Internalizing the Costs of Work

I came across an interesting article by Olav Muurlink in the Sydney Morning Herald. (I really want to go to Australia, but it’s not happening any time soon, so I compensate a little by including some Australian papers in my news reader.) The jumping off point had to do with penalty rates that, I infer, require employers to pay higher rates to have employees work nights and weekends. It has apparently become a political issue in the Australian campaign cycle. The author says:

Penalty rates are often cast as a roadblock to business or employment but public health researchers see penalty rates as a deterrent against employing workers in ways that risk workers’ health.

It’s pretty easy to predict how such a measure would be cast here. “Let the market decide!” “You’re only hurting workers!” Etc. The thing is that an efficient market requires arms’ length transactions where each participant in a contract is making rational decisions without coercion. The need for things like food and shelter means that a potential employee isn’t as free to walk away from a deal or sit on the sidelines until opportunities improve. The invention of property laws means that a person has more limited opportunities to satisfy the need for food and shelter without dealing with other people. But we put up the property law fences so long ago, we forget that they are artificial restraints on liberty. (I’m not some wild-eyed radical suggesting that we get rid of property laws, but I do like to remind people that our laws put a heavy thumb on the scale in favor of property ownership, and we should give that thumb some consideration when reviewing the options of those with less property.)

In any event, Murlink points out that these penalty rates were *meant* to discourage work at odd hours. Work is not the end all and be all.

This is not an argument he makes, but obviously there is a point of unacceptable return, where the cost of labor does not justify the wage paid for it. We don’t permit contracts for perpetual servitude in exchange for food and shelter. That gets dangerously close to involuntary servitude even though an individual could theoretically enter into such an agreement “voluntarily.” We have to ask ourselves, when does the need for food and shelter make an employment agreement less than truly voluntary?

Murlink’s arguments center on the research that shows the costs of irregular work hours and the physical and mental toll imposed upon workers when they lack (or perceive that they lack) control over their work conditions.

A large and well-conducted Hungarian study was able to predict heart disease by simply asking “how much can you influence what happens in your work group”. Of the work variables in this study “sense of control” was the single most powerful predictor of ischaemic heart disease in women, and not far behind for men.

So what is “in your head” is important, and what we find consistently is that blue collar workers not only are more likely to work hours they can’t control, but they feel less in control of other aspects of their work and life.
. . .
[T]there are other ways working time factors pose risks to your health. When time we would normally spend on self-care or even essentials like eating is lost, we buy it back in unhealthy ways – skipping exercise and buying fast food, for example.
Ironically, overwork or unusual hours – even working on weekends – makes us fat. The human body is not designed for constant work. In fact, the eight hour day and the five day week very roughly mark the boundaries at which humans can safely work. The risk of an occupational injury on a ten hour day for example, exceeds that of an eight hour day by 41%, while even higher increases in risk have been observed on the sixth and seventh day of consecutive work.

As a society, we’re working more Saturdays, more Sundays, more nights, and more unusual shifts than ever before, and one way or another, we’re paying penalties. Either businesses pay them in cash, individual workers pay with health, or society pays through health care.

Let’s reiterate that. There is a cost for this kind of work. The question is not whether there is a cost, the question is who will bear the cost. If the cost is externalized onto taxpayers or individual workers, then it won’t be reflected in the price. Purchasers of these services are, in effect, receiving a subsidy — and, therefore, the demand for the weekend and overnight work will be artificially high. The penalty rates are an effort to internalize the costs such that the costs are reflected in the price. When the price internalizes all of the costs of a product, the laws of supply and demand can allow the market to work efficiently. When subsidies are involved, things get skewed.