Open Letter to an Anonymous E-mail Correspondent

by Don Boudreaux on January 21, 2011

in Reality Is Not Optional, Trade

Dear Mr. or Ms. FedupwithHayek:

You write: “You [Don Bx] wrong[ly] assume workers don’t want more job security. They do. They don’t appreciate trade lowering that security.”

I disagree, at least with the implication that the value to workers of greater job security exceeds the costs of supplying such security.  Consider:

Nothing prevents a firm – say, Acme, Inc., a hypothetical chain of hair-styling salons – from offering the following sort of deal to consumers: “Acme will cut your hair, but only on condition that you agree to buy at least six haircuts each year from Acme for the next 25 years.”  If Acme gets enough customers to buy haircuts on this condition, then it can offer more job security to its stylists, receptionists, and other employees than can Acme’s competitors who do not condition the sale of haircuts on customers’ willingness to sign such contracts.

Obviously, consumers won’t buy haircuts from Acme on these terms unless Acme makes these terms worthwhile to consumers – say, by offering haircuts at much lower prices.

But to operate profitably while charging much lower prices, Acme would have to find enough employees who value job security so highly that they’re willing to work for wages far below what they would earn by working elsewhere.

Because I see no such successful attempts by firms to cater to the alleged demand that workers have for greater job security, I conclude that workers in general are not willing to pay the cost of securing more job security.  In short, the value to workers of greater job security is less than is the value to them of higher wages today.

Securely yours,
Donald J. Boudreaux


28 comments    Share Share    Print    Email

Previous post:

Next post: