David R. Henderson  

Is Losing Your Job in Your Economic Self-Interest?

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"Fear is Why Workers in Red States Vote Against Their Economic Self-Interest" is the title Robert Reich gives yesterday's post on his site. Reich starts by addressing why no one in West Virginia complained [I'm taking his word for it that no one complained, although I'm not sure how he knows] about dangerous chemicals getting into the water supply. It's because, he says, they worry about losing their jobs because they fear that enforcement of tough environmental laws might cause the businesses that use the chemicals to shut down.

That could be, but I think economists of pretty much all political stripes would more likely look at the fact that the damage caused by chemicals is a classic negative externality and, because it would be suffered with a small probability by a large number of people, few people would have much incentive to do much about it before the fact. Workers directly affected by potential job loss, after all, are probably a small percent of the number of people hurt by poisoned water.

But I want to address a different issue in Reich's piece: there's a tension, to put it mildly, between the title of his post and the content. When someone publishes a piece in the New York Times, the Wall Street Journal, or any newspaper, I don't pick on titles because I know that the author rarely gets to choose his title. But this is Reich's own web site. He is the one who chooses the title.

These three paragraphs give the gist of his argument:

For years political scientists have wondered why so many working class and poor citizens of so-called "red" states vote against their economic self-interest. The usual explanation is that, for these voters, economic issues are trumped by social and cultural issues like guns, abortion, and race.

I'm not so sure. The wages of production workers have been dropping for thirty years, adjusted for inflation, and their economic security has disappeared. Companies can and do shut down, sometimes literally overnight. A smaller share of working-age Americans hold jobs today than at any time in more than three decades.

People are so desperate for jobs they don't want to rock the boat. They don't want rules and regulations enforced that might cost them their livelihoods. For them, a job is precious -- sometimes even more precious than a safe workplace or safe drinking water.


Notice especially the last paragraph. Many workers fear that they will lose their jobs if various regulations are enforced. One might expect Reich to argue that this fear is unjustified. Earlier in the piece, he gives one instance where it turned out not to be justified. But that is not what he is arguing. He doesn't say their desperation is unwarranted. In fact, given his statement about companies shutting down overnight, he seems to think it's even more warranted than I do.

I would have thought that almost anyone looking at the issue, and certainly one who was once a Secretary of Labor, as Reich was, would think that having a job is in someone's economic self-interest. But Reich implicitly argues that it's not.


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CATEGORIES: Labor Market , Regulation



COMMENTS (20 to date)
Yancey Ward writes:

Yes, Reich's argument makes zero sense to me, too, and I doubt one could ever get him to understand why it is illogical.

David R. Henderson writes:

@Yancey Ward,
I bet you could get him to understand. My sense of him is that he’s reasonably smart but doesn’t go back to a framework the way economists do. So he can start with an idea and then transition to another one without realizing the contradiction. I’m not saying he would admit that he understood.

Jeff writes:

I'm guessing he means "economic self-interest" in the sense of the increased social spending that comes with electing Democratic majorities. It is his opinion, I surmise, that it would be in the economic self interest of working class white people in places like West Virginia, Kansas, Oklahoma, etc., to vote for nice, caring, soft-hearted social democrats like say Martin O'Malley rather than heartless reactionaries like Sam Brownback. The Brownbacks of the world are generally "against unions, against expanding Medicaid, against raising the minimum wage, against extended unemployment insurance, and against jobs bills that would put people to work," all of which he takes as things that would benefit working class people at the expense of the upper class.

RPLong writes:

Even if I accept Reich's argument, it's difficult to understand why it would apply to "workers in red states," and not simply workers everywhere.

Jon Murphy writes:

@RPLong:

He seems to imply that Red states are weaker, economically speaking, than Blue states.

Jon Murphy writes:

Reading though Reich's piece, it is reliant on two pieces of anecdotal evidence. The first comes from the quote of the woman in 2008, the second comes from the Oklahoma plant. These two stories may represent the truth, but he doesn't really give us any reason to think they do.

Similarly, he closes his piece with an ad hominum, preferring to blame everything on evil companies who want to keep workers down, rather than understanding why opposition arose to the factory closing.

All due respect to him, it's a poorly reasoned argument.

dave smith writes:

Other bloggers on this blog have argued that in fact redistribution is not even in the poor's best interest.

Seems that people who vote socialist also worry about losing their jobs.

Some of Allende's friends want their jobs, other of her friends want clean water. Allende stands with her friends.

Dan W. writes:

Likewise, West Virginians now vote solidly Republican in presidential elections because they FEAR losing their coal mining jobs due to EPA regulations supported by the Democratic candidate.

And as has been proven out, this fear was rational and justified.

IOW, Reich's headline is demonstrably false. It should be written: "Workers in red-states vote their economic self-interest".

foobarista writes:

One key point here is defining "economic self-interest". Is it government handouts in the form of cash or employment in the bureaucracy? Or is it real-world employment with the chance to grow into a responsible position where you are no longer poor?

Ever since the "what's the matter with Kansas" days, lefties have been making this argument, without much in the way of defense for it other than vaguely Marxist class-struggle arguments.

Tom West writes:

I think the point is that if the article is right, people are willing to take a significant risk with their health in order to keep their job.

For those of us on the left, the question is: Should they be allowed to take that risk?

For those saying no, we can point at that fact that most will delude themselves by ignoring or underestimating the risk and will feel betrayed and unhappy when they end up paying with their health.

