An Interesting Thing You Might Not Realise About Unemployment

Unemployment figures are often bandied around by Cassandra-types who portend doom on the state of society. But there are at least two conditions under which slight peaks of unemployment give exhibition to societal progression.

One is when a firm closes down due to competition elsewhere. This will hike up the unemployment figures for a short time, but it also means that in industry there has been an improvement in efficiency (I explain this in more detail here).

The other is when worker productivity means people need to work fewer hours to enjoy the same, or in many cases, a better standard of living (ditto when goods become less expensive).

Compare the working hours of domestic tasks in 1916 to those of 2016, or compare the average time spent working in 1916 to that of 2016 – it’s clear that we do a lot less work in the present age yet we have a vastly superior standard of living.

If you went back in a time machine and invited the average citizen from 1916 to look at the equivalent standard of living in 2016 they would be astounded. As times progress we continually see increased standard of living for less human energy expended, which translates into fewer working hours per year.

Thus it is quite possible, as is the case in America, to have more industrial production than ever before but fewer people employed in manufacturing than ever before. Or to put it another way, our great-grandparents worked a lot harder than us to obtain a standard of living well below ours.

Sometimes it’s true that more jobs equals better standards of living, but not always: there are times when fewer jobs and less working time equals more prosperity and improved standards of living.

Here's another thing you may not have considered. Increase in unemployment could mean that there are lots more people out there unwilling to work, but it more likely means that people looking for work are rational jobseekers.

For example, take every unemployed person in the country. Many of them could increase their chances of work if they lower their standards, but what they are trying to do is strike the balance between the length of search and the type of job.

A rational searcher will hold off taking just anything to increase the chances of finding a more desirable job, up until the point where the costs of the search are not greater than the gains. The unemployment pool makes up a lot of these rational searchers.
 
On top of all that, there is always this big question, which doesn't get considered often enough - Is Employment Always Desirable For Everyone?

Could A Basic Income Work?

Recently Tim Harford, in an article in the Financial Times, talked about the idea of a 'basic income' - a much vaunted idea in some circles and a much deprecated idea in others. It's not even an idea that's more popularly left or right - figures as far to the right as Friedrich Hayek and Milton Friedman, and groups as far to the left as the Green Party have both come out in support of it, although as you'd expect they differ on the nuts and bolts of the mechanism.

But can it work? Obviously, as most people would concur, it's ridiculous and absurd to offer a basic income universally, because lots of middle and high earners don't need it. However, a basic income given to people who have no work-based earnings or low earnings from work would be okay, as long as it tapers out according to a certain threshold of earnings, but in a way that doesn't disincentivise work either.

Whether there is a basic income system that could get the balance right between managing the varying and complex needs of a whole range of people and not being too expensive and bureaucratic, I'm not sure. I'm even less sure about whether our politicians are intelligent enough to devise such a system.  

If such a thing were to work then off the top of my head I could envision it being along these lines. The government could set a basic income of x per year by using a cut-off point of y per year, and a withdrawal rate of 50%. That means that a basic supplement to a person's income would be equal to 50% of the difference between annual income and the y cut-off point. So a person out of work would get the basic income of x, and a person who earned an amount lower than y would get a supplementary income, and this keeps narrowing as earnings increase up until y.

So, picking a figure for simplicity's sake (a proper study would need to be done by people with all the facts to hand to find the optimal figure), if y = £17,000, and the basic income is £8,000, someone earning nothing gets a basic income of £8,000, someone earning £11,000 per year gets a £3,000 supplement (half the difference between his or her earnings and y), and someone on £15,000 per year gets a £1,500 supplement, and so on, and then when y is reached (£17,000) there is no supplementary income, and y is the point at which every pound earned thereafter is taxed. There are still serious issues about how any basic income would be paid for - because simply raising taxes to cover the costs only adds to some of the problems the government would be looking to solve.

Whether it's with a basic income, or other kinds of change, something needs to be done to revise our welfare system - it is anachronistic and has evolved far beyond the original scope of its intention, in a country that's very different from the one at the time of its inception in the late 1940s. The method of tackling a diverse range of welfare needs in a one-size-fits-all fashion is now entirely unworkable, as is the perverse conflict between whether a claimant is better off working or on benefits. Basic income or no basic income, the UK has for a long while now needed a new Beveridge Report for the 21st century.

Career & Maternity: When The Irresistible Force Meets The Immovable Object

On Thursday in this Blog post I set about dispelling one or two myths about sex pay differences. It was a popular blog post, generating about seven times as many hits as an average blog post of mine, but it did come with a bit of heat as well as light, mainly to do with the issue regarding how prospective employers may sometimes discriminate against women in their thirties to avoid taking on someone who might soon become pregnant and need maternity leave.

I explained in a subsequent debate that while it is illogical for employers to discriminate due to sex, there are conditions under which they might be driven to discriminate due to maternity. A critic thought that inconsistent, but alas, there is no inconsistency - this only goes to show a misunderstanding of the important difference between sex discrimination and maternity discrimination. Fairly obviously it is not in the interests of an employer to discriminate based on things like sex skin colour, sexuality, and so forth, but it can be in their interests to discriminate when other factors, like maternity, come into it.

To give you an illustration that makes the point even clearer - an employer might not be discriminatory at all when it comes to young black men but he might choose not to employ a particular young black man because he happened to have four different children by four different women. The same is true in the case of women - an employer may not have any reason to be biased against women in general, but he may have a reason to be biased against women with a high probability of being pregnant soon.

The difference between the first case and the second is that in the case of the black man he could have changed the fact that he was irresponsible enough to father four kids by four different women, whereas a woman who soon wants to be a parent can't change the fact that biological evolution has conditioned that only women have babies.

So, the upshot is this; in life we have this issue to contend with - the immovable force of female biology coming up against the irresistible force of businesses needing to make decisions that are best for their firm's survival, and that in life this sometimes causes a conflict of interest. Despite this, one of the key basics of economics is that sometimes problems that look like they need solutions are in fact non-problems that just describe different people wanting different things or making different life decisions.

What I really want to get across here is that I'm always happy to hear people's views on problems in society, and I am open to hearing solutions - but a lot of the time people want to tell us problems and not attempt to offer solutions. Sometimes it's clear to me that they are non-problems, sometimes they are small problems with no realistic solutions, and sometimes there may well be solutions to make things better - but either way, my interest in these so-called problems dwindles if no one wants to talk about solutions.

Despite some impassioned reactions to my blog, anyone who thinks the maternity pay gap/discrimination situation is a problem that needs changing must at the very least tell us how they think things should be changed, and explain why it's practical - not just complain about the situation with no recourse to resolve it. It's no use saying things are wrong without first establishing that there are things that can be done that actually will help the situation without harming others, and also that there are actually realistic solutions to any problems identified.

The 'without harming others' point is so essential and so often missed - you cannot artificially put things in place to protect one group in the employment market without artificially hindering another group at the same time. For example, there is another group in particular that gets penalised when would-be mothers get artificially protected - that group is the women that don't want any children but may miss out through discrimination to account for all the women that do. As things stand if you're a 33 year old woman that doesn't want kids, you are highly unlikely to require a career break, which means there's no reason for you to be discriminated against. But your prospective employer won't know that, so he or she is likely to believe you have a high probability of being a mother, and may act accordingly.

What's the solution then? The truth is, I don't think there is one (except through some kind of binding contract - of which more in a moment), and I've not heard any single detractor suggest a solution, they've been too busy trying to convince me that there is a problem but offering nothing further.

Control is beyond your control

There are two main reasons that an economy is impossible to command efficiently from on high. The first reason is that the entire nexus of economic activity is just too complex and too diverse for any politician to get a handle on. The second reason is that human beings, even when acting rationally, are still very difficult to map to a final theory of predictable behaviour. Without having full knowledge of the entirety of society and every detail, even a world in which every human acted rationally for the majority of the time would still leave us unable to arrive at a gland slam model on which to base any kind of sovereignty.

Humans are often selfish but they will also act selflessly, particularly when there are selfish gains, but also for sporadic acts of kindness at a cost to themselves. They often have strong moral convictions in one area of life (it is wrong to avoid taxes) but relax their moral convictions in other areas of life (like being willing to cheat on a partner). They will often behave one way when caught up in a group collective, but depart considerably from such behaviour at an individual or familial level. They will be quite prudent in spending money on things they need, but in times when status-mongering or social gain is in front of them they will spend quite recklessly. The upshot is, let humans loose in society and they become a mess of contradictions and opposites.

One relatively small element of this complex society is each individual woman's life choices. Some women will choose an uninterrupted career over motherhood; some will choose motherhood over any kind of career; some will choose motherhood and an interrupted career; and even on top of well-intentioned plans some women will fall pregnant unexpectedly when they didn't plan to, whereas others will plan to fall pregnant and find it never happens.

