the people the article covers don't have any skills worth talking about. They studied art history, social analysis, hotel management and things like that. Such people would find it hard to find a committed employer even in better times. The first example is a doctor, but she suffers from a double whammy of regulation: not only labor laws but also licensing that makes it hard for her to even relocate to a better run country.
> Under European labor laws, permanent workers are usually more difficult to lay off and require more costly benefit packages, making temporary contracts appealing for all manner of industries, from low-wage warehouse workers to professional white-collar jobs.
Make it extremely costly for an employer to exit a permanent contract and employers are less willing to enter those contracts. Shouldn't be terribly surprising.
In some places it's actually illegal to intentionally skirt the labor laws by using temporary contractors for jobs that are not of temporary nature (seasonal agriculture workers ok, cashiers not ok), but yeah, it's not enforced that much.
And trying to enforce it won't really help. It'll just drive away even those temp jobs, if the employers cannot find legal ways to go around requirements.
The fundamental problem is that employment law tries to treat the employer as a nasty exploiter, not as a provider of something good to those to whom it pays salary. The law often starts from confrontation and zero-sum game, not from having shared goals and interests.
The biggest reason for this is that some employers are nasty exploiters. I'd like to make-believe that everyone treats each other well, but it just isn't so. The laws aren't designed to accuse everyone, but to protect future workers from suffering a similar fate.
So you wind up getting laws designed so that employers need to be fair when firing, allowing folks time off after pregnancy (including men), allowing folks to stay home when they are sick, and making sure folks can try to correct their ways before getting fired.
And contrary to your belief, enforcement of laws seems to happen here (norway). Temp agencies seem to be much more used than they were in the US.. and weirdly less predatory to the worker. It still sucks only having a temp job, but that's how a lot of folks get started working here.
Sure some (I'd grant even a majority) employers are nasty exploiters. But let the employees handle them. They are adults, they can make their own decisions. I don't see why the government has to play mommy.
How do you expect they do that? Do you have example where it works out for the people being treated badly now? Would a lawsuit work if there aren't laws to protect you? What sort of decision is it when you have to stay home with your sick child while knowing you could lose your job or have your hours cut because of it? Is there recourse when an employer reports you were fired, even though you put in your notice?
There aren't remedies for these folks in the states Now. If all people had that power, they'd be more likely to use it. Unfortunately, you have to have a bit of privilege to pull it off when there aren't laws to protect you (and sometimes when there are).
The employees handled them. They handled them by voting in a government that passed the labor regulation that forbids employers from firing people because they feel like it.
Sans the (many) inefficiencies, the government is basically an expression of the collective will.
However, treating all employers as nasty exploiters then means that more of them will have to act such. A better recourse would be to ensure the labour market works, so that the nasty exploiters lose employees and have to start behave themselves.
Do only "the rich" use taxicabs? Uber is generally cheaper than a cab, so if middle class uses cabs (and overwhelmingly has smart phones), why wouldn't they also use Uber?
These are day-to-day contracts. I don't think you understand how temporary they are.
As for flexibility of hours on interim contracts, it's nonexistent, because employers don't want to give that. They'll hire whoever just complies with their hours and usually not even allow for swaps.
I've even been on the other side of this. Allowing hour swaps leads to first the impression of preferential treatment, then actual preferential treatment (because "he's doing it"), then fights, then a total disaster.
This is a very common theme with labor laws. Most people are very, very bad at predicting second- or higher- order effects of a regulation. If the market encourages some behavior one doesn't like (like firing people), it may be the case that one is simply too myopic to comprehend whatever large-scale stochastic optimization the market is doing, and what's going to give when one stops that optimization from happening.
As a result, many (most?) well-meaning market restrictions end up hurting more than they help, often in indirect and difficult to quantify ways spread out over thousands of different interactions. This (friction introduced by the inability to fire people who should be fired) is actually one of the easier examples to point to.
The problem with simulation for testing is that it requires creativity. Creativity of a distributed set of actors, each acting in their own (perceived) self-interest and trying to find exploits.
