David R. Henderson  

Tucker on the Young Unemployed

Los Angeles Times Distorts... Walter Oi on Government Budget...
Consider: Why does any business hire an employee? It happens based on the belief that the business will make more money with the employee than without it. The business pays you, you do work, and, as a result, there are greater returns coming in than there would otherwise be.

But think through what this means. It means you have to add more value than you take out. For every dollar you earn, you have to make it possible for the business to earn a dollar plus something extra. This task is not easy. Businesses have costs to cover in addition to your salary. For example, government mandates that businesses be insured. You have to be trained. There could be healthcare costs, too. There are uncertainties to deal with. All of these add to the burden that you place on the business, which adds to the costs of hiring you.

This is from Jeffrey A. Tucker, "Advice to Young, Unemployed Workers," The Freeman, May 16, 2013. Somehow I missed the piece when it came out last year. It's well worth reading, not just for young, unemployed workers but also for everyone, young or old, employed or not.

The Justice Trap

Here's another of my favorite passages from Tucker:

First, you will discover that people in general are extremely reluctant to admit error. People will defend an opinion or an action until the end, even if every bit of logic and evidence runs contrary. Sincere apologies and genuine admissions of error and wrongdoing are the rarest things in this world. There is no point at all in demanding apologies or in becoming resentful when they fail to appear. Just move on. Neither should you expect to always be rewarded for being right. On the contrary, people will often resent you and try to take you down.

How do you deal with this problem? Don't get frustrated. Don't seek justice. Accept the reality for what it is. If a job isn't working out, move on. If you get fired, don't seek vengeance. Anger and resentment accomplish absolutely nothing. Keep your eye on the goal of personal and professional advancement, and think of anything that interrupts your path as a diversion and a distraction.

Years ago, I came to the conclusion that seeking justice is usually not worthwhile no matter how unjustly you think you were treated. It can take your energy and take you away from achieving your other goals. Here's what I wrote recently, in my Regulation piece on Walter Oi, about seeking justice:
He [Walter Oi] then went on to tell me that, yes, the Japanese-Americans were treated unjustly, but that the best thing to do for them was to move on and not create a new government program.

That comment has not only stuck with me, but also helped reinforce a belief I had then embraced and still believe today. I have always been a strong believer in justice. At the same time, I've seen many people get stuck in what I call "the justice trap." They were badly treated, they want justice, and they should get justice. But the search for justice, when they don't get it quickly (which they often don't), can make them bitter and lead them to play "Ain't it awful," not moving on with their lives. One thing I like about watching professional sports is seeing how quickly players move on when they get a bad call from a referee, and how effective they are when they do move on. Seeing someone who was treated very unjustly as an innocent child but who did not hold a strong grudge reinforced my belief that the justice trap should be avoided.

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CATEGORIES: Labor Market

COMMENTS (20 to date)

I liked this part of Tucker's piece;

Why are minimum wage jobs so hard? Because it’s difficult for an inexperienced worker to be worth paying that much. The employer has to extract as much value as possible from the relationship with you just to make that relationship happen at all. That can’t happen right away because odds are you are losing the company money in the first months of employment simply because you are untrained. You end up scrambling like crazy just to earn your keep.

I know Phds in economics who don't seem to understand this.

Kevin Dick writes:

It may not be rational for any individual to seek vengeance, but as you know this can lead to suboptimal aggregate outcomes. Vengeance is in some sense a public good for preventing oppression. That's why higher primates seem to be wired for "altruistic punishment"--seeking vengeance when it is not in their personal best interest.

In the spirit of "accept the reality for what it is", it seems like Tucker could have provided more constructive ideas for how to deal with these feelings given that they may in fact be hardwired.

LD Bottorff writes:

We are hardwired to scratch what itches. Wisdom is learning not to scratch every itch. I don't know of any constructive ideas to deal with it except to keep in mind what happens when you scratch an area of skin exposed to poison ivy; you make things worse.

