Lawyer Reasoning Differs from Economist Reasoning

Lawyer Reasoning Differs from Economist Reasoning


Here’s a letter to the New York Times:

Arguing for government to prevent employers from dismissing workers except for just cause, Moshe Marvit and Shaun Richman argue like lawyers (“American Workers Need Better Job Protections,” Dec. 29).  Let’s examine their proposal like economists, who ask probing questions of a sort that seem not to occur to Messrs. Marvit and Richman.

– Because imposition of a just-cause requirement raises each employer’s cost of hiring workers, won’t employers respond by hiring fewer workers or by paying lower wages (or by using some combination of both)?  If not, why not?

– Because greater job security is a benefit to each worker, why don’t more employers compete for workers by offering just-cause clauses in employment contracts?  Might the reason be that most workers do not value greater job security as much as they value the higher wages that employers, absent such a clause, can afford to pay?

– To support their case, Messrs. Marvit and Richman offer three anecdotes of employer mistreatment of workers.  But there are today in the United States approximately 28 million employers and about 155 million employees.  Are these three anecdotes so representative of the American labor market that we should abandon the employment-at-will standard that has been the default standard in the U.S. for all of our history?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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