If you program a simulation with the same type of thinking used to draft the law, assuming that people will employ and comply with the law "as intended", you're liable to fall prey to an exploit that you weren't creative enough to think about, else you'd have (possibly) addressed it in the law.
I disagree with your conclusion because the timeline is different; first there was the labor law which was won via tough fights from the working class and then came the lobbyists, the crooked politicians, the neoliberals etc and essentially took down the law by allowing temporary workers.
Thus I would go with something like make it extremely easy for the employer to get employees without any kind of obligation and the employer will be less willing to choose any type of contract that respects the employee. As we so often hear, the responsibility of the CEO is to the shareholders (thus not to the employees).
IMO, the CEO is responsible to at least three sets of stakeholders generally: customers, investors, and employees.
The order in which or degree to which the CEO considers each constituency when making decisions might vary by the decision, but I generally favor them in the order listed above (even as I am an employee). If you don't serve your customers well, nothing else matters...
As for the law being worked arond, that was bound to happen; I think anytime you unduly restrict one side, that side will seek loopholes or exploits or withdraw from engaging. In this case, hiring temporary workers, engaging other companies under contract, automating the function (entirely or partially), moving that function to another geography, or doing without happens.
I'm in the process of opening another software development location in Europe. In studying where to locate, it was surprising to me how varied labor law was across various locales, and while any such decision is obviously multi-dimensional, labor law was a significant driver in the final location selected. (Several finalist locations were all workable; one of the locations had a much more balanced set of labor laws and local practices.) To inhabitants and prospective employees in the locations not selected, that looks identical to jobs moving away from their locale to another, more balanced, locale in large part due to local labor law.
Given the levels of unemployment in the EU over the last 10 years, and the current million+ a year immigration rate, this is going to get worse before it gets better. A lot worse.
Mostly a result of regulations that make it difficult for companies to get rid of people (either because they're not good or the company needs to shed staff).
I've seen this sort of thing backfire a lot in Europe where well intended regulation causes far more harm (both to individuals and the economy of the country) than good.
Was in a meeting not too long back where major investments were being discussed and the places to invest where on the table (with jobs at stake). Long story short some regulatory monkey was saying "this ref prevents this, you'd have to do that" and such for a location in Europe at which point the execs in the room basically just said "fine, we just won't invest there... if they want to have silly practices we'll just put the jobs elsewhere." And they did.
I'm no Republican but the concept of regulations killing jobs and hurting the people they intended to help is a very real thing.
The same argument can be made about taxes. Based on your reasoning, it's a race to the bottom for all countries in order to attract businesses.
Are we supposed to have no regulation and no taxation on businesses because otherwise some other state/country can offer them a better deal? Or do we need to have stronger regulation across country borders/policy that prohibits these loopholes. Maybe we should tax a US company more if they choose to produce products in another country to get around regulations that we have in the US.
I don't think the parent poster suggested there be no regulation or taxes.
Clearly there are more to countries than tax rates and regulations. However, the parent poster relates an anecdote where one country with less restrictive regulation is chosen over another, all other things being equal.
So to answer your question, if a country has a superior market or the right labor pool, then it will succeed despite higher tax rates or restrictive regulations, to a point.
Despite a zero corporate tax rate and few regulations, Somalia still hasn't posed a threat to Europe and the U.S. as a corporate headquarters. The "race to the bottom" is bounded by other factors besides tax rates and regulation. Rule of law, enforceability of contracts, access to a skilled labor pool, access to markets, etc. are more important.
Interestingly enough, these factors are a correlated to sufficient government revenue and regulation to uphold contracts and satisfy labor.
The article is about temp work never turning into full-time. That's a different symptom of the same problem you replied to, and it's not solved by regulating across borders.
Thought experiment here but I think there may be an argument for no taxes on a business by flowing the taxes through to personal income. Double taxation creates incentives that I don't think are good for small businesses on a systemic level.
Here is why: as a business owner I face a 40% tax rate at the corporate level and then 35% on personal income. I am thus highly incentivized to keep profit in the business and reinvest it or look for growth opportunities rather than distribute it to myself and our other shareholders.
