Most likely, there is a big difference between short-run and long-run effects. For instance, employers value the workers they have, and are reluctant to fire them when labor costs go up. A lot of “pro-worker” policies thus seem to be a kind of magical free lunch. Over time, however, as a generation of workers turns over and is replaced, mandatory benefits represent a real added cost, evaluated anew, and employers will respond accordingly. They will cut the paid dollar wage, cut other job benefits, require more hard work, automate more, or cut back on plans for growing the business. The downward-sloping demand curve is the best established empirical regularity in all of economics, and in this context that means some laborers -- maybe most laborers -- will pay a price for their new benefits, one way or another.
Tuesday, 30 August 2016
Mandating extra employee benefits comes at a cost
May be not immediately but over time they do. Tyler Cowen makes the point in an article at Bloomberg.