But we'll also delude *ourselves* by underestimating the economic and social harm when certain industries are closed down as simply too harmful to their employees (and not profitable enough to improve). Widespread unemployment is massive blight on the social fabric.

Of course, these choices don't stop one deep. The fact that a community as a whole chooses to accept the risk means fewer means of escape for those who don't. Closing industries prevents both the clear-eyed and the deluded from making free choices.

Nothing is ever simple.

Mark V Anderson writes:

Yes, Professor Henderson, you've found another poorly written article by a big name leftist. Are there no good articles by leftists? It seems more profitable to discuss good arguments by leftists instead of making fun of poor ones. Tom West almost always comes up with good points from the left point of view. I would think there would be articles in the leading journals. Or is Tom an outlier?

David R. Henderson writes:

@Mark V Anderson,
I never claimed that Reich’s article was poorly written. I actually think it’s fairly well written. Nor did I make fun of him. I’m taking on a claim that much of the left makes and seems to regard as important.
If I thought that virtually no one paid attention to Reich and that virtually no one had the same thought he expressed in this piece, I would not bother addressing it.
I think it is very important to critique poor arguments by anyone, leftist or otherwise, but I agree with you, Mark, that one should not make fun of such arguments.

Mark Bahner writes:
I think the point is that if the article is right, people are willing to take a significant risk with their health in order to keep their job.

Maybe it's because they think/know that losing their jobs creates a significant risk to their health and the health of their loved ones?

Losing a job creates significant health risks

Mark Bahner writes:

More on job loss health effects

A 2012 study by Wellesley College researchers, "Recessions Can Take up to Three Years Off Older Workers’ Lives," found that the likely cause is the loss of employer-sponsored health insurance. Workers who lose their jobs during their late 50s or early 60s face shortened lifespans.
ThomasH writes:

Henderson's analysis seems to imply that the costs of environmental regulations (that reduce the level of damaging activities and hence employment in those activities) are greater than the benefits, say lower chances of disease or injury. If not, then voter hostility to environmental regulations WOULD be an example of voting against their interests. It would be a "reasonable" mistake in that when macroeconomic policies are failing to maintain full employment, the risk of losing one's job is likely to be more salient than the (often long term) risk of disease or injury. It is the same kind of mistake we often see in opposition to free trade, immigration reform, etc.

Jay writes:
I think the point is that if the article is right, people are willing to take a significant risk with their health in order to keep their job.

...or they're skeptical of the risk in the first place or the government's ability to improve it and hence vote the way they do.

Even if they accept the risk, their wages should properly reflect the risk so the government can probably keep out most of the time (see "Deadliest Catch" on Discover channel for an example).

Brian writes:

" It is the same kind of mistake we often see in opposition to free trade, immigration reform, etc."

Thomas H.,

It's not necessarily a mistake. Everyone constantly weighs short-term versus long-term net benefits. Sometimes you just can't wait for the long-term benefits to kick in.

As a hypothetical example I've already mentioned in an earlier post, suppose that immigration reform substantially opened the borders, causing negative effects that would take 30 years to overcome. That is, the net benefit would take 30 years to be realized. Why would any voters in their 50s, 60s, and 70s vote for such a change? The rest of their lives would be spent dealing with the negative consequences; they wouldn't live to see the long-term benefits.

Similarly with action on global warming. Why would anyone vote to engage in expensive mitigation now when the benefits (i.e. avoiding possible negative effects) won't be realized for another 50 - 100 years?

In the case of workers, all of us have a fairly short window of opportunity during our peak earning years and to try to achieve the good life. Why would anyone risk losing that earning opportunity for payoffs that are much longer term? It's just not rational to do that.

Brian writes:

"For those of us on the left, the question is: Should they be allowed to take that risk?"

Tom West,

For everyone, whether on the left or right, shouldn't the answer be yes, people should be allowed to take the risk. No one has more to gain or lose from the health risks than the person whose health is at risk. Can anyone rationally pretend to care more about strangers than the strangers care about themselves?

The real problem here is that many people on the left, Reich included, frequently interpret choices made by adults as occurring under coercion (i.e., not free). Some people don't have health insurance? Well, they must be too poor, or they've been denied by greedy insurance companies, etc. Some people won't fight polluting industries? They must be afraid of retaliation.

Failure to value what the left values is not a sign of coercion.

Hazel Meade writes:

Lately, I have been wondering if maybe losing one's job actually IS in your economic self interest. That is, the workers might be better off on the dole.

The reason is, in the past few years I went from being a grad student living on less than $20,000/year, to making a six figure salary, and I'm having trouble saying my lifestyle really improved that much.

The problem is that I got his by a double wammy. My taxes went from $0/year to at least $20,000/year. And the cost of living approximately tripled due to a change of location.

Ok, so it's not all bad, I bought a (newer) car. I now live in a two bedroom duplex instead of a 1 bedroom triplex. I have a (shared) back yard. I am putting money into a 401(k). I am able to afford a few hobbies. A can afford to dine out a few times a month. Money is slowly trickling into savings.

What I still can't afford is: Buying a house. Purchasing new clothes retail. Going on a vacation.

Given the pros and cons, I can't help wondering if the marginal improvements in my lifestyle are really worth working 40-50 hours a week.

So there are two direction you could go from here:
1. It's in my interest to vote for more social welfare so I can quit my job and live on the dole.
2. It's in my interest to vote for lower taxes so I can save money and make a down payment on a house. And for less regulation so that houses will be cheaper and easier to build.

It depends on whether you think you will benefit more from more social welfare spending, or from more economic opportunity.


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