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TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.) The downside of employee protections is that it makes companies more reluctant to hire. And also once

by btilly 4y ago

TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.) The downside of employee protections is that it makes companies more reluctant to hire. And also once hired, the salary to be offered is reduced to cover the estimated current value of the future employee protections. These are real downsides, particularly for young people who are trying to get a foot into the corporate ladder. I have even personally witnessed a situation where a company evaluated a legal change to increase employee protections, and decided to layoff almost everyone in a particular country before the new law took effect. (The company was Pictage, the country was Argentina, and this was a bit over a dozen years ago.) So I'll take the up front downsides of at will over the hidden downsides of employee protections.

prottog 4y ago
Indeed! Harder to hire, harder to fire. Like most such schemes, it advantages those already inside at the cost to those looking in from the outside; see also rent control.
kenjackson 4y ago
If increased employee protection causes you to layoff almost everyone in a country -- you probably had little good business reason to be in that country. Employee protection exists because there's a huge power imbalance. A company who can constantly just say, "we'll fire you if this doesn't get done" and colludes with other companies on such matters makes it very difficult for workers. This is why employee protection, unions, etc... exist.
- WalterBright 4y ago
  Whether it does or does not protect them, employees will pay for these protections in the form of lowered salary and fewer jobs available. Nothing comes for free.
  - danielheath 4y ago
    That's absolutely true, but in practice most people would experience substantial hardship if they suddenly lost their job. I wouldn't, but being in a country with employee protections means the people around me are almost never placed in a desparate situation, and I am meaningfully safer because of that.
    - WalterBright 4y ago
      Since you'd get more pay without these protections, you can save the excess for a rainy day. People should save for a rainy day, anyway. Why must the employer be their parents? I don't buy the idea that people in a free country like the US somehow found the one and only job they could ever have.
      - kenjackson 4y ago
        You likely won’t get more pay. In times without protections against collusion and without minimum wages, and laws against child labor — wages don’t typically go up. But you will have more workers in labor. Just not protected and poorer.
        WalterBright 4y ago
        Pay for workers is set by Supply&Demand, just like everything else. Adding worker protections increases costs to hire, which reduces demand, and so salaries drop. It's inevitable.
      - ADuckOnQuack 4y ago
        > Since you'd get more pay without these protections, you can save the excess for a rainy day. It sounds like you are speaking from a position of extreme privilege, more than 165 million Americans (over half) do not have a spare ~$400 for an emergency, much less savings to pay rent after a sudden job loss. And when people get desperate some turn to crime. Which then increases your costs through increased taxation for policing and incarceration and secondary effects such as reduced safety and increased personal costs due to crime, such as increased insurance costs and the greater threat of being targeted. So when all costs are internalized, worker protections pay dividends at making a society better for all involved, for example the many northers European countries with very low crime and very strong worker protections.
  - kenjackson 4y ago
    Maybe fewer jobs, but probably not lower salaries. Collusion would likely would cut into salaries a fair bit.
  - shynrou 4y ago
    Yeah you are absolutely right. Here in germany a lot of companies pay a decent premium on temporary/loan workers and freelancers just to not be bound to then.
- kcplate 4y ago
  > If increased employee protection causes you to layoff almost everyone in a country -- you probably had little good business reason to be in that country. This kind of directly speaks to the commenters point. There may have “little good”, but enough reason until the legal change to increase employee protections created “no good reason”.
deanCommie 4y ago
Sure, it's a spectrum. People use the same argument to justify removing minimum working age laws, weekend laws, OSHA laws, EPA protections, retirement, healthcare etc. In a pure unregulated market, employers would be able to offer employees much higher salaries! The reality is somewhere in the middle. Though what America thinks is reasonable is very different than what the rest of the developed world thinks is.
lmm 4y ago
> TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.) Maybe not, but the world isn't zero-sum. Some things really do raise or lower the overall average. > I have even personally witnessed a situation where a company evaluated a legal change to increase employee protections, and decided to layoff almost everyone in a particular country before the new law took effect. (The company was Pictage, the country was Argentina, and this was a bit over a dozen years ago.) What was the law change? And how long would it have been before those employees were laid off otherwise? That's an interesting datapoint to hear about, but "employee protections" can mean many different things. > So I'll take the up front downsides of at will over the hidden downsides of employee protections. Unfortunately you don't get to skip out on the hidden downsides of at will either.
- btilly 4y ago