Harold Cockerill writes:

This is much better advice that that coming from many community activists who are more than willing to push people into the justice trap.

David R. Henderson writes:

@Kevin Dick,
All good points, Kevin.
In the spirit of "accept the reality for what it is", it seems like Tucker could have provided more constructive ideas for how to deal with these feelings given that they may in fact be hardwired.
Yes, that would have been nice, but let me try. I have two favorite quotes about vengeance and the second one helps me with your question. Neither will help with the “altruistic punishment.”
I actually gave both quotes in a graduation speech in 1981, which, believe it or not, I have on tape. It was at the high school I graduated from in 1967.
First quote, which I saw at the local bakery when, as a kid, I went to get bread for my mother. It was from Confucius, or, at least, the baker thought it was: “He who seeks revenge digs two graves.”
Second quote, which I heard from Nathaniel Branden at a weekend-long intensive in the late 1970s: “Living well is the best revenge.” After quoting it to the high-school students, I said, “If you want to show those people, whoever they are, live your life exactly as you see fit."

awp writes:

"Tucker on the Young Unemployed"

Fixed costs of employment are obvious but I have never thought about them in this manner before.

Has anyone ever tried to estimate the average non-wage cost of employing workers? low-skilled/high-skilled?

As a young employed engineer I made ~20/hr and was billed out at ~100/hr. My first year when it came time for bonuses to be put in our 401k the company claimed 4% profit. So working ~60 hours a week the non-wage cost of employing me was maybe something like ~70/hr, or more than three times my salary.

My work was capital intensive, so would I expect a higher or lower ratio for low-skilled workers?

Zc writes:

"Has anyone ever tried to estimate the average non-wage cost of employing workers? low-skilled/high-skilled?"

Yeah, hundreds of thousands of people do regularly...man of them are called small business owners? But, to David's point (which your question served as a prime example) many people are oblivious to true costs of employing someone. Sadly, people ignorant of such matters because they've never run a business not infrequently end up in political office where they pass laws adding to the complexity and costs while acting surprised by the results.

Bedarz Iliaci writes:

Prof Henderson,
You assume that justice consists in taking revenge.
But is this assumption just?

Revenge is defined as returning evil for evil.
But justice is simply giving to a man his due. Now, an evil-doer gets evil done to him, as a matter of justice but the spirit of justice is entirely different from the spirit of revenge.

To punish an evil-doer is doing good to him. It tells him the truth of his actions and allows him to pay his debt to the society.

But revenge, properly speaking, seeks only the evil of the wrong-doer, in itself.

Thus, the justice trap is better put as revenge trap.

David R. Henderson writes:

@Bedarz Iliaci,
Good catch. I think you interpreted me the way you did because both of my favorite lines were about revenge. But I’m not confusing revenge and justice. Even if one seeks justice without revenge, it’s often futile and self-destructive. So I need a third saying to go after just the justice part, not the revenge part. :-)

Rolf Penner writes:

The topic of the "Justice Trap" is a good one that I think could be expanded upon. There are macro and micro versions of this everywhere and we all burn a lot of calories dealing with being wronged.

David R. Henderson writes:

@Rolf Penner,
Actually, when I was first outlining The Joy of Freedom: An Economist’s Odyssey in 1995 or 1996, I was planning a section on that. I’ve forgotten why I dropped it.

Rolf Penner writes:

The topic bleeds over into psychology and philosophy, but from a purely economic point of view, seeking justice or revenge, depending on how strongly one feels about it, is incredibly inefficient. Had Walter Oi, in your example, not moved on after being wronged as a child, and waited for some kind of Justice he would not have had the kind of happy and productive life that he did. Far too many people don't move on and let the injustice define them which accomplishes nothing.

I like your sports analogy as well. One of my boys is a hockey goalie and he was taught very early that almost as soon as he lets a puck get by him he has to forget about it and think about how he's going to stop the next one. He can think about what he didn't do right for a few seconds and how to keep it from happening again, but then he has to quickly hit the reset button and play like it never happened.

