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Comment by btilly | Hacker News Reader

TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.)

The downside of employee protections is that it makes companies more reluctant to hire. And also once hired, the salary to be offered is reduced to cover the estimated current value of the future employee protections. These are real downsides, particularly for young people who are trying to get a foot into the corporate ladder.

I have even personally witnessed a situation where a company evaluated a legal change to increase employee protections, and decided to layoff almost everyone in a particular country before the new law took effect. (The company was Pictage, the country was Argentina, and this was a bit over a dozen years ago.)

So I'll take the up front downsides of at will over the hidden downsides of employee protections.

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If increased employee protection causes you to layoff almost everyone in a country -- you probably had little good business reason to be in that country.

Employee protection exists because there's a huge power imbalance. A company who can constantly just say, "we'll fire you if this doesn't get done" and colludes with other companies on such matters makes it very difficult for workers. This is why employee protection, unions, etc... exist.

Whether it does or does not protect them, employees will pay for these protections in the form of lowered salary and fewer jobs available.

Nothing comes for free.

That's absolutely true, but in practice most people would experience substantial hardship if they suddenly lost their job.

I wouldn't, but being in a country with employee protections means the people around me are almost never placed in a desparate situation, and I am meaningfully safer because of that.

Since you'd get more pay without these protections, you can save the excess for a rainy day.

People should save for a rainy day, anyway. Why must the employer be their parents?

I don't buy the idea that people in a free country like the US somehow found the one and only job they could ever have.

You likely won’t get more pay. In times without protections against collusion and without minimum wages, and laws against child labor — wages don’t typically go up. But you will have more workers in labor. Just not protected and poorer.

Pay for workers is set by Supply&Demand, just like everything else. Adding worker protections increases costs to hire, which reduces demand, and so salaries drop.

It's inevitable.

> Since you'd get more pay without these protections, you can save the excess for a rainy day. It sounds like you are speaking from a position of extreme privilege, more than 165 million Americans (over half) do not have a spare ~$400 for an emergency, much less savings to pay rent after a sudden job loss.

And when people get desperate some turn to crime. Which then increases your costs through increased taxation for policing and incarceration and secondary effects such as reduced safety and increased personal costs due to crime, such as increased insurance costs and the greater threat of being targeted.

So when all costs are internalized, worker protections pay dividends at making a society better for all involved, for example the many northers European countries with very low crime and very strong worker protections.

> It sounds like you are speaking from a position of extreme privilege, more than 165 million Americans (over half) do not have a spare ~$400 for an emergency

"Extreme"? What nonsense. I know many middle class people who don't have a spare $400 for an emergency. They also have a boat in the driveway. They don't have an income problem, they have a spending problem.

> And when people get desperate some turn to crime.

Or sell the boat. I remember one couple I counselled that couldn't pay the rent, but had a new car. I suggested they sell that, and buy one they could afford. I was surprised to find out that's just what they did.

It's not a poverty problem, it's a financial management problem. Don't conflate that with being actually poor.

> when people get desperate some turn to crime.

Crime causes poverty, not the other way around.

The downside to treating employees like children is a lower standard of living.

Most people _don’t_ save for a rainy day. That’s an objective fact; imagining it would be otherwise if you gave them a bit more money is a fantasy not supported by anything observed in reality.

As to finding another job: of course they will, but switching costs are pretty high for job changes.

Maybe fewer jobs, but probably not lower salaries. Collusion would likely would cut into salaries a fair bit.

Yeah you are absolutely right. Here in germany a lot of companies pay a decent premium on temporary/loan workers and freelancers just to not be bound to then.

> If increased employee protection causes you to layoff almost everyone in a country -- you probably had little good business reason to be in that country.

This kind of directly speaks to the commenters point. There may have “little good”, but enough reason until the legal change to increase employee protections created “no good reason”.

> TANSTAAFL. (There Ain't No Such Thing As A Free Lunch.)

Maybe not, but the world isn't zero-sum. Some things really do raise or lower the overall average.