  The law change would double the period for which severance had to be paid. This additional liability would have been a significant fraction of the net worth of the company. The 2008 financial crisis had left the company in a position where it needed to downsize anyways, and the board of directors gave the CEO the choice between covering that liability by making the US layoff bigger, or avoiding the extra liability by getting rid of basically the whole Argentinian operation. The CEO chose to preserve US jobs. The Argentinian operation would have seen a layoff either way. But nowhere near as dramatic as the one that actually happened.
- kqr 4y ago
  Yes, free lunches exist but to see them you have to measure in utiles rather than straight-up dollars. At-will is a huge risk for the individual, since they're going from roughly 100 % employment to 0 % employment. On the other hand, in a decently sized organisation (where employee protection is typically enforced), being stuck with a bad employee and asking them for meaningless work that bothers nobody else means paying for 100 % capacity and only getting, say, 94 % of it. Over a large number of employees, the organisation can be fairly confident of what this percentage will be. Much smaller risk. In other words, the utility cost for the employer of employee protection is smaller than the utility cost of at-will for the individual. (Homeowner's insurance is a similar type of situation. Makes no sense to the individual if you look at the dollar costs, but in terms of utiles it does actually work out for both parties in most cases. Another case is hedging major business expenses -- costs more, but you and the counterparty both lose fewer utiles from it.)
spaced-out 4y ago
>The downside of employee protections is that it makes companies more reluctant to hire. And also once hired, the salary to be offered is reduced to cover the estimated current value of the future employee protections. Yep, that why software engineers in California and New York, where there are a lot of employee protections, don't get paid as much as SWEs in the Midwest or the South, where there are less... Right? Or maybe the real economy is more complex than the kiddie models you were taught in Econ 101?
- IG_Semmelweiss 4y ago
  I'd like to open up this question again after some decades. I don't think it will play out as you might think. Innovation hubs move. Historically, this has always been true. Right now those are SV and NY. It won't remain so.
  - stonogo 4y ago
    Silicon Valley, New York, and arguably Texas have been the hubs of computing innovation as long as there has been a commercial computer industry. Other tech hubs have sprung up, but we're looking at forty years of unceasing domination here. Innovation hubs move when new industries arise.
    - cvwright 4y ago
      Massachusetts was a power player too, at least in the earlier days
    - IG_Semmelweiss 4y ago
      That's a short time horizon. Innovation hubs have been in China, Middle East, Venice, London, etc. The printing innovation lasted around 300 years. Steam engine another 150 years. The industrial revolution less than 100. How long do you think computers will dominate major innovation? And if it does, will the innovation hub stay in SV ? What happens if biotech takes over? MRNA tech ? Driverless cars ? VTOL ? Rocketry or Space Tourism ? ML or low-code apps changing the dev of software as we know it today ? Do you see any of those hubs in SV ? Are they in SV today ?
ClumsyPilot 4y ago
We have already seen what the world is like with no employee protections - exploitation of children for labour, like in the British coal mines. Unsafe working conditions in Victorian workhouses, leaving men without hands and without means to feed their family, and with no compensation because 'you agreed to it'. Bosses extorting sexual favours from employees, i.e. Hollywood casting couch. You can still see this in many developing countries, children on assembly lines in China, or how a clothing factory in Bangladesh caved in killing most women working there. TANSTAAFL is obviously and demonstrably false - child labour leaves them without education and traps them in poverty. Their creativity and future potential is lost to society. Employees without hands are an obvious loss to society. But the employer doesn't care, he saved a few bucks on safety. He isn't paying the cost. This argument further extends to education and beyond. The argument of TANSTAAFL was used by coal companies in the 1920's. At the time they used to hire assassins to murder Union leaders and even killed the local sheriff. https://www.youtube.com/watch?v=vg9xywAxb10 https://www.youtube.com/watch?v=vg9xywAxb10 This also sometimes happens in developing nations today, sometimes at the behest of western companies.
- nverno 4y ago
  What is the 'argument of TANSTAAFL' here? It just means there are hidden costs to things that appear free. From that coal video, when the coal companies gave the miners the clothes and gear for 'free', but there were all the hidden costs- that would be an example of TANSTAAFL, but it's not being used as an argument.
dendriti 4y ago
>the salary to be offered is reduced to cover the estimated current value of the future employee protections. This is a fallacy. Companies will pay employees as little as possible. Why would they pay you more just because employee protections were removed?
- setr 4y ago
  Competition? If everyone is paying an extra 20% in overhead, then that’s an extra 20% they can’t put down as competing bids for the resource in question And vice versa… if multiple companies want that resource.. they all have 20% more to bid with

by btilly 4y ago

prottog 4y ago

Indeed! Harder to hire, harder to fire. Like most such schemes, it advantages those already inside at the cost to those looking in from the outside; see also rent control.