That's not so easy to do if your boss chews you out for no reason, or you get fired, or your spouse runs off with someone else, or you get thrown in an internment camp at a time of war, etc. But I think the most successful people are the ones that can quickly process what happened, leave it behind, and move on with their lives.

I know this is one of the things I wrestled with up here in Canada when we were fighting for the right to sell our own wheat. The injustice was obvious but how much energy do you put into trying to right the wrong vs just getting on with things, especially when the other side in the fight has no limits on the resources and manpower they can throw at you.

ThomasH writes:

How does the first observation count as advice. What does one do different as result of knowing that part of one's compensation is used by the employer to purchase health insurance (unless he tries to nose into your coverage on grounds of HIS religious beliefs).

An element to consider is whether the justice, if obtained will produce a correct incentive. Clearly in the Japanese internment case the answer is no. Damages for marketing cigarettes as "safe" maybe so.

Sai A writes:

Agreed, never expect to be rewarded for doing something right. When you expect, then you will be disappointed.
I disagree with having uncertainties when running a business. I think you should be very certain about what you are doing, before you start a business. If you don't know about "that the government mandates that businesses be insured" or "health care costs" then you probably shouldn't be running a business. Successful business are the ones that people are fully aware and prepared for anything that comes their way.
"The proximity and similarity of nations is what stimulates the intensity of international trade" (Persson). A business man is aware with who and what they are trading with before every transaction. Certainty and confidence is largely needed for running a business.

shoo writes:

There's a word for avoiding the justice trap: forgiveness. You owe me but I make a choice not to make you pay. I've been told that increased serotonin levels are associated with a forgiving attitude. Avoiding the justice trap makes us happier.

David R. Henderson writes:

There's a word for avoiding the justice trap: forgiveness.
That doesn’t quite fit what I have in mind. Certainly forgiveness works in this context. But there are many people who have treated me unjustly and from whom I’m not seeking justice, but whom I have not forgiven. Not that I hold a grudge: it’s simply that I haven’t forgiven them.

Rolf Penner writes:

I don't think forgiveness has to factor into it. And you don't simply forget either, that just sets you up for being wronged again. Hopefully one learns to not put oneself in that position again or avoid the kind of people or businesses that try to take advantage of you.

David R. Henderson writes:

@Rolf Penner,
Well stated.

Kitty_T writes:

I'm amazed by how often the point about needing to earn your keep just doesn't occur to people, and not just young people. I understand not knowing just how much you actually cost an employer (given that the government goes to quite an effort to obfuscate that), but the more basic idea seems alien to a lot of people.

I remember watching a (US) labor lawyer explain at will employment to a bunch of (European) executives who were planning to expand operations to the States. They were just ... shocked. How horrible, they declared, what dehumanized segment of workers were subject to such abuse? Almost everyone, I said, pointing out that both the labor lawyer and I were at will employees. They gawped, and asked what prevented the partners from firing me right then and there for no reason. ("Yes, what," said the partner at the meeting, looking rather amused.) I said "For the same reason they hired me in the first place: I produce more than I cost, I produce at least as much as other people they could hire at similar cost, and I have skills they'd rather have here than at a competitor."

They stopped gawping. One sort of looked like he'd had a revelation of the divine. But I couldn't get my head around the idea that such an arrangement had apparently not occurred to them.

Shoo writes:

@Rolf Penner
You and David make a good point. Forgiveness is not required to avoid the Justice Trap but I wonder if it's not more closely related than it seems at first glance. If I choose not to make someone pay what they owe that seems awfully close to the definition of an act of forgiveness. We humans are complicated creatures and I suppose we can do an external act of forgiveness without forgiving on an emotional or internal level.

But I would hypothesize that those who find the most contentment in avoiding the justice trap have, perhaps subconsciously, also forgiven.

To the other point, making myself vulnerable to the same offense is a not a necessary part of forgiveness. Although in practice many people do seem to fall into that trap.

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