Now imagine you are Sam Walton of Walmart. You stumbled upon a fantastic business model that prints money (or your Apple sitting on $250bn in cash). On the margin you will always opt to reinvest the money in the company or at least let it sit there unspent (i.e. Apple/Google/Msft) if the alternative means paying an incremental tax on it. So what do you do? Grow grow grow.
Anyway just wanted to share my thoughts. I am not trying to be controversial... I believe that long term sustainable health of an economy is predicated on the health of small businesses. I genuinely believe double taxation may have a potentially perverse incentive and negative outcome on a society simply by the way it alters my own decision making and incentives.
If in the US and a small business owner you should use S-corp taxation to avoid that. But yes small business has too many challenges in the US, it's the land of megacorp dominance.
Well, for taxes, there's an obvious Scylla and Charybdis[1]: too high, and economic activity is scared away or pushed underground. Too low, and you can't afford public goods that make the place pleasant to live and facilitate economic activity.
I would like to see a similar model explaining what labor law accomplishes and how you know when the laws are being too strict. The problem is that the obvious answer ("so workers don't get exploited") isn't very satisfying: there's sort of an inherent barrier to not paying enough, which is competition for workers[2]. You would need to explain labor law as filling some role that isn't a simple matter of competitive compensation.
[2] The typical argument is like, "look at [obviously poorer time]. They paid [obviously bad wage]. Now [after years of accumulation of capital] we mandate they don't do that, and stars above! They get good wages now." I don't find that satisfying.
> The problem is that the obvious answer ("so workers don't get exploited") isn't very satisfying: there's sort of an inherent barrier to not paying enough, which is competition for workers.
Collusion among employers to keep wages down still happens. The combination of minimum standards plus anti-collusion laws function as a belt-and-suspenders approach to the problem (labor law has other purposes, too; so does anti-collusion law.)
Sure. I can understand how it happens. But unless you want to list some of those other purposes:
A) That would justify anti-conspiracy countermeasures, not general "you have to pay them more" laws.
B) It would rather dubiously require a conspiracy along the rather huge number of low-skill employers. I can accept a conspiracy between McDonald's and BK, but across numbers indistries and localities?
There has to be a happy medium. Selling yourself short to appease a large corporation which may turn around and leave at a moment's notice is a race to the bottom. Having home grown small businesses and entrepreneurs is the best path towards a prosperous society. Regulations need to be practical and enforceable, otherwise you risk choking off the little guys.
I think the point is not that it's driving off huge corporations but that it makes life difficult for every business. It doesn't seem to make life easier for workers either.
I believe in the principle that the unintended consequences of any policy usually wind up outweighing the intended ones.
> The term cobra effect stems from an anecdote set at the time of British rule of colonial India. The British government was concerned about the number of venomous cobra snakes in Delhi.[3] The government therefore offered a bounty for every dead cobra. Initially this was a successful strategy as large numbers of snakes were killed for the reward. Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped, causing the cobra breeders to set the now-worthless snakes free. As a result, the wild cobra population further increased. The apparent solution for the problem made the situation even worse.
I believe the Danish have replaced most laws that make dismissal difficult / risky and instead developed a strong unemployment insurance / welfare system. Companies need to be able to adjust their workforce quickly. And it's a lot easier for an employee to say "go screw yourself" to an abusive employer if they know they won't be out on the street if they lose their job.
> Mostly a result of regulations that make it difficult for companies to get rid of people (either because they're not good or the company needs to shed staff).
It's not as if the permatemp phenomenon isn't a problem right here in the United States, where it's generally pretty easy to fire people.
There's good evidence that minimum wages can be used to nudge up bottom tier salaries without very much impact on employment rates. For use-cases that tend to suffer most (eg youth employment), most EU countries have exemptions.
Labour laws which try to force longevity come with some costs that aren't very easily mitigated. "At-will" employment sounds very aggressive but forced employment sounds bad too.
I think compensation packages (based on years in employment) should replace no-firing laws. This will keep a softer incentive in place, but avoid making hiring people so risky.
