Arnold Kling  

Euvoluntary Employment

Libertarianism: How, not Why... PSST and Fragility...

Karl Smith asks,

If we accept that the labor market would clear at One Cent Per Year. Then the question is why has the labor market not cleared while at the same time the wage has not dropped to One Cent Per Year.

Perhaps Mike Munger has the answer. Employment at one cent a year is not euvoluntary, because it takes advantage of the fact that someone has no good alternative. (Yes, I know that people could get more than one cent's worth out of a year's home gardening and cooking, but that only changes the numbers, not the basic principle.)

We do not want to see people forced to take jobs at low wages for lack of an alternative. Hence, the minimum wage. Hence, unemployment benefits. The economist has a good argument for why the minimum wage is counterproductive. The economist might come up with a better design for unemployment benefits, in order to maintain the household's living standards without taking away as much of the incentive to work. But many non-economists (and, indeed, many economists) would rather see people not work than see them work at very low wages.

Our moral intuition insists that employment must be euvoluntary. Ironically, this intuition may be the root cause of involuntary unemployment.

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COMMENTS (1 to date)
Joe in Morgantown writes:

The reason Mr Smith's autoworker won't work at such a low wage is not unemployment benefits and (probably) not the minimum wage. It's PSST.

The unemployed autoworker is looking for a pattern of sustainable trade for his labor. He sees that he won't make as much as he was making. But he (rightly) thinks he can do better than scrubbing Mr Smith house. But what?
Any job that pays a very low wage is unlikely to be the best solution to his optimization problem; better to keep searching.

Unemployment insurance may make this search less desperate, but it didn't cause the search for new pattern.

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