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Rejecting Work: Incentives vs Injustice Aversion

November 4th, 2011 · 3 Comments · Economics

My friend Steve cites a smart, educated, and experienced friend who has sadly been affected by the economic downturn and has now been laid off. She’s been offered a job at a pay scale that’s apparently inconsistent with the residential real estate industry work she’s had in the past (lower) and with hours that are also inconsistent (greater), given this, she has declined the position. Simply put, the offer didn’t hit her minimum compensation threshold.

She is frustrated that the “productive class” haven’t brought the decimated real estate industry back to 2007 levels and provided a job for her that’s consistent (or better I assume) with what she’s had in the past:

It makes my blood boil when the super wealthy call themselves “Job Creators” … I have ONE question for those people. WHERE THE FUCK ARE ALL THE JOBS YOU’RE SUPPOSED TO BE CREATING??

Finishing school commentary aside, Steve makes the case that her decision was likely based on a sense of injustice, not of incentives.

If Jane is one of those mythical “rational optimizers” that (right wing) economists love to talk about, she’ll say Yes to any offer. Some money is better than none, right?
But humans don’t do that. If the offer’s too low, they say FUCK THAT. They forego free money to enforce their sense of fairness.

While I do find the anachronistic devotion to the labor theory of value charming in a retro kind of way, I disagree with his analysis. First of all, Steve is fighting a straw man here. “Right wingers” don’t assume people lack a compensation threshold, or that leisure has zero value. His biggest error though is to assume (as he explicitly states) that the alternative to low pay is zero pay.

In this instance I might argue there’s more of a rational incentive-based decision process happening here. Especially if one or ore government assistance programs come into play. Given that on average WA state unemployment benefits provide a cash equivalent of $10 hourly (post tax), it’s easy to argue that working for $12.50 an hour (pre-tax) is just not rational. Especially if you’re not burdened by an irrational emotion-based “dignity of work” ethos.

Plus he ignores the single most relevant question: did someone else take the job? That simply must be answered with a “no” for his argument to be relevant. If this prospective employer found a taker for his offer the pay was appropriate (and maybe even high) by real-world market standards.

My reason for posting about this was a video I ran across today that I think aligns. It shows scores of people ostensibly pursuing employment yet rejecting opportunities to get hired. In many cases the job under consideration doesn’t provide the appropriate level of prestige that they seek from their peer group. Compensation is a big issue too, but mostly because it’s not high enough to match specific expense levels they want to address “pay off student loans” etc. There’s a hint of anger over inequity, but as you’ll see it’s mostly that they see themselves as having lots of other options. A few are here.


3 responses so far ↓

  • 1 Steve Roth // Nov 6, 2011 at 8:31 am

    First to get this out of the way: she did collect unemployment for a while. She hated doing it (I know: utterly irrational response to financial incentives; go figger. Wait: there is such a thing as non-financial incentives? Pas possible.). I know she hasn’t collected it for quite a while.

    So don’t be dissing her “dignity of work ethic.” Doing so is…unseemly, given that she has spent thousands more hours doing decidedly unpleasant work, over many more years, than you or I ever have or will.

    I think what my friend is responding to (and I certainly am) is the very explicit trickle-down promises of Reaganomics — promises which have not been fulfilled. “Let the rich people get richer and we’ll create good jobs for everyone.”

    It turns out (as many of us predicted) that the hill constructed by Reaganomics is very steep — extremely difficult or impossible for many/most to climb. The city on top is quite small and increasingly rich, and is populated mostly by those who started in the city, or very close to it.

    Meanwhile at the bottom is a huge contingent that worked diligently to climb that steep hill, but (maybe because they just didn’t have the stuff — brains, diligence, tolerance for pain, whatever — maybe because of shitty luck), fell and tumbled back to the bottom.

    Want “convection”? Make the hill less steep. People will still have ample incentive to climb it, and since they’re less likely to fall back down again, less disincentive to try.

  • 2 Steve Broback // Nov 28, 2011 at 2:05 am

    I have a post queued up to address most of the points you raise here. I think all would agree that greater wage growth for the non-college educated labor pool would have been the preferred scenario, but advocating the labor theory of value is not the correct angle to pursue IMHO. You also greatly overestimate the control our domestic/taxable “rich” have over the size and slope of any metaphorical career hill that exists. Welcome to the global economy.

  • 3 Steve Broback // Nov 28, 2011 at 2:14 am

    Still would like to know if someone else took that job at the offered rate. Sadly, the boss only needed one player who decided not to “forego free money to enforce their sense of fairness” to invalidate the claim that that saying “F. That” is anything but tilting at windmills.

    You and I both agree that having employers loitering outside prisons waiting to train workers is a great world to live in:

    You can thank those awful tax-dodging capitalist opportunists for that scenario….

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