Society isn't a giant piece of clay that can be moulded exactly as a potter wants it to be - it is a multi-faceted network of activity in which millions of people, including business owners (who themselves have a family and staff to think about), have to make local decisions most conducive to their own survival and well-being.

Consequently, then, legislation that seeks to protect some citizens in the free market against the free choices of other citizens in the free market only usually occurs by harming the latter group - most of whom are individuals trying to make the decisions they can to secure the solvency of their business and the jobs of that business's employees.

Although all I've said favours the contrary to what I'm now going to say, if you have got this far and you still are insisting that some kind of solution be put in place, then all I can say is, when you get a situation like this, where there is a clear distinction between maternity discrimination and sex discrimination, the most obvious solution is some kind of binding contract. After all, let's not forget, an agreement between an employer and an employee is already a binding contract, so if you really want to ensure the artificial protection of one group in society then a binding contract could be the only answer that can be entertained, short of becoming a nation that can arrest people for thought crimes.

The advantage of a contract is most conferred on all the women who don't want kids but who may be treated as they do, but it would also bring transparency to thousands of employment contacts that looked to protect women who didn't yet want kinds and employers who feared they might. If you think it's a problem that requires an interventionist solution (and personally I don't) then that might be your best solution.  And if it isn't you're perfectly welcome to comment below and suggest your own solution. But for goodness' sake, please do give up this habit of telling us all about the problems without first working out the following:

A) Whether they are actually problems or just facts about differences in life.

B) Whether, if they are actually problems, they are problems that can be solved without making the situation worse, or another group equally worse off.

C) What, if they are actually problems that can be solved without making the situation worse, or making another group equally worse off, you are proposing as a solution.

Then, and only then, does this become a proper debate that sheds light instead of heat.

Ed Miliband's Bonkers Zero Hour Contract Proposal

Ed Miliband's latest attempt to screw up a part of the economy is his desire to legislate on zero hour contracts:

"If you work regular hours for three months, Labour will give you a legal right to a regular contract, not a zero-hours contract."

I have no doubt Ed Miliband isn't ignorant of the fact that such a policy will harm lots of people and help only a tiny few, yet he doesn't seem to care two hoots - he supports the popularity-engendering policy because he knows most people will endorse it based on the help for the tiny few while at the same time being wholly oblivious to the wider harm it will do. If you happen to be one of those few to whom that applies, you'll be happy. But for the vast majority, the labour market of supply and demand involves a mutual allocation of resources (work and wages) far beyond the scope of any top-down management, and with far more efficiency than arbitrarily introduced state-meddling can achieve. Telling employers they must offer a regular contact after three months (a figure seemingly plucked out of the air) can only harm the qualities of mutually allocated resources. This isn't anything more than standard first year economics - something politicians seem to be happy to ignore to buy votes.

What Ed Miliband is missing is the most important point. Yes, some people struggle on zero hours - the part of the labour market that contains much of this kind of work is often insecure, unstable and volatile anyway - but the notion that this law will make things better is moonshine. Here's the key point. The labour market of supply and demand is dictated by the numerous price signals that generate all kinds of information about the value of labour, the supply of services, length of contracts, and so forth. A dentist can work in the same place for 15 years doing a similar number of hours each day. A sub-contracted painter and decorator can work at dozens of places in that time, with varying lengths of contract. Selling labour is not homogenous, it is heterogeneous - and you're just not going to be able enforce better pay or more stability without damaging a whole sub-section of people in that labour market.

So it's not that I'm repudiating Ed Miliband's proposal because I've suddenly developed amnesia about the struggles of people's ability to live or the volatility of the market - I'm repudiating it because its implementation will simply alter the behaviour of employees and employers in the supply and demand market because the vital price signals of information on which the economy runs will be distorted.

It's easy to think of zero hour contracts only in terms of employees, and to imagine most employers to be cold, uncaring exploiters. But it distorts the true reality. Economic policies affect employers as well as employees - and employers are the essential providers in this equation. Make a law that helps low earners and you hinder another group (usually low-skilled employers but also other low earners). Make a law that helps tenants and you hurt another group (usually landlords). Make a law that helps Brits and you hurt another group (usually anyone who isn't a Brit). Nothing comes without a cost.