Absolutely. These do-gooders never consider the unintended side effects of their policies and end up hurting their own constituency. (Though the cynic in me thinks that they understand it perfectly well. They enact these policies just to score cheap brownie points.)
The article calls dismisses one or two year contract jobs as temporary work. All jobs are temporary in at-will environment!
Meanwhile, according to the article (which quotes a report based on numbers 5 years old, so who knows how things are now), 50% of new jobs in the EU are still permanent. And 20% of the temp contracts turn into permanent positions.
Not that permanent is actually permanent, employers in the EU fire permanent employees all the time (either for cause, or because there is no viable business alternative; permanent positions also come with a 3-6 month "at-will" probationary period).
Laws that are different for "temporary workers" normally require those workers to genuinely be temporary. That means you get laid off when your time is up regardless of whether you are doing a good job or whether the company wants to keep you: unless you are spectacular, your contract ends and it's someone elses turn.
In an environment with very liberal labor laws, there is no government enforced "time up". If you're doing good work and the company still needs you, then you still have a job.
And as you point out, "permanent" jobs aren't permanent anyway. I can't really see good reasons to have such tight labor laws.
Years ago, I was told by an executive at a company that I did some consulting for that it cost them the equivalent of seven years of an employee's annual salary to fire someone if the employee was working in their French subsidiary.
I suspected that there was some hyperbole in that claim, but perhaps a HN reader knows just how costly it is to fire an employee in France, for example.
Some of this is due to regulations, some of this is the fact that they can now get away with it. The market can be efficient in more than one way.
I will say that the concepts of year contracts are totally alien to me as an American. But I think Europe still works on the old-school postwar model, where you're horribly underpaid at the start of your career and the company makes a bunch of money off of that, but over time you make more and more until it morphs until a well paid sinecure. So they're just stuck at that horrible entry phase forever and never move to the good part.
Hold on a second. People are essentially suggesting "strip the regulations, let companies fire people at will". How precisely are short-term contracts worse than at-will employment where you can be fired at a moment's notice? You need to constantly have one eye on the job market either way, or risk losing your income security. At least short-term contracts don't create an information asymmetry - you need to find a new job at the end of the contract, not whenever your boss decides, for reasons unknown to you, that they don't need you any more.
If workers want security in employment, they're going to have to create it themselves - through worker-owned companies.
There are several advantages to the employer to have temp contract workers rather than full time employees (even at will). You don't have to pay them benefits like health insurance, workers' comp, 401k etc. Also if they get fired they are much less likely to bring a discrimination lawsuit.
In the US a lot of people are understanding why less coercive labor laws ultimately end up benefitting the employees. That's why so many states have gone right to work recently.
Edit: I would also like to add that I don't support mandating unions to represent all employees. Just like an employee should be under no obligation to join/pay dues to a union, a union should have no obligation to represent all employees. It should be a voluntary association.
Very similar situation persists in India where the section VIIB of the Industrial Disputes Act says that a company needs government permission to lay off people if they have 100 or more employees. As a result a lot of companies never go beyond 99, giving up growth and employment prospects for a large part of the population. Moreover, this creates a vast class of underemployed people outside the protection of those laws, euphemistically called the "informal sector".
100 comments
[ 3.3 ms ] story [ 170 ms ] threadhttp://finance.yahoo.com/news/elon-musk-doubles-down-univers...
Do we really need to make employment as unpleasant and stressful as it can possibly become before we accept the fact that some kind of basic safety net is needed?
That's a large oversimplification. Employment is stressful because the business world is stressful.
By entering into a contract with an employer, the employer is not only giving you a salary, but some sort of assurance that you'll be buffered from the market because the employer has larger cash reserves to ride out market fluctuations.
Nobody can stop you from freelancing, which gives you ultimate freedom, but also doesn't insulate you from market conditions. By making it more difficult to fire you, the employer has to reduce compensation, benefits, and protections because the overall value proposition has shifted, since the employer now is far less flexible in dealing with market situations.
