Blog of the Day

Economic Thought of the Day from Daniel Hamermesh (almost a blog)

December 25, 2007—We were walking along a main street in Maui, past an outlet of ABC General Stores (of which there are probably more outlets per square mile in a city in Hawaii than there are ☼$$ outlets). Signs on the window advertised that it was hiring clerks for this and other outlets to be opened soon and that the company had never had a layoff. This is a pretty good way to attract new workers. The perceived absence of risk of layoff should attract more workers to apply and should encourage workers who otherwise might consider themselves too qualified for the job to think about working there. People are willing to forego some wages (essentially a negative compensating wage differential) for the amenity of working in a job with no risk of layoff. The ad and its implicit promise put a burden on the company—should it later lay off workers anywhere, remaining workers’ morale is likely to sink fast, with negative consequences for worker productivity.