Minimum-Workforce Legislation

by Don Boudreaux on January 1, 2007

in Work

Why doesn’t government require each employer to hire a minimum number of full-time employees?  If, as the proponents of modest increases in the minimum-wage argue, "reasonable" government mandates that raise the costs of running a business have little or no ill effect on the labor market, why not also legislate – in addition to a minimum-wage – a “minimum workforce”?

Oh sure, economists with their brains kicked into reverse by supply-and-demand curves would argue that a minimum-workforce requirement would cause some firms to go out of business, and some other firms who would have otherwise opened for business never to materialize.  These economists would insist that the very purpose of the legislation – to create more jobs – would likely be undermined by the legislation.

But surely if the minimum-workforce requirement were set at a reasonable number of workers – say, four full-time employees per firm (or, perhaps, one full-time employee per firm for every $75,000 a firm earns annually in gross revenue) – then the ill effects would be small and the potential upside effects worthwhile.  The owner of that aroma-therapy kiosk in the mall, for example, would hire four full-time workers rather than just two.  Likewise for that daycare center down the street, the house painter across town, and the mom’n’pop pet store on Main Street.

Workers who today can’t find jobs would be more likely to find them if employers were forced, if just a bit, by government to behave as if they consider the welfare of others when making their hiring decisions rather than focusing so selfishly on their bottom-lines.  Nothing about the unhampered market leads it to consider fully the welfare of people willing to work but who can’t find gainful employment.  A minimum-workforce statute would correct this market imperfection.

Economists (ever the nay-sayers) might also point out that the unemployment rate in the United States today is quite low – less than five percent.  So the number of potential workers who stand to be helped by this legislation is small.

No matter, replies the champion of this legislation.  If this legislation results in a net increase in jobs, then some real flesh-and-blood human beings will be helped.  Because it’s impossible to raise a family if you’re unemployed, such legislation would benefit workers who need jobs.  It would reduce the ranks of the unemployed by requiring that employers – who, after all, are in the business of employing workers – each to hire a fair share of workers.  The absolute number of workers benefited might be small, but it’s real – as opposed to the textbook-and-chalkboard speculations of Ivory Tower economists who have “models” that suggest that net employment might fall.  Such legislation — by employing persons who would otherwise remain unemployed — would even help to reduce income inequality.


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