The business world has always been stressful; my point is that current and upcoming market forces (i.e. automation) are adding onto that stress more and more.
Without figuring out some plan, people are in for a lot of misery as jobs are replaced with automation. It'll be a mistake to suggest we constantly reduce the requirements on employers to provide for fair compensation for work.
If today we are saying labour laws should be relaxed to allow employers to employ people full time with reduced compensation and benefits (which seems to be the response to the article), what is the next axe to fall? Lowering of minimum wage?
My point is that the business world is becoming more and more stressful for businesses also, something you're not taking into account.
Automation and the elimination of certain markets affect businesses just as much as employees. When times become harder, the solution is not to increase worker rights, as that's what's happening in Europe.
If you're in a highly uncertain business environment as a business, AND it's incredibly difficult to adapt by letting employees, you start hiring temporary employees, and full time employees become a thing of the past.
And yes, lowering the minimum wage might be something you have to think about. There really isn't anything left to do when your labor is worth less than the minimum wage.
We don't need to and we should not make employment unpleasant and stressful. The point of this article was that the current system is increasingly making employment unpleasant and stressful, and this is largely due to the dichotomy of having either strongly protected, "permanent" jobs, or non-protected temp jobs. The more protected these permanent jobs become, the scarcer they get. Added regulation does not really help, it will just make even those temp jobs more scarce as companies (and even government organisations) get more and more careful about hiring because of the high stakes and big commitment you make with the hiring decision.
Years ago, when I was freshly married and we had our first children, I was on a string of temp jobs - all with the same employer. The company lost significant markets, there were layoffs; the local union guy publicly said "we should throw out those temp guys to protect the permanent jobs".
I did not like that, and I have somewhat distrusted the unions (including mine, of senior salaried employees) ever since (even if I'm a member). One of the things that makes life so stressful is that employment becomes a game, something where you think you should manipulate other people and some artificial criteria, and build relations and scheme, to keep your job.
It would be less stressful just to have what you call "race to the bottom" and actually have a system where you try to do your job well and if there's need for that job, then do it.
You'd be surprised. Many of the southern countries have rigid labor laws and strong family ties instead of government safety nets .
However, there the labour laws are in fact more rigid than in the "socialist" North European welfare states which have, in many ways, more of a market economy. For instance, the policymakers in Mediterranean countries have wanted to discourage laying off employees by increasing the burden to employers about laid-off staff: you have to pay a year's salary or more to a permanent employee who is laid off.
And, in the end not very surprisingly, particularly the youth unemployment is exceptionally high in Greece, Spain, Italy and Portugal.
What is stupid that in North Europe, the unions, such as Finland's SAK, want to have the same as in Italy. I guess there is no other plausible explanation than populism and short-term power grab by politicians who don't really care what their policies actually mean with all their side effects.
This would be more effective if done in an organized fashion.
If we ever do UBI, I predict there will be massive problems that no one was able to predict that will arise as soon as the system is in place and we'll be no better than when we started.
Quite incredible how much rage is evoked by even mentioning it, though.
Also, letting people make the best decision for them isn't the same thing as the best rule for everyone to follow. Tragedy of the Commons is the best example for this - if everyone makes their best choice for how many fish to catch, the lake gets emptied.
I really ought to turn the above two points into a detailed blog post aimed at libertarians. (Libertarians make good points, too - generally they have better policies than the ones they critique. These processes are some of the biggest things that libertarians categorically ignore, though.)
Is there any reason to believe this is not a random, unsubstantiated fear?
Perhaps a better example is the secret ballot.
That phenomenon is called "welfare cliff", and it should be addressed if politicians wants to make part time jobs easier for both employers and employees.
The real problem with part time jobs is that they usually don't include health insurance benefits. It is cheaper for an employer to give one full time worker health insurance benefits instead of giving two part time workers health insurance benefits.
I think if the US had free national health insurance it would really change the landscape of part time jobs as more people would be open to it.
