Can confirm, I run a business. The biggest expense to my company are the employees. All the regulatory requirements and bullshit that comes along with it, not to mention the risk of an employee suing the company for whatever reason. There's a lot of risk hiring employees, that's why I try to minimize the number of employees I have to hire, whenever possible.
Every company tries to minimize the number of employees. But the fact remains that the employee always takes on more risk, as being fired at the wrong time, say during the crisis we just had, might end up in homelessness. Yet companies love to pretend they are the ones taking the risk and need the right to abuse employees, fire then at will, don't oay a living wage and all that.
That's because they are taking a risk. If you make it harder to fire people, companies simply won't hire them in the first place. The harder it is to fire someone, the more dangerous it is to hire them. The more cautious employers will be about hiring in the first place. This is a real problem in countries that have strict firing laws.
It's easy to fire employees in Denmark. That's one reason why it's economy and employment rates are quite good for Europe, and while you think it proved your point, it's evidence of the opposite. See [1][2][3].
If you're interested in the academic research, someone above in the thread posted research links on the relationship between ease-of-firing and employers' willingness to hire. If you find those unsatisfying, this is a well-researched (empirically, not just theoretically) and uncontroversial topic among economists, so you should be able to find much more research.
> "The Danish system creates a flexible labor market," the Danish Confederation of Trade Unions said in an official document. "Danish companies are more willing to hire new employees in times of economic revival than their European competitors, who have trouble letting off workers when the economy goes downhill again."
> Note that the source of this last comment is the country's largest labor union confederation, a sign of the consensus surrounding the easy-to-fire policy.
Except the reality is that most people are in unions, covering them quite well (around 1.8 million[0] out of 2.7 million[1] in the job market).
Many jobs have a firing period of 1, 3 and 6 months, rising with the time you've been there. Sickness is a legal absence. Maternity and paternity leave is a legal requirement along with at least 5 weeks of vacation a year.
It is not black and white though, I'm in sweden. Companies will of course hire out of necessity, but strive as much as possible to not do it - outsource, consultants, temp workers, move abroad etc etc
But they do that too everywhere. I'm Norwegian. I've been a co-founder of companies both in Norway and the UK. I see little evidence that it makes all that much difference. On one hand you do take a somewhat greater risk in terms of hiring in Norway, but conversely the ability to fire much more easily does not get exercised much. Of course that's no help for those who end up being affected.
On the opposite end of the spectrum, in Norway not only is it harder to fire someone, but terminating an employment contract is normally with 3 months mutual notice. So you risk bad hires, but you also don't risk essential staff members disappearing overnight very often, as serving out the 3 months notice is normal and expected. That makes companies with small teams less vulnerable in that respect.
Overall I don't really know if it makes much difference to employers. I hasn't seemed like that for me. But it makes a big difference for employees.
The economist must consider both the seen and the unseen. Yes, people have jobs in Denmark 🇩🇰, but there are employment positions and opportunities that do not exist because firing regulations price them out of the market.
Possibly true, though nonexistent jobs must surely be a difficult thing to count.
But at will employment also imposes economuc costs, which economists don't really care to count, like economic security, health and psychological well being, mutual respect between companies and their public, and the opportunities to do stupid image damaging life-harmful shite like Marriot did to this man.
I’m sympathetic to the person in the story. Firing over such a slight, possibly inadvertent, infraction seems excessive, and that makes me suspect we don’t know the whole story.
As much racket as people have made in this thread about at-will status in the U.S., the truth is more moderate. Not all states have at-will employment. Even in those that do, there are protected classes. The former Marriott employee might easily file an age-discrimination lawsuit, for example.
But again, consider the unseen. Marriott’s management has created a possible advantage for their competitors. The man has been given his moment in the limelight, a fantastic opportunity to better himself and his situation.
Indeed that is true. But stories like this have emotional salience, because they happened to real people. The jobs that didn't get created in the first place don't have that same resonance, because they're for theoretical people. But the harm is no less real. And the important question is that we at least try to empirically evaluate the question of which is worse, rather than simply indexing on the emotional resonance of anecdotes like this one.
The effect of workforce excesive protection is not the same on individual companies as on a country as a whole.
Individual companies won't hire if some law hits them specifically, the same as if they're cash strapped, lost a big customer or some raw materials they need raise their price.
For a country it's loss of competitiveness and more long term. The questions are more like: can we as a country afford this law? is individual suffering worth the wealth create?
