Coronavirus Diary (55): The Labor Economics of La-La Land

The business and political leaders featured in this NJTV News segment sound delusional to me. They’re talking here as though things will be fine “down the Shore” by June 1, and that there’s a good chance that we’ll have a normal shore season. You don’t need a crystal ball or some sophisticated econometric model to see that that’s ridiculous.

Even in the best-case scenario, we’re talking about 50% capacity at most establishments where people might gather, along with job cuts and revenue losses. Who’s going to flock back to the boardwalks and amusement parks after watching thousands of people die from an illness that transmits asymptomatically? Some will, I’m sure. Some people have learned nothing from what we’ve just experienced, and some live their lives the way they drive, treating stop lights and yield signs as unnecessary distractions from the risk-positive thrills they seek. But to bank on people like that is to invest in stupid. You’d think that an investment in stupidity was an expression of stupidity, but my degree is in philosophy, not marketing or finance. My investment advice tends to be one-dimensional.

Here’s an idea. Why not plan now for the coming changes in the labor market, rather than gamble on the proposition that Summer 2020 will be just like old times at Point Pleasant, LBI, and Wildwood? Things will be hard for people no matter what happens, but why not take the initiative to cushion some of the blows?

 

The “paradox” (it’s not a paradox at all, actually) is that while joblessness claims are at record highs, there are jobs out there to be had. I’m not trying to dissuade anyone from taking unemployment if they want to. My point is: why lure people into markets that will be losing jobs while ignoring markets desperate for labor? Precisely because these latter markets are desperate for labor (and labor is in a sense in short supply), there is some room there to close the usual gap between labor and management. Granted, this is often non-unionized labor, but when managers are desperate for labor, and job applicants are in short supply, the ones who are in the market have more leverage to set the terms of employment than they ordinarily would. And setting those terms in these circumstances for these jobs is a moral and practical imperative.

Put another way: a job candidate should be put in the position of saying:

Yes, I’ll take this filthy job cleaning COVID positive shit and piss off your floors, but I could be taking unemployment instead, so you’d better make damn sure that I have the PPE to keep myself safe, and a wage that makes this worth doing.

Just for starters. Contrary to whatever mythology you may have heard from free market economists, private firms tend to undervalue the safety of workers. They have little incentive to value it as highly as it’s worth. The asymmetrical bargaining power that management enjoys is often insurmountable. So the availability of unemployment benefits improves workers’ bargaining power.* My job advice: use it without apology.

I see nothing wrong, in compensation for the undervaluation of safety by firms, with stacking the deck in favor of workers doing dangerous work. Many people object to the government’s offering more in the way of unemployment benefits than what some might have been making (or might make) by working. That can be a problem, I agree, but from another perspective, it’s also a solution. Some people shirk work; if you pay them enough, they’ll sit at home indefinitely and never seek gainful employment. But some people want to work; you couldn’t pay them enough to sit at home for very long.

 

Focus on the latter group. Imagine that they go out into the current labor market. The jobs hiring are in general dangerous; they exist precisely because they require exposure to the coronavirus. Typically, they’re in lines of work that involve mitigating the effects of the virus (which only makes sense: there’s an obvious reason why there’s a demand for such jobs). Why should such people go into “labor negotiations” (to use an inappropriately grandiose term) with the deck stacked against them? Why shouldn’t they be able to drive a hard bargain of the kind I’ve just mentioned above? If so, why not start making the needed labor adjustments now, steering people toward promising labor markets, and training and equipping them for work there? And paying them accordingly? The truth is that making cotton candy on the boardwalk at Seaside is more dangerous than being a janitor with PPE at, say, Hackensack Meridian at Brick. Why induce anyone to do the former when jobs are open at the latter? Don’t think I haven’t looked.

The alternative is to assume that we’re somehow going to recreate the summers of pre-pandemic past during the summer of pandemic present. It’s easy enough to do, I guess. Just pretend that the pandemic never happened, because the virus itself never existed. Or tell people that things weren’t really that bad, were they? Or admit that they were bad for awhile, but things are all different now.  Or get mad at the “doomsayers” and “fear mongers,” and insist that if we just think happy, positive thoughts, the labor market will sort itself out. Or, abstracting from all of the messy details from the immaculate Olympian heights of some think tank, just keep repeating “there’s no place like an equilibrating labor market, there’s no place like an equilbrating labor market” over and over while gesturing at a bookshelf of microeconomics textbooks. Things will go just fine. Don’t they always? This is America.

Right. Maybe that’s the problem: this is America. These mayors and business leaders in South Jersey spinning out their smiley-face scenarios are setting people up for a fall. They don’t seem to have gotten the pandemic memo. Pretending is what got us into this disaster. It’s not going to get us out. If we don’t stop doing it, we never will.

 


*For an excellent discussion, see W. Kip Viscusi, Pricing Lives: Guideposts for a Safer Society. Viscusi argues that safety is undervalued throughout the market. I don’t know whether he’d agree with my further inferences from that fact.

Thanks to Alison Bowles, Sheba Qureshi Dougherty, Jennifer Rodriguez, and Sherida Yoder for helpful feedback on an earlier version of this post.

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