It is hard. There are incentives for employers to only hire full time (more people = more administrative work and less favorable numbers when computing taxes, etc). There are incentives for unemployed people to seek full time jobs and not part time jobs: You lose unemployment benefits when you do any type of job. The so called welfare cliff.
So you can extrapolate from that exactly how employers use part-time.
What really happened in an economy with 23% unemployment? Now anyone can hire you legally for as little as 100 euro per month and, since there are a million people out there looking for a job, can demand from you to work 12 hours per day for 5 or 6 days a week. Slavery does give a competitive edge to a business.
How is that "part time"?
Basic Income won't solve this mess unless you are willing to give up a lot to get it. As in it won't be free, some benefits will go by the wayside as BI will need to cover all your needs. I figure education will hit the block first, get a job while on BI to prove you can hold one then you can get schooling or more advanced trade skill training.
the problems with BI are many. politicians and such would have a difficult time establishing how much is enough because even those who wholly exist on a BI system would demand access or the ability to obtain certain items and goods. the danger is establishing by government edict a permanent underclass, appeased just enough to keep them from challenging the system.
likely to be better to incentivize hiring people by providing discounts/paybacks/guarantees to employers to get the people in place
Not sure what's going on with more liberalised countries like the Netherlands, but consider the massive influxes of people from continental Europe to the UK, which has relatively relaxed labor laws, and that may have something to do with it.
Also, note that most of the people the article covers don't have any skills worth talking about. They studied art history, social analysis, hotel management and things like that. Such people would find it hard to find a committed employer even in better times. The first example is a doctor, but she suffers from a double whammy of regulation: not only labor laws but also licensing that makes it hard for her to even relocate to a better run country.
> Under European labor laws, permanent workers are usually more difficult to lay off and require more costly benefit packages, making temporary contracts appealing for all manner of industries, from low-wage warehouse workers to professional white-collar jobs.
Make it extremely costly for an employer to exit a permanent contract and employers are less willing to enter those contracts. Shouldn't be terribly surprising.
The fundamental problem is that employment law tries to treat the employer as a nasty exploiter, not as a provider of something good to those to whom it pays salary. The law often starts from confrontation and zero-sum game, not from having shared goals and interests.
So you wind up getting laws designed so that employers need to be fair when firing, allowing folks time off after pregnancy (including men), allowing folks to stay home when they are sick, and making sure folks can try to correct their ways before getting fired.
And contrary to your belief, enforcement of laws seems to happen here (norway). Temp agencies seem to be much more used than they were in the US.. and weirdly less predatory to the worker. It still sucks only having a temp job, but that's how a lot of folks get started working here.
There aren't remedies for these folks in the states Now. If all people had that power, they'd be more likely to use it. Unfortunately, you have to have a bit of privilege to pull it off when there aren't laws to protect you (and sometimes when there are).
And while I realize that this is controversial, but in order for this to work 2 other conditions are necessary:
1) limit immigration
2) throw the book at any employer caught employing illegal immigrants (because they're not doing it to help the illegal immigrants)
Sans the (many) inefficiencies, the government is basically an expression of the collective will.
However, treating all employers as nasty exploiters then means that more of them will have to act such. A better recourse would be to ensure the labour market works, so that the nasty exploiters lose employees and have to start behave themselves.
> The fundamental problem is that employment law tries to treat the employer as a nasty exploiter
Because they are, almost inevitably, if left unchecked.
Is slightly more convenience for the rich (if you use uber and deliveroo, that means you) worth allowing exploitation of the poor ? If so, how much ?
Do only "the rich" use taxicabs? Uber is generally cheaper than a cab, so if middle class uses cabs (and overwhelmingly has smart phones), why wouldn't they also use Uber?
Also, poor people generally would rather be "exploited" and employed than on the dole.
As for flexibility of hours on interim contracts, it's nonexistent, because employers don't want to give that. They'll hire whoever just complies with their hours and usually not even allow for swaps.
I've even been on the other side of this. Allowing hour swaps leads to first the impression of preferential treatment, then actual preferential treatment (because "he's doing it"), then fights, then a total disaster.
