In every “advance industrialized country” there are thousands of labor laws which regulate and control the relationship between the employer and the employee. Many of these thousands of laws have to do with how an employer can lay off an employee. To a very large degree it can be said that the labor contract has become increasingly worthless, as the contract’s terms are deemed irrelevant in the face of federal and state legislation. As a result, businesses have a much more difficult time replacing some workers with others, or simply cutting part of their workforce in an effort to save costs. The proponents of these labor laws cite the idea that to lay workers off for the good of the business and its profit is unfair and immoral, but is it really so? Furthermore, if laying a worker off is necessarily immoral, is it more moral to force the business to maintain that employee’s contract? The fact is that few people take the time to consider the secondary effects of these kinds of regulations, both in terms of the detriment to the business, to the alternative worker and to the employee’s other colleagues in that sector of a firm’s labor pool. If one were to take a more objective look, one would find out that allowing a business to do what it needs to increase profits is the most moral and most beneficial in the short-run and the long-run.
A firm will generally base its employee-related decision making based on productivity figures. Any and all businesses are interested in maximizing profit. By this model, it could be assumed that a worker with a higher level of productivity would be more attractive than a worker with a lower level of productivity. If a worker is laid off it is probably because of insufficient productivity. Labor is no different from any other good or resource in the sense that workers will be competing with each other. Even assuming “full employment”, positions of higher pay will always be the object of competition between workers who want higher pay. It would therefore make sense if a firm laid off a relatively less productive worker in favor a more productive worker, right? In the case of full employment the now unemployed laborer would retool and find a job in another sector (for example, whatever sector his replacement came out of). In a world without full employment the individual would become unemployed and would have to compete for a limited amount of jobs.
Is this unfair? Perhaps from the individual’s perspective it’s not exactly desirable. He accepted and maintained his employment under the assumption that all viable alternatives did not have as high utility to him. That is, that the opportunity cost of alternatives was lower than not accepting his position at the employer he is now fired from. Now that he has been fired he is either unemployed or working at a less desirable place. Perhaps it is unfair when dozens of workers are laid off from a factory because they went on strike for higher wages, but found that the factory was more interested in maintaining existing wages by just hiring new laborers. Before one condemns the practice as unfair, one should flip the coin on its other side.
Is not more unfair that the more productive laborer cannot compete for a job because of government regulations which favor the unproductive? Is it not unfair to the other employees, who must pay in the long-run as a firm’s profit decreases due to increased marginal costs by accepting the fact that the firm will either go under or let people go to struggle to make a profit? The problem is simply that most people are unwilling to take a look from both sides of the picture.
They accept the concept of fairness without looking at objective economic consequences of the legislation. It not only remains true in regards to labor laws regulating how an industry can get rid of unproductive elements in its labor force, but also with other labor laws. These include minimum wage (which creates a surplus of labor), hour regulations, et cetera. Ultimately, although they may seem as beneficial to the worker, it is only inevitable that they are beneficial to a small number of workers while detrimental to the majority.