kenjackson 4y ago

If increased employee protection causes you to layoff almost everyone in a country -- you probably had little good business reason to be in that country. Employee protection exists because there's a huge power imbalance. A company who can constantly just say, "we'll fire you if this doesn't get done" and colludes with other companies on such matters makes it very difficult for workers. This is why employee protection, unions, etc... exist.

WalterBright 4y ago
Whether it does or does not protect them, employees will pay for these protections in the form of lowered salary and fewer jobs available. Nothing comes for free.
- danielheath 4y ago
  That's absolutely true, but in practice most people would experience substantial hardship if they suddenly lost their job. I wouldn't, but being in a country with employee protections means the people around me are almost never placed in a desparate situation, and I am meaningfully safer because of that.
  - WalterBright 4y ago
    Since you'd get more pay without these protections, you can save the excess for a rainy day. People should save for a rainy day, anyway. Why must the employer be their parents? I don't buy the idea that people in a free country like the US somehow found the one and only job they could ever have.
    - kenjackson 4y ago
      You likely won’t get more pay. In times without protections against collusion and without minimum wages, and laws against child labor — wages don’t typically go up. But you will have more workers in labor. Just not protected and poorer.
      - WalterBright 4y ago
        Pay for workers is set by Supply&Demand, just like everything else. Adding worker protections increases costs to hire, which reduces demand, and so salaries drop. It's inevitable.
    - ADuckOnQuack 4y ago
      > Since you'd get more pay without these protections, you can save the excess for a rainy day. It sounds like you are speaking from a position of extreme privilege, more than 165 million Americans (over half) do not have a spare ~$400 for an emergency, much less savings to pay rent after a sudden job loss. And when people get desperate some turn to crime. Which then increases your costs through increased taxation for policing and incarceration and secondary effects such as reduced safety and increased personal costs due to crime, such as increased insurance costs and the greater threat of being targeted. So when all costs are internalized, worker protections pay dividends at making a society better for all involved, for example the many northers European countries with very low crime and very strong worker protections.
- kenjackson 4y ago
  Maybe fewer jobs, but probably not lower salaries. Collusion would likely would cut into salaries a fair bit.
- shynrou 4y ago
  Yeah you are absolutely right. Here in germany a lot of companies pay a decent premium on temporary/loan workers and freelancers just to not be bound to then.
kcplate 4y ago
> If increased employee protection causes you to layoff almost everyone in a country -- you probably had little good business reason to be in that country. This kind of directly speaks to the commenters point. There may have “little good”, but enough reason until the legal change to increase employee protections created “no good reason”.

deanCommie 4y ago

Sure, it's a spectrum. People use the same argument to justify removing minimum working age laws, weekend laws, OSHA laws, EPA protections, retirement, healthcare etc. In a pure unregulated market, employers would be able to offer employees much higher salaries! The reality is somewhere in the middle. Though what America thinks is reasonable is very different than what the rest of the developed world thinks is.

lmm 4y ago

> TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.) Maybe not, but the world isn't zero-sum. Some things really do raise or lower the overall average. > I have even personally witnessed a situation where a company evaluated a legal change to increase employee protections, and decided to layoff almost everyone in a particular country before the new law took effect. (The company was Pictage, the country was Argentina, and this was a bit over a dozen years ago.) What was the law change? And how long would it have been before those employees were laid off otherwise? That's an interesting datapoint to hear about, but "employee protections" can mean many different things. > So I'll take the up front downsides of at will over the hidden downsides of employee protections. Unfortunately you don't get to skip out on the hidden downsides of at will either.