As a result, many (most?) well-meaning market restrictions end up hurting more than they help, often in indirect and difficult to quantify ways spread out over thousands of different interactions. This (friction introduced by the inability to fire people who should be fired) is actually one of the easier examples to point to.
Get a bonus for most bugs fixed? Lots of bugs produced, logged and fixed.
Get a bonus for bug free code? Very little code produced.
I do think for economics a more detailed simulation is needed in which we can try different laws before they passed.
If you program a simulation with the same type of thinking used to draft the law, assuming that people will employ and comply with the law "as intended", you're liable to fall prey to an exploit that you weren't creative enough to think about, else you'd have (possibly) addressed it in the law.
Thus I would go with something like make it extremely easy for the employer to get employees without any kind of obligation and the employer will be less willing to choose any type of contract that respects the employee. As we so often hear, the responsibility of the CEO is to the shareholders (thus not to the employees).
The order in which or degree to which the CEO considers each constituency when making decisions might vary by the decision, but I generally favor them in the order listed above (even as I am an employee). If you don't serve your customers well, nothing else matters...
As for the law being worked arond, that was bound to happen; I think anytime you unduly restrict one side, that side will seek loopholes or exploits or withdraw from engaging. In this case, hiring temporary workers, engaging other companies under contract, automating the function (entirely or partially), moving that function to another geography, or doing without happens.
I'm in the process of opening another software development location in Europe. In studying where to locate, it was surprising to me how varied labor law was across various locales, and while any such decision is obviously multi-dimensional, labor law was a significant driver in the final location selected. (Several finalist locations were all workable; one of the locations had a much more balanced set of labor laws and local practices.) To inhabitants and prospective employees in the locations not selected, that looks identical to jobs moving away from their locale to another, more balanced, locale in large part due to local labor law.
I've seen this sort of thing backfire a lot in Europe where well intended regulation causes far more harm (both to individuals and the economy of the country) than good.
Was in a meeting not too long back where major investments were being discussed and the places to invest where on the table (with jobs at stake). Long story short some regulatory monkey was saying "this ref prevents this, you'd have to do that" and such for a location in Europe at which point the execs in the room basically just said "fine, we just won't invest there... if they want to have silly practices we'll just put the jobs elsewhere." And they did.
I'm no Republican but the concept of regulations killing jobs and hurting the people they intended to help is a very real thing.
Are we supposed to have no regulation and no taxation on businesses because otherwise some other state/country can offer them a better deal? Or do we need to have stronger regulation across country borders/policy that prohibits these loopholes. Maybe we should tax a US company more if they choose to produce products in another country to get around regulations that we have in the US.
Clearly there are more to countries than tax rates and regulations. However, the parent poster relates an anecdote where one country with less restrictive regulation is chosen over another, all other things being equal.
So to answer your question, if a country has a superior market or the right labor pool, then it will succeed despite higher tax rates or restrictive regulations, to a point.
Despite a zero corporate tax rate and few regulations, Somalia still hasn't posed a threat to Europe and the U.S. as a corporate headquarters. The "race to the bottom" is bounded by other factors besides tax rates and regulation. Rule of law, enforceability of contracts, access to a skilled labor pool, access to markets, etc. are more important.
Interestingly enough, these factors are a correlated to sufficient government revenue and regulation to uphold contracts and satisfy labor.
Here is why: as a business owner I face a 40% tax rate at the corporate level and then 35% on personal income. I am thus highly incentivized to keep profit in the business and reinvest it or look for growth opportunities rather than distribute it to myself and our other shareholders.
Now imagine you are Sam Walton of Walmart. You stumbled upon a fantastic business model that prints money (or your Apple sitting on $250bn in cash). On the margin you will always opt to reinvest the money in the company or at least let it sit there unspent (i.e. Apple/Google/Msft) if the alternative means paying an incremental tax on it. So what do you do? Grow grow grow.
Anyway just wanted to share my thoughts. I am not trying to be controversial... I believe that long term sustainable health of an economy is predicated on the health of small businesses. I genuinely believe double taxation may have a potentially perverse incentive and negative outcome on a society simply by the way it alters my own decision making and incentives.