Employers have lots to consider when they take on people. They have to make forecasts about the future; they have to consider market fluctuations; they have to consider what they should invest; and they have to consider which future state-interference will hamstring them. Zero hour contracts are sometimes opportunities to exploit, but they are mostly opportunities to reduce risk in a frequently unstable market, and create lots of short-term employment.

Think who the beneficiaries of zero hour contracts might be - students, single parents, retirees, those looking for additional employment to top up their main job, and those with multiple part time jobs. The ability to work flexibly as and when they want is a very beneficial thing for them. Ed Miliband's proposal to ruin theirs and their employers' flexibility is narrow and short-sighted.

What Ed Miliband also doesn't understand is that the kind of economic growth enjoyed when his party was not in government is the main vehicle that will reduce zero hour contracts for those not happy with them. The reason being, job growth increases the necessity for employee stability, which will only diminish the allure of zero hour contracts for both employers and employees, because employers are going to want stability in their personnel. Moreover, as unemployment rates fall and job creation continues to take place, greater power is transferred to jobseekers, which places selection pressure on firms offering less desirable contracts. Ironically, Ed Miliband's proposal will uproot some of the stability in the market, which will more than likely go on to have a cobra effect type scenario whereby he contributes to an increase in zero hour contracts - the very opposite of what he's trying to do.

The state's best role is to reduce the tax burden for people on low incomes or in a volatile part of the market, and give them the supplementary financial help they require, leaving those vital price signals untouched.

Why Doesn't Ed Miliband Offer The Kind Of Help That Will Actually Be Helpful?

Ed Miliband is drumming up support for his party in the pre-election campaign by promising financial help to small businesses to enable them to hire more staff. He is, not for the first time, confused. Post-tax incomes of businesses are not the primary determiner of employment levels. Employment wisdom is simple: if the output for additional staff has a value that covers their salaries then an employer should employ them. If not, then they shouldn't. This rule applies irrespective of whether you're a high street kebab shop or a multi-national corporation. Ed Miliband's financial incentives won't help raise employment levels.

To see why; suppose you've just eaten a nice big two-course meal in a restaurant, and the proprietor comes and offers you a free dessert. If you're stuffed, and you care more about your health and comfort than capitalising on a freebie, you will politely decline the proprietor's kind offer. Your optimum level of food consumption does not depend on whether you've paid for your food or not - it depends on your body's metabolism. Just as you will not take on more food unless your body needs it, similarly you will not take on more staff unless they bring a value that covers their salaries. If they will, then you don't need Ed Miliband's supplements - they would be better spent elsewhere; and if they won’t then Ed Miliband's supplements will not go towards raising employment levels.

This is why, rather than governments getting involved, it is much better if banks loan to small businesses of their own volition. A bank will lend if the borrower's ultimate gain from spending the money enables him or her to pay back the loan with interest. A government won't have anything like the same kind of risk signals, nor the incentive for prudence, as it is spending other people's money, not its own. Miliband’s claim that tax cuts for small businesses will help increase employment is a sure-fire vote winner. But like many sure-fire vote winners, it is fallacious.

What would work better would be large tax cuts for middle and low earners. You see, unlike rich people who delay spending and consume higher end products (Ferraris, yachts, swimming pools, £500 handbags, etc), middle and low earners are likely to increase their spending, which will increase employment. The exact same wisdom applies to minimum wage laws too. Instead of a minimum wage law that creates unemployment, hikes up prices and places an unfair burden on employers of low-skilled workers, the government could simply reduce the tax burden of low earners.

The answer to the question - Why Doesn't Ed Miliband Offer the Kind Of Help That Will Actually Be Helpful? - is that the helpful way is less of a headline grabbing vote-winner, so it's one he's unlikely to pursue with the same enthusiasm.

* Picture courtesy of bbc.co.uk

Zero Hour Debacle

With the Coalition government doing quite well, Ed Miliband is really struggling to make any political ground in opposition (his party probably will get the most seats next year, but that's not to do with anything good he's brought to the table).

