Job Security

Virtually every modern industrial nation has faced issues of job security, whether they have faced these issues realistically or unrealistically, successfully or unsuccessfully. At the most simplistic level, some people advocate that every worker be guaranteed a job, with the government if necessary. In some countries, laws make it difficult and costly for a private employer to fire , anyone. Labor unions try to do this in many industries and in many countries around the world. Teachers' unions in the United States are so successful at this that it can easily cost a school district tens of thousands of dollars-or more than a hundred thousand in some places-to fire just one teacher, even if that teacher is grossly incompetent.

Job security laws and policies restrict an employer's ability to layoff workers for economic reasons or to fire them for unsatisfactory work. The obvious purpose of such laws is to reduce unemployment but that is very different from saying that this is their actual effect. Countries with such laws typically do not have lower unemployment rates, but instead have higher unemployment rates, than countries without widespread job protection laws. In Germany, which has some of the world's strongest job security laws, double-digit unemployment rates are not uncommon, while in the United States, where there are no such national laws mandating job security in the private sector, Americans become alarmed when the unemployment rate rises to 6 percent.

Although the United States has no national job security laws imposed by government on private employers, the government itself has laws protecting the job security of its own civilian employees who have acquired permanent status and federal judges have lifetime tenure.

The very thing that makes a modern industrial society so efficient and so effective in raising living standards-the constant quest for newer and better ways of getting work done and more goods produced-makes it impossible to keep on having the workers doing the same jobs in the same way. For example, back at the beginning of the twentieth century, the United States had about 10 million farmers and farm laborers to feed a population of76 million people. By the end of the twentieth century, there were less than one-fifth this many farmers and farm laborers, feeding a population more than three times as large. Yet, far from having less food, Americans' biggest problems now included obesity and trying to find export markets for their surplus crops. All this was made possible because farming became a radically different enterprise, using machinery, chemicals and methods unheard of when the century began-and requiring far fewer people.

Farming is of course not the only sector of the economy to be revolutionized during the twentieth century. Whole new industries have sprung up, such as aviation and computers, and even old industries like retailing have seen radical changes in which companies and which methods have survived.

In little over a decade, between 1985 and 1996, Sears lost 131,000 jobs while Wal-Mart gained 624,000 jobs. Altogether, more than 17 million workers throughout the American economy lost their jobs between 1990 and 1995.

But there were never 17 million Americans unemployed during this period, nor anything close to that. In fact, the unemployment rate in the United States fell to its lowest point in years during the 1990s. Americans were moving from one job to another, rather than relying on "job security" in one place. The average American has nine jobs between the ages of 18 and 34.

In Europe, where job security laws and practices are much stronger than in the United States, jobs have in fact been harder to come by. During the decade of the 1990s, the United States created jobs at triple the rate of industrial nations in Europe. In the private sector, Europe actually lost jobs, and only its increased government employment led to any net gain at all.

This should not be surprising. Job security laws make it more expensive to hire workers. Like anything else that is made more expensive, labor is less in demand at a higher price than at a lower price. The one exception is government employment, where the employers are spending other people's money-the taxpayers' money.

Job security policies save the jobs of existing workers, but at the cost of reducing the flexibility and efficiency of the economy as a whole, thereby inhibiting the creation of wealth needed for the creation of new jobs for other workers. Because job security laws make it risky for private enterprises to hire new workers during periods of rising demand for their products, existing employees may be worked overtime instead or capital may be substituted for labor, such as using huge busses instead of hiring more drivers for regular-sized busses. However it is done, increased substitution of capital for labor leaves other workers unemployed. For the working population as a whole, this is no net increase in job security. It is a concentration of the insecurity on those who happen to be on the outside looking in. Meanwhile, the total number of jobs can decrease, or be less than it would have been otherwise, as a result of job security laws and policies which increase the costs of employing workers.

It is much the same story in the American academic world, where associate professors and full professors usually have lifetime tenure, while assistant professors, lecturers and instructors work on short-term contracts. The job Insecurity of the latter faculty members can be far greater than in other sectors of the economy where there is no tenure, and therefore where there are more new jobs opening up. But, in academia, tenured professors have unchallenged possession of jobs that would otherwise be available. Again, those on the inside looking out benefit at the expense of those on the outside looking in, while the higher expenses entailed by tenure make the whole system more expensive to those who pay tuition and taxes to support it.

Even military personnel in the NATO countries have job security. One consequence is that the average age of soldiers in Belgium's armed forces is 40, compared to 28 in the American military. Soldiers are unionized in Europe and, through job security and other policies, absorb a much higher percentage of NATO's military spending, leaving less for spending on equipment and weapons. Thus, while the United States spends about 36 percent of its military budget on personnel, Belgium spends 68 percent and Portugal 81 percent. The result is obsolete NATO military equipment that can cost lives in the event of combat. Meanwhile, NATO troops get generous vacations and work light enough schedules to allow many of them to pursue part-time civilian careers. In one Belgian military hospital, "doctors now work four-hour days for full-time pay, allowing some of them to set up private practices," according to a news item in the Wall Street Journal. What all this will mean if NATO armies have to fight, using over-age soldiers and obsolete equipment, is a question that can get ignored by those politicians who do not think beyond the next election, where their generosity with the taxpayers' money can be expected to payoff in votes from those who have benefited.

Even in the absence of formal laws and policies on job security, there are many efforts to preserve jobs threatened by technological change, foreign imports or other sources of cheaper or better products. Virtually all these efforts likewise ignore the danger that greater security for some given set of workers can come at the expense of lessened job opportunities for other workers, as well as needlessly high prices for consumers.

One of the emotionally powerful arguments heard in politics and the media during the "down-sizing" of many large American corporations during the 1990s was that workers were being laid off in industries where sales and profits were going up and the top executives were getting large and rising pay. For example, the workforce at General Motors was cut by 50,000 in just 5 years, while sales were rising and the price of General Motors stock increased 50 percent. From an economic standpoint, this meant that it was possible to do more business with fewer workers, creating better prospects for profit, which in turn led to rising stock prices.

Should General Motors have kept these workers on, as a humanitarian good deed? The argument for doing this might have been stronger if the workers had nowhere to go and no other means of supporting themselves and their families. But the unusually low rates of unemployment in the American economy as a whole during this period of widespread corporate down-sizing suggests that these workers had plenty of places to go. They were classic examples of scarce resources which have alternative uses. If unneeded workers had been retained at General Motors as disguised welfare cases, they would not have added to the output of other parts of the economy where there was much genuine work for them to do. Moreover, consumers would have had to pay needlessly higher price for automobiles to subsidize featherbedding, as well as losing the benefits of all the other goods and services that the displaced automobile workers produced in other sectors of the economy to which they were forced to move.

It has sometimes seemed especially galling that corporate executives who got rid of thousands of workers were rewarded by pay increases for themselves. However, it is worth considering the consequences of the situation in government, where executives are likely to be rewarded according to how many people they supervise and how large a budget they administer. These different situations create opposite incentives-to get as much work done with as few people and resources as possible in private industry and with as many people and resources as available in government. This is one reason why it often costs much less for private companies to perform the same tasks as a government agency performs. The public pays the costs of the government's inefficiencies, whether as consumers or as taxpayers.

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