Some French folk are now protesting the French state’s proposal to slightly ease employers’ legal ability to fire workers. When a good economist hears of such protests, and of the allegedly pro-worker diktats that the protesters wish to keep in place, the first question that occurs to that economist is “Don’t these protesters understand that to raise employers’ costs of firing workers is to raise employers’ costs of hiring workers?”
While I’m certain that some of the protesters do understand this reality – “Hey, I’ve got my le poste; and all I care about is keeping that job no matter what happens to you or to anyone else!” – I’m certain also that many other people, sadly benighted, honestly believe that these so-called ‘worker-protection’ diktats actually help workers as a group. These benighted people are incapable of seeing, not just beyond what Deirdre McCloskey calls “the first act” of the economic drama; they can’t or won’t see beyond the opening lines!
It’s bewildering to contemplate. How can someone not see that the higher the cost of hiring and employing human labor relative to the benefits that that labor can generate for employers, the less interest employers have in employing human workers? How can someone not see that government-erected barriers to the firing of workers make each worker hired a more costly investment for employers – and, thus make some workers who would have been, without these barriers, worthwhile to hire, unattractive to hire.
Such blazing blindness is truly bewildering.
I wonder how many of the people who deny that government-imposed restrictions on firing are also, in effect, government-imposed restrictions on hiring have the same view about non-human inputs in production. Suppose that the state enacts ‘IT-protection’ legislation that prohibits firms from ever discarding – from ever not using – any computer hardware and software that firms might purchases as inputs. Would people who support legislation protecting workers from ever being fired think that this ‘IT-protection’ legislation will have no effect on the amounts and kinds of computer hardware and software that firms choose to purchase or rent?
Or suppose that the state enacts ‘landlord-protection’ legislation that prohibits businesses and families from ever ceasing to rent any office space, factories, apartments, or houses that they might rent today. Do people who support legislation protecting workers from ever being fired not see that this ‘landlord-protection’ legislation will reduce the number (or the square footage, or both) of properties that are today rented out?
Or suppose that the state enacts ‘clothing-protection’ legislation that forces people who buy clothing today to wear that clothing with some minimum frequency (say, once weekly) for some minimum number of years (say, ten years). Do people who support legislation protecting workers from ever being fired not see that this ‘clothing-protection’ legislation will change both the quality and the quantity of clothing purchased today?
I suspect that even people who support such ‘worker-protection’ diktats understand that ‘IT-protection’ and ‘landlord-protection’ and ‘clothing-protection’ legislation would indeed change both the quantities and qualities of IT, rental properties, and clothing that are bought today – and change these in ways that harm IT producers as a group, that harm owners of rental properties as a group, and that harm clothing producers as a group.
A related point: I suspect also that many of the people – including many of the economists – who do see that French-style ‘worker-protection’ diktats in fact harm workers as a group are among those people who nevertheless are skeptical of the employment-destroying effects of minimum-wage legislation. Such skepticism is mysterious. If someone understands that a prohibition on firing workers so artificially raises the costs of employing workers that fewer workers are employed, why does that same someone not understand that a minimum wage, by artificially raising the cost of employing workers, also – and according to the same economic logic – results in fewer workers being employed? Apart from the empirically utterly implausible claim that monopsony power runs throughout the U.S. market for low-skilled workers, there’s no reason why someone who correctly understands the employment-shrinking effects of French-style ‘worker-protection’ diktats should not also understand the employment-shrinking effects of minimum-wage diktats. But mysteriously, many people – including, embarrassingly, many economists – hold these mutually incompatible beliefs.
The above originally appeared at Cafe Hayek.