Chapter 83 Question 074

Why do employees vote for politicians who support workplace safety regulations, but always prefer jobs that pay more and are more dangerous? The conventional explanation is that workers need regulations to protect them from exploitation by employers who wield market power.Yet it is always those labor markets that are most closely linked to security regulation.Whether a security mechanism can pass the test of cost-benefit principle depends on whether employees are willing to pay its cost.If a competitive market does not have a mechanism that can pass this test, the pie will fall that day.Suppose, for example, that a security mechanism costs fifty dollars a week, and employees are willing to sacrifice $100 a week in wages for the extra security provided by the mechanism.

If the employer fails to provide such a mechanism, a competitor can use it to pay employees $60 less than the previous employer (which includes the $50 cost of the mechanism and another $10 cheaper dollars).So the employees who changed the new company and the new company itself seized the opportunity.In this way, if employees want more security and are willing to bear the cost of it, companies have an incentive to provide security even without regulation.So why do we need government regulation? The example of a hockey player's helmet (Chapter 5) suggests that employees may prefer to limit their options when it comes to safety.Like hockey, many of the most important things in life are determined by the relative positions of the players.Good schools are necessarily a relative concept, so families strive to provide better educational opportunities for their children, much as athletes strive to gain a competitive advantage.Families try to buy homes in the best school districts they can afford; only to drive up the price of those homes at the expense of all families.In the end, half of the children end up in the poorer half of the schools.

Riskier jobs pay more because employers spend less on safety.Employees thus gain an economic advantage by taking the job, allowing them to compete more effectively for housing in better school districts.Just as ice hockey players who are not restricted by the rules are eager to take off their helmets to play, employees who can freely choose whether to engage in higher-risk occupations also realize that they can only send their children to higher wages if they lower their safety requirements. A good school, otherwise, the child will have to go to a bad school.In both cases, restricting individual freedom of choice prevents a race to the bottom that benefits no one. (race to the bottom, also translated as competition, meaning that those who participate in the competition are aligned with each other at the lowest point. Translator's Note)