this is an interesting proposal by @BharatRamamurti and @owenslindsay1. it basically has the govt subsidize a high starting wage for workers, but only temporarily. is it a good idea? 1/ ht @DanRiffle
nyti.ms/38yUjBZ
nyti.ms/38yUjBZ
that depends in how durably you think path-dependence defines labor markets. when the free money is gone, does downward wage rigidity mean employers eat the cost, just pay workers more, or will employers churn to rehire at lower wages and cut labor costs? 2/
obviously some of both. but i don’t love the back-end incentives. basically shittier firms—firms that know how to function well despite churn, who treat labor as just a commodity to economize and don’t show loyalty to workers—will gain a large cost advantage over decent firms. 3/
in competitive, low margin service industries—think restaurants—this advantage will go to national chains. independent small business owners will feel compelled to adopt large firm “efficiencies” (ie become shitty employers) or die. 4/
you want to design market rules so that “market discipline” compels people to do good things, not bad. i’m not sure this proposal meets that threshold. /fin