His latest tactic is to try to pillory zero hour contracts in an effort to make him sound like he's on the side of struggling people. His proposal isn't to ban them, it is to legislate to ensure that:

"Workers can demand a fixed-hours contract when they've worked regular hours over six months for the same employer. And they will they receive a fixed-hours contract automatically when they've worked regular hours for more than a year - unless they chose to opt out"

This is both inconsistent and myopic. It's inconsistent because if Miliband thinks zero hour contracts are bad for everyone then he should want them to discontinued. If he thinks they're good for some people, he is impelled to leave people's working arrangements to those involved in the arrangements, and not impose any extraneous (and arbitrary) regulations of the above kind. And it's myopic because the imposition of 6 month and yearly thresholds won't help the people working under those conditions that he's trying to protect, it will simply encourage employers to lay off employees just before the deadline to circumvent any contractual obligations.

As daft as Miliband has been here, the big annoyance though, as usual, is when politicians meddle when they are not wanted. When the Institute for Economic Affairs surveyed people working under zero contract hours they found over 50% of people found them beneficial, with 30% not liking them, and the rest not minding much.

But even if we don't read too much into surveys (and sometimes it’s not good to), the usual rule of thumb still supplies - governments should not interfere in the allocation of resources in voluntary transactions because they cannot do it better than those actually involved of their own volition. Thousands of people work under zero hours contracts - most of whom are people who've preferred them to the alternatives. A lot of people I know find them ideal for their circumstances - they suit all kinds of people; students, semi-retired people, and the many who want to earn cash but not be tied down.  It's a shame that some politicians in this country are getting so nannified that they are nearly blind to the qualities of a flexible, free market, and hopelessly unmindful of people's liberty to manage their own affairs.

* Picture courtesy of The Sunday Times

On The Myth That Thatcher Ruined British Industry

 

In a free market economy there is little place for national affiliation. If an employer has found 100 non-British workers who are willing to work for £3 per hour less than his 100 British workers, the nation is better off (as is the global economy), because before the non-British workers began to do the jobs, there were 100 potential workers each being overpaid by £3 per hour.  In a 40 hour week that amounts to a net overpayment of £12,000. In market economics, Adam Smith's 'invisible hand' states that competition brings about self-interest for the good of everyone, where prices near-perfectly match supply and demand.  Free market economy at a global level works well because hard workers, innovators, entrepreneurs and finance experts amount to different people, with a free market that enables them to coordinate their skills. It's no use being emotionally affiliated to an industrial factory that's costing us money just because it happens to be one’s own place of work, or because it happens to be based in one's own country. Thatcher's critics have got it backwards – she didn’t ruin the British economy - it is the efficiency of the relationship between prices, supply and demand that she used to help save the British economy. The northerners who are bemoaning post-Thatcherism fall largely into two camps; they are either people who really want to seize opportunities and as a result decided that after their industry has been outsourced they'll change vocations; or they are people who have decided that a life of paid leisure (albeit low income) is preferable to changing vocation or learning new skills.

Photo courtesy of lancha.deviantart.com

A Silly Argument About Diversity

Strange argument from Simon Fanshawe on the BBC's Sunday Morning Live today, arguing that "All employers should stop simply always hiring the best person for the job. Instead, they should actively recruit as diverse a workforce as possible"

That's obviously rubbish - employers should always appoint according to who is best for the job. But that's not all.  If a workforce really were 'as diverse as possible' then by definition it would contain quite a few people who were largely unsuitable for the role in which they found themselves. Moreover, if that's your primary interest, a maximally diverse workforce should contain people like an Islamic fundamentalist, a football hooligan, an 18 year old Goth, a transsexual who sniffs glue and self-harms, a gambling addict, a mason, and a member of the flat earth society. Then you'd be some way to creating a workforce that was 'as diverse as possible' - but I don't think it would be a very good workforce.

No, for soliciting opinions, forming think tanks, forecasting, or debating topics, a diverse array of minds is of huge benefit. But places of work aren't like that. Each role requires a specialised set of skills - so hire the best person for each role, with the best personality, and you'll get the best workforce. That's all the diversity you need. Diversity for diversity's sake only means artificially disadvantaging people who are better for the roles than the people you're taking on to obtain your diverse workforce.

* Photo courtesy of Facebook.com

Follow Up: Rents, Housing, The Minimum Wage, & Too Much Employment

After a friend from America commented on the last Blog regarding how she agreed that rises for low earners are dwarfed by other prohibitive factors, I thought I'd do a quick follow up about the specific case she mentioned - rent prices rising with rises in the minimum wage, producing a nullifying effect. Here's how things are in the capital of England  In London there is a great need for low-skilled work, but rent prices make it hard for low-skilled workers to live in London, so the Government subsidises them with housing benefit.