I would like to see a similar model explaining what labor law accomplishes and how you know when the laws are being too strict. The problem is that the obvious answer ("so workers don't get exploited") isn't very satisfying: there's sort of an inherent barrier to not paying enough, which is competition for workers[2]. You would need to explain labor law as filling some role that isn't a simple matter of competitive compensation.
[1] My post on the importance of having a model that identifies both a Scylla and a Charybdis: http://blog.tyrannyofthemouse.com/2015/12/the-scylla-charybd...
[2] The typical argument is like, "look at [obviously poorer time]. They paid [obviously bad wage]. Now [after years of accumulation of capital] we mandate they don't do that, and stars above! They get good wages now." I don't find that satisfying.
Collusion among employers to keep wages down still happens. The combination of minimum standards plus anti-collusion laws function as a belt-and-suspenders approach to the problem (labor law has other purposes, too; so does anti-collusion law.)
A) That would justify anti-conspiracy countermeasures, not general "you have to pay them more" laws.
B) It would rather dubiously require a conspiracy along the rather huge number of low-skill employers. I can accept a conspiracy between McDonald's and BK, but across numbers indistries and localities?
I believe in the principle that the unintended consequences of any policy usually wind up outweighing the intended ones.
I love the story:
> The term cobra effect stems from an anecdote set at the time of British rule of colonial India. The British government was concerned about the number of venomous cobra snakes in Delhi.[3] The government therefore offered a bounty for every dead cobra. Initially this was a successful strategy as large numbers of snakes were killed for the reward. Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped, causing the cobra breeders to set the now-worthless snakes free. As a result, the wild cobra population further increased. The apparent solution for the problem made the situation even worse.
https://en.wikipedia.org/wiki/Cobra_effect
Basic income does the same thing for the distortionary minimum wage.
It's not as if the permatemp phenomenon isn't a problem right here in the United States, where it's generally pretty easy to fire people.
There's good evidence that minimum wages can be used to nudge up bottom tier salaries without very much impact on employment rates. For use-cases that tend to suffer most (eg youth employment), most EU countries have exemptions.
Labour laws which try to force longevity come with some costs that aren't very easily mitigated. "At-will" employment sounds very aggressive but forced employment sounds bad too.
I think compensation packages (based on years in employment) should replace no-firing laws. This will keep a softer incentive in place, but avoid making hiring people so risky.
Sharks are welcome to have an opinion on the food chain, just be aware of their position when evaluating it.
Meanwhile, according to the article (which quotes a report based on numbers 5 years old, so who knows how things are now), 50% of new jobs in the EU are still permanent. And 20% of the temp contracts turn into permanent positions.
Not that permanent is actually permanent, employers in the EU fire permanent employees all the time (either for cause, or because there is no viable business alternative; permanent positions also come with a 3-6 month "at-will" probationary period).
Laws that are different for "temporary workers" normally require those workers to genuinely be temporary. That means you get laid off when your time is up regardless of whether you are doing a good job or whether the company wants to keep you: unless you are spectacular, your contract ends and it's someone elses turn.
In an environment with very liberal labor laws, there is no government enforced "time up". If you're doing good work and the company still needs you, then you still have a job.
And as you point out, "permanent" jobs aren't permanent anyway. I can't really see good reasons to have such tight labor laws.
I suspected that there was some hyperbole in that claim, but perhaps a HN reader knows just how costly it is to fire an employee in France, for example.
I will say that the concepts of year contracts are totally alien to me as an American. But I think Europe still works on the old-school postwar model, where you're horribly underpaid at the start of your career and the company makes a bunch of money off of that, but over time you make more and more until it morphs until a well paid sinecure. So they're just stuck at that horrible entry phase forever and never move to the good part.
If workers want security in employment, they're going to have to create it themselves - through worker-owned companies.
Edit: I would also like to add that I don't support mandating unions to represent all employees. Just like an employee should be under no obligation to join/pay dues to a union, a union should have no obligation to represent all employees. It should be a voluntary association.