Jasper Smith

Commentary on politics, economics, culture and sports.

Long live flexicurity

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A great Ezra Klein comment thread was generated from his post entitled: Wal-Mart and the Mom-and-Pops. I won’t do a major excerpt (read the whole thing), but will just mention that a sub-discussion got involved using the example of Wal-Mart, and its efforts to browbeat the maker of Crest into lowering prices, and how this cycle plays out in the form of poor wages and benefits for workers. Anyway, one commenter opined that

It’s a stupid argument that Wal-Mart or Crest or any other company can thrive only by treating workers like shit and paying them little.

Yes, but who exactly is arguing that undervaluing workers is the “only” way a company can thrive? Talk about straw man arguments. Obviously plenty of enormously successful private sector employers in the United States pay excellent wages and benefits. Indeed, American workers are some of the world’s most expensive. The key question is: what if any role should government play in mandating how much workers should cost.

While it may be true that sometimes firms can prosper quite nicely while paying a relatively high price for labor (see Ford Motor Company circa 1928) it’s equally true that employers can sometimes perform pretty dismally while overpaying for labor (see Ford Motor Company circa 2007). All in all I’d just as soon have a firm’s owners, and not government, determine how much they can afford to pay for labor. I doubt Goldman Sachs or Boeing or IBM or Pfizer are paying more than they have to for their American workers. It’s just that the going rate for skill sets in those fields is high — a lot higher than the going rate for the skill sets involved in stacking shelves or flipping burgers.

Not that workers doing these types of less skill-intensive tasks ought to be treated badly. Far from it. They ought to enjoy — like their counterparts in other rich countries — the generous protections of a robust, taxpayer-supported safety net. The big advantage to relying on government for social protections — rather than private sector mandates — is that government is too big to fail. One can certainly imagine a GM, say, or a Caterpillar having trouble paying for healthcare or pensions. But the United States government is very unlikely to give up ownership of its printing presses.

Very robust safety net + very free markets: the Nordics have it right.

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Written by Jasper

September 6, 2007 at 5:41 pm

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