Suppose we have John the cleaner; John works in Canary Wharf cleaning for a big city firm, and is subsidised by the Government (which means the taxpayer).  John's housing benefit is stopped, meaning he can no longer afford to live in London, which means his firm has to hire another cleaner.  But when John represents all low-skilled earners, things change, as city business that need cleaners will have to increase wages of cleaners to enable them to live in London, lest they have cleaner-less offices.

So assuming we stop the minimum wage, as my last Blog post suggests, we are left with a choice, with neither option perfect. We ether:

A) Stop topping up the incomes of low earners with tax credits as that is only really a further subsidy to the employers of low-skilled workers, letting the market care for itself, which would reduce the probability of inflated housing cost and under payment for low-skilled workers, but would create a vortex.

B) Continue to top up the incomes of low earners with tax credits, whilst having the corollary effect of increasing the inflated housing cost problem (among other things).

Most people in the UK prefer B, which is fair enough, as it's the pearl of great price of the welfare state.

Incidentally, here's where the situation started to intensify. Until the eighties Conservative government sold off their council houses, local councils used to build council properties and rent them out for modest sums (modest sums subsided by the taxpayer, of course).  Naturally, the selling off of council houses was ideological in the sense that the Tories expected to secure votes from these house-owners, but also it was seen as efficient, because it transferred the cost of maintaining properties from the council to the individual property owners.

But this had a knock-on effect; low-earners were then expected to rent property from private landlords, which causes problems when they are numerous.  One of the ineluctable laws of economics is that if demand increases and supply decreases or remains unchanged there will be a higher equilibrium price to account for the scarcity of supply. That is to say, to apply it here, when claimants of housing benefits constitute a greater part of the market, rents are hiked up. As a corollary, higher rents engender a surge in buy-to-let investments, which forces up house prices, which comes full circle in justifying high rent.  This 'locking in; effect means that taxpayers are expected to subsidise low earnings to guard against a low-earner exodus from London, or a compelled increase in the minimum wage.

Too much employment?

Another rule of economics is that taxing something produces less of it, and subsidising something produces more of it. The minimum wage (which is basically a stealth tax on employers of low-skilled work) reduces employment by a little, and income tax credits (which are basically subsidies) increase employment.  But by how much?  That's the key question few people ever ask, which is irresponsible, because although subsidising something produces more of it, it is a great mistake to assume that the more the better, because that assumes it is automatically preferable to have too much of something rather than too little of something else.  If someone is going to pour some sugar and some salt on your roast dinner, you'll certainly hope they pour very little sugar and the right amount of salt.  But only a fool would argue that because they under-did the sugar then any amount of salt won't ruin the dinner. Clearly, while the right amount of salt is good for bringing out the flavour, too much will ruin the dinner altogether. 

In the above situation, the minimum wage is like sugar and income tax subsidy is like salt - too much salt and you'll have too much employment, which engenders inefficiency.  In other words, one mustn't assume that just because employment is good that there can't be too much of it - too much unemployment is bad, but so is over-employment.  If increases in income tax credit push employment past the optimum level of efficiency, then we'd either look for a reduction, or an alternative policy.  To put it another way, it is injudicious to focus only on who enjoys the benefits of a policy without examining who picks up the costs. As we've seen in the last Blog, the cost of the minimum wage falls on the employers of low-skilled labour, which, in the long run, is borne by the customers of the businesses in price hikes. The cost of income tax credit subsidies falls on the government, which means it falls on taxpayers as a whole. While I think income tax credit is preferable to the minimum wage - even the minimum wage becomes preferable to a situation whereby too much employment is created by tax credits that are too high.

 * Photo courtesy of bbc.co.uk

The Ill-Effects Of Compulsory Lunch

I found out something the other day about my workplace regulations that I think I knew, but that has slipped back into the recesses of my mind. Under legal compulsion we employees are obliged to take at least 30 minutes lunch break.  So if I want to work through lunch and leave off 30 minutes earlier, then according to the HSE Working Time Regulations I'm breaking the law.  This basically means that if I can find better employee-use for my time then the law restricts my use of it. Is it better that lawmakers err on the side of 'health and safety' caution, or better that my ability to control my own devices is adhered to?  My gut instinct is they're doing the right thing - but at least in one sense it is constricting, because it has negative spillover effects.