"Wealth created" though hides some of the reality. That 'wealth created' consists also in jobs for individuals. So, a better question might be: Is the suffering alleviated by allowing easy firing greater than the suffering alleviated by preventing easy firing? And that is an empirical economic question, which is difficult to answer.
No, they instead choose to contact work out. Companies acquire labor to maximize profit, and regulations simply cause them to alter how they choose to obtain labor.
In countries with strict firing laws, this is only a problem for people like you who think business are entitled to do their will, and who see worker rights as obstacles to avoid.
The entire issue is solved by probation periods - in UK my probation period was 6 months(during which I could be let go almost instantly for any reason) and after that it's a 3-month notice period - if the company wanted to let me go they would need to tell me at least 3 months in advance.
Yes, but his point is that the harder the regulatory regime makes it to fire a bad employee, the fewer employees he will be willing to hire in the first place.
Considering how many times companies (usually run by young ambitious entrepreneurs) tried to pay me less than was promised, I'd say that employees take on quite a bit of risk too.
Agree completely. I got rid of my employees and now outsource everything. I'll never have another full-time employee ever again, if I need someone they are going to work as a consultant and get a 1099. For every guy like this one at Marriot, there are 1,000 who have genuine problems and need immediate firing.
Depends on what you mean by "more humane" but U.S. has lower unemployment than OECD average, and European countries mostly have higher. In particular, France and Italy, known for how difficult it is to dismiss employees both individually and in masses, have high unemployment.
North European countries, where individual dismissal is difficult but mass dismissal (restructuring) is easy, fare better.
Germany, also with quite rigid employment laws, has low unemployment. As the dominant euro member it is basically running the monetary policy of the whole continent from its own needs.
It’s difficult to compare though, because of other factors. I believe the main one between countries like France and Italy and Germany is actually the Euro currency. It’s generally considered to be overvalued compared to France and Italy’s economies and undervalued compared to Germany’s. This makes Germany’s exports extremely competitive (at the expense of costlier imports) which has spurred on their ability to build up a huge manufacturing sector and run a massive trade surplus. France and Italy, on the other hand, enjoy cheaper imports at the expense of less competitive export industries, and unsurprisingly have a trade deficit. Differences in inflation rate, etc. between the Eurozone countries which might otherwise be balanced out by flexible exchange rates can’t be. Instead you get ‘internal devaluation’ which often means higher unemployment.
How federal systems get around this (like how all the states in the US using the same currency) is having the Federal Government tax and spend which can balance a lot of that out. Europe doesn’t have that, but eventually will have to or split back into individual currencies.
I believe this is also why gold standard systems have always failed eventually too - they require fixed exchange rates and even with rebalancing every now and then you can’t be as effective as a floating exchange rate.
I wonder why you get downvoted, because your comment is reasonable and in good tone even if one were to disagree. I happen to agree: of course the ease of dismissing employees is far from the only factor impacting employment in a country, and the euro structure of fiscal union without transfer union is clearly having problems.
You have the causality reversed. All of the things you enumerated are caused by the relative economic strengths of those economies. Those relative economic strengths are themselves caused by (in large part) by their regulatory regimes, particularly with respect to things like hiring and firing.
I’m not saying that regulatory environment doesn’t contribute, but the monetary aspect has an amplifying effect.
Germany’s trade surplus wouldn’t be able to be anywhere near as large without the rest of Western Europe pulling down the Euro exchange rate, and unemployment in the trade deficit countries likely wouldn’t be anywhere near as high without (from their perspective) Germany pulling the exchange rate high.
Ah, ya then I agree. The euro is a terrible mistake. You can't have a universal currency without a universal regulatory scheme, as Europe is discovering, and countries like Britain are resisting.
At higher cost, less is demanded, and we tend to be loss averse. Driving up the perceived risk and thus the cost of firing bad employees unavoidably reduces the supply of jobs.
No good or service is perfectly inelastic — certainly not employees.
At higher cost, less is demanded, and we tend to be loss averse. Driving up the perceived risk and thus the cost of firing bad employers unavoidably reduces the supply of labor.
Indeed, it’s a two-way street, and that’s a good thing! As someone who got tired of the bureaucracy and lame policies, I took my labor and started my own company. It turns out that there is a noticeable minority of entrepreneurs, freelancers, and the self-employed around these parts.