btilly 4y ago
The law change would double the period for which severance had to be paid. This additional liability would have been a significant fraction of the net worth of the company. The 2008 financial crisis had left the company in a position where it needed to downsize anyways, and the board of directors gave the CEO the choice between covering that liability by making the US layoff bigger, or avoiding the extra liability by getting rid of basically the whole Argentinian operation. The CEO chose to preserve US jobs. The Argentinian operation would have seen a layoff either way. But nowhere near as dramatic as the one that actually happened.
kqr 4y ago
Yes, free lunches exist but to see them you have to measure in utiles rather than straight-up dollars. At-will is a huge risk for the individual, since they're going from roughly 100 % employment to 0 % employment. On the other hand, in a decently sized organisation (where employee protection is typically enforced), being stuck with a bad employee and asking them for meaningless work that bothers nobody else means paying for 100 % capacity and only getting, say, 94 % of it. Over a large number of employees, the organisation can be fairly confident of what this percentage will be. Much smaller risk. In other words, the utility cost for the employer of employee protection is smaller than the utility cost of at-will for the individual. (Homeowner's insurance is a similar type of situation. Makes no sense to the individual if you look at the dollar costs, but in terms of utiles it does actually work out for both parties in most cases. Another case is hedging major business expenses -- costs more, but you and the counterparty both lose fewer utiles from it.)

spaced-out 4y ago

>The downside of employee protections is that it makes companies more reluctant to hire. And also once hired, the salary to be offered is reduced to cover the estimated current value of the future employee protections. Yep, that why software engineers in California and New York, where there are a lot of employee protections, don't get paid as much as SWEs in the Midwest or the South, where there are less... Right? Or maybe the real economy is more complex than the kiddie models you were taught in Econ 101?

IG_Semmelweiss 4y ago
I'd like to open up this question again after some decades. I don't think it will play out as you might think. Innovation hubs move. Historically, this has always been true. Right now those are SV and NY. It won't remain so.
- stonogo 4y ago
  Silicon Valley, New York, and arguably Texas have been the hubs of computing innovation as long as there has been a commercial computer industry. Other tech hubs have sprung up, but we're looking at forty years of unceasing domination here. Innovation hubs move when new industries arise.
  - cvwright 4y ago
    Massachusetts was a power player too, at least in the earlier days
  - IG_Semmelweiss 4y ago
    That's a short time horizon. Innovation hubs have been in China, Middle East, Venice, London, etc. The printing innovation lasted around 300 years. Steam engine another 150 years. The industrial revolution less than 100. How long do you think computers will dominate major innovation? And if it does, will the innovation hub stay in SV ? What happens if biotech takes over? MRNA tech ? Driverless cars ? VTOL ? Rocketry or Space Tourism ? ML or low-code apps changing the dev of software as we know it today ? Do you see any of those hubs in SV ? Are they in SV today ?

ClumsyPilot 4y ago

We have already seen what the world is like with no employee protections - exploitation of children for labour, like in the British coal mines. Unsafe working conditions in Victorian workhouses, leaving men without hands and without means to feed their family, and with no compensation because 'you agreed to it'. Bosses extorting sexual favours from employees, i.e. Hollywood casting couch. You can still see this in many developing countries, children on assembly lines in China, or how a clothing factory in Bangladesh caved in killing most women working there. TANSTAAFL is obviously and demonstrably false - child labour leaves them without education and traps them in poverty. Their creativity and future potential is lost to society. Employees without hands are an obvious loss to society. But the employer doesn't care, he saved a few bucks on safety. He isn't paying the cost. This argument further extends to education and beyond. The argument of TANSTAAFL was used by coal companies in the 1920's. At the time they used to hire assassins to murder Union leaders and even killed the local sheriff. https://www.youtube.com/watch?v=vg9xywAxb10 https://www.youtube.com/watch?v=vg9xywAxb10 This also sometimes happens in developing nations today, sometimes at the behest of western companies.

nverno 4y ago
What is the 'argument of TANSTAAFL' here? It just means there are hidden costs to things that appear free. From that coal video, when the coal companies gave the miners the clothes and gear for 'free', but there were all the hidden costs- that would be an example of TANSTAAFL, but it's not being used as an argument.

dendriti 4y ago

>the salary to be offered is reduced to cover the estimated current value of the future employee protections. This is a fallacy. Companies will pay employees as little as possible. Why would they pay you more just because employee protections were removed?

setr 4y ago
Competition? If everyone is paying an extra 20% in overhead, then that’s an extra 20% they can’t put down as competing bids for the resource in question And vice versa… if multiple companies want that resource.. they all have 20% more to bid with