Here's why. If I go into a sweet shop to buy sweets then the sweet shop owner is the supplier and I am the consumer. But in the labour market, the equivalent of sweets is the labour itself - meaning employers are the consumers of labour, and employees are the suppliers. I'm selling my labour, and the HSE Working Time Regulations are telling me about the quantitative service limit imposed on what I'm selling. When it comes to sweets, or just about any saleable product, we have regulations imposed in the form of minimum standards (criteria that products must meet). In other words, a sweet shop owner can't just sell anything as a sweet, because there are parameter lines (product quality, edibility, sell-by dates, trade description, copyright, etc) within which his product must be placed.

So while saleable products mustn't fall below a certain quality, the HSE Working Time Regulations are ostensibly saying the opposite about labour - that is must not 'exceed' a certain quality, where quality means hours generated.  By working through your lunch you're exceeding the standards, even if for whatever reason your doing this has proved immensely beneficial to you and the company.

I'd hazard a guess that if you asked most politicians about the benefits of this law they'd tell you it is for the benefit of those with the propensity to work too hard (try it by emailing your local MP if you're curious). That's about the opposite of the truth; the law doesn't benefit those with the propensity to work too hard - it punishes those whose ability for hard work makes up for other inabilities - and it benefits those with the 'other abilities' the hard workers might lack.  Suppose I employ two project coordinators whose overall output is of equal value, but whose qualities differ.  Matt is smarter, but Tim is a harder worker, often in contravention to the HSE Working Time Regulations. If I stop Tim, who do I benefit most? Not Tim. In stopping Tim I impede his ability to be on a par with Matt, and reduce his chances of a promotion, because it's Tim's hard work that puts him on the same par as Matt. Denying someone the ability to work too hard benefits not the extra hard workers but those with better qualities in other areas.

Working Time Regulators are trying to keep the price of products higher than their market value, so they must stop those producing products from competing on quality.  Of course, I cheated in that last sentence - I said 'products' instead of 'labour' - because it would be corruption if it were done with products, yet perfectly acceptable when done with labour. Working Time Regulations do not get rid of competition between workers - they merely artificially confer benefits on some skill sets at the expense of others.  In fact, to take it to its extreme, if you got rid of skill-based competition altogether, you'd end up with employers discriminating on much less desirable things like looks, skin colour, ethnicity, sexual orientation, and similar such considerations we wouldn't wish to see in the workplace.

So at least in one sense, employees don't need the kind of regulatory protection in the labour market that stops them working hard.  Just like the free market itself - competition between employees allows them to compete on an even playing field.  Here's an illustration that should help.  Suppose there's a specialised type of data-reader computer that is manufactured. If the most efficient computer-maker could produce such a computer at the cost of X, then X will be its market price. In a free market economy, competition between providers drives down the price of goods, which is good for buyers and bad for providers. To avoid price competition there could be collusion, where it is agreed that no one will sell this type of computer for less than Y, where Y is double the value of X. But imagine what then happens; providers who are no longer competing on price now start to do the natural thing - they compete on quality instead.  If I can make a better computer for Y than you can, I have an advantage, because our prices are the same, but mine has qualities or features that yours doesn't have. So the only way to retain the benefits of our collusive minimum price agreement is to restrict the quality of the type of computers being made - which is to impose maximum standards by ensuring neither of our computers is qualitatively better than the other one.  If you can see how absurd that is, you should have a sense of why employment regulations don't benefit those they're supposed to benefit.

You may say that regulations are good for a reason that seems obvious - they guard against over-working, which as a corollary guards against tiredness, aches, cognitive impairment, not eating enough and so forth. but I think this assumes the wrong thing twice over; 1) That arbitrarily designated times imposed by the Government are better than other times that could be imposed, and 2) That we are not the best at deciding what is best for us.  Not only are both of those manifestly wrong; as well, there is an incorrect assumption attached to it - that people only manage their own affairs because of legal precedents.  That's obviously not the case; the reason we aren't over-working or cognitively impaired or short on food is because we know best how to manage our affairs.  To offer an analogy; the reason supermarkets don't employ a member of staff to direct customers to checkouts is that it would be a completely superfluous job post, because we shoppers are just as good at assessing queues, the number of shopping items for each customer, the speed of cashier, etc as a paid member of staff would be.  The upshot is, employment laws conceal hidden costs that impair those they are supposed to protect - because we are the best at deciding our life patterns - and no one is a better custodian of our own destinies than we are, including our ability to sell our labour.

* Photo courtesy of bbc.co.uk