Low Status Workers Are NOT More “Exploited”

Russ Roberts once told me that when he lived in Asia he felt reluctant to hire a maid, even though they were very cheap there, and well worth the price. This makes sense to me — I suspect he felt that people would blame him for the poverty of his maid, even if he paid above market wages. It is sad that such feelings discourage beneficial trades.

I recently noted that we mainly limit work hours for low status workers, leaving doctors, lawyers, managers, financiers, artists, writers, athletes, academics, and software engineers to work crazy hours. Responses reminded me of how eager folks are to blame non-poor associates of the poor. Many said that only low status workers need protecting from employer “exploitation”:

Doctors are unlikely to be exploited the same way mine workers are. (more)

If you are a peon subject to the whims of a boss, he has little incentive to acquiesce in your desires. (more)

“White collar” … employees were considered able to drive their own bargains better than the government could bargain for them. (more)

I am a software engineer … working 13-hour shifts. … My employer has had ten or more open positions for the past five years … This means I negotiate with my employer from a position of strength. … My brother-in-law has part-time employment plowing snow. A couple days ago he worked a 13-hour shift. … If he were to object, his employer would have no trouble finding someone else to plow the same snow. So he negotiates with his employer from a position of weakness. (more)

Many people who live paycheck to paycheck are not in a position to decline additional required work – if the boss says you need to work over the weekend, and it is extremely costly for you to find a new job, you have little choice but to agree. … Skilled workers are more costly to replace, expect to be working extensive hours, and are likely to be wealthier and more capable of credibly threatening to quit. (more)

Labor markets are complex, and vary greatly by industry and location. Job design must trade task productivity, worker dislikes, and risk tolerances on both sides. Workers and employers must search for a good match of skills, flexibility, and style. Co-worker and family member preferences must be taken into account. One must anticipate changing outside options, the chance of betrayal and detection, and relationship specific investments. Negotiations vary with private info, temperament, and commitment devices. Industries and locations vary in their degree of competition and collusion among employers, and among employees.

The many ways in which labor markets can vary would seem to offer a wide scope for the regulation of such markets to vary with industry, location, and demographics. This scope is hardly infinite, however. A plausible efficiency justification for some regulation and how it varies with circumstances should come with a plausible story about how a factor like those listed above induces inefficiency, how some regulation reduces this problem, and how that inefficiency-inducing factor varies with context in a way that explains how the regulation varies with context.

Economists don’t understand everything about labor markets, but we do understand a lot, enough to make it noteworthy when we say: we economists just don’t see a plausible efficiency justification for applying work hour limits mainly to low status jobs. Yes, worker signaling and status competition can lead to excess work hours. Yes, reducing the quantity of available labor can increase wages. Yes, longer work hours tend to hurt associated family members. But these all apply similarly to high vs. low status jobs.

Yes, employees with worse outside options give in more to increased employer demands, but ex ante competition makes employers offer ex ante compensation for such an ex post advantage. Also, increased demands should mainly take the form of lower compensation, rather than distorting job details such as work hours away from their efficient values. Furthermore, since high skilled workers actually tend to stay on their jobs longer, they are less familiar with and prepared to lose a job, and being fired sends a worse signal to outsiders.

While economists don’t see a plausible efficiency rationale for work hour limits that exclude high status work, we do see a quite plausible non-efficiency rationale: people like both to show their concern about the “downtrodden,” and their dislike and defiance of big corporations. And they can signal both these things by blaming the plight of the low status on their employers, and then claiming to help by regulating employer choices about work details, such as work hours and safety.

Note that this can function as a signal of caring about low status workers even if it actually hurts them – signal observers need only think that these signalers believe that it helps. And the plausibility of this story is increased by the fact that we commonly regulate low status folks more than high status folks, supposedly to help them. For example, we and our regulations show more concern about recreational drugs (e.g., crack) favored by the low status, about alcohol availability to the low status, and about teen mothers more than 40+ moms.

Given the lack of a plausible efficiency rationale and a quite plausible non-efficiency rationale, I tentatively conclude that we mainly limit low status worker hours as a way to signal care and defiance, rather than to address a labor market inefficiency.