> I have even personally witnessed a situation where a company evaluated a legal change to increase employee protections, and decided to layoff almost everyone in a particular country before the new law took effect. (The company was Pictage, the country was Argentina, and this was a bit over a dozen years ago.)

What was the law change? And how long would it have been before those employees were laid off otherwise? That's an interesting datapoint to hear about, but "employee protections" can mean many different things.

> So I'll take the up front downsides of at will over the hidden downsides of employee protections.

Unfortunately you don't get to skip out on the hidden downsides of at will either.

The law change would double the period for which severance had to be paid. This additional liability would have been a significant fraction of the net worth of the company.

The 2008 financial crisis had left the company in a position where it needed to downsize anyways, and the board of directors gave the CEO the choice between covering that liability by making the US layoff bigger, or avoiding the extra liability by getting rid of basically the whole Argentinian operation. The CEO chose to preserve US jobs.

The Argentinian operation would have seen a layoff either way. But nowhere near as dramatic as the one that actually happened.

Yes, free lunches exist but to see them you have to measure in utiles rather than straight-up dollars.

At-will is a huge risk for the individual, since they're going from roughly 100 % employment to 0 % employment.

On the other hand, in a decently sized organisation (where employee protection is typically enforced), being stuck with a bad employee and asking them for meaningless work that bothers nobody else means paying for 100 % capacity and only getting, say, 94 % of it. Over a large number of employees, the organisation can be fairly confident of what this percentage will be. Much smaller risk.

In other words, the utility cost for the employer of employee protection is smaller than the utility cost of at-will for the individual.

(Homeowner's insurance is a similar type of situation. Makes no sense to the individual if you look at the dollar costs, but in terms of utiles it does actually work out for both parties in most cases. Another case is hedging major business expenses -- costs more, but you and the counterparty both lose fewer utiles from it.)

>The downside of employee protections is that it makes companies more reluctant to hire. And also once hired, the salary to be offered is reduced to cover the estimated current value of the future employee protections.

Yep, that why software engineers in California and New York, where there are a lot of employee protections, don't get paid as much as SWEs in the Midwest or the South, where there are less... Right?

Or maybe the real economy is more complex than the kiddie models you were taught in Econ 101?

I'd like to open up this question again after some decades. I don't think it will play out as you might think.

Innovation hubs move. Historically, this has always been true. Right now those are SV and NY.

It won't remain so.

Silicon Valley, New York, and arguably Texas have been the hubs of computing innovation as long as there has been a commercial computer industry. Other tech hubs have sprung up, but we're looking at forty years of unceasing domination here. Innovation hubs move when new industries arise.

Massachusetts was a power player too, at least in the earlier days

That's a short time horizon.

Innovation hubs have been in China, Middle East, Venice, London, etc.

The printing innovation lasted around 300 years. Steam engine another 150 years. The industrial revolution less than 100.

How long do you think computers will dominate major innovation? And if it does, will the innovation hub stay in SV ?

What happens if biotech takes over? MRNA tech ? Driverless cars ? VTOL ? Rocketry or Space Tourism ? ML or low-code apps changing the dev of software as we know it today ?

Do you see any of those hubs in SV ? Are they in SV today ?

Now you're moving the goalposts from decades to centuries, across which it is slightly absurd to pretend that 'innovation hubs' have anything to do with workers' rights. Changes in culture happen regardless of where the innovation is, and when you start talking about centuries it's pointless to try to measure the effect of worker protections on salaries. There are just too many variables over that amount of time. Pretending you can effectively isolate one is ridiculous.

Regardless: yes, all of these things are in SV today. If any of them proves to revolutionize society in our lifetime I think you'll find SV will retain its status.

Absolutely.

My only note it is that isn’t 40 years. For SV it’s more like 60 years (going back to the founding of Fairchild) or even longer if you want to go back as far as HP and other radio shops.

For NYC, it’s even longer. IBM has had a major NYC presence since at least the 30s (and obviously its main HQ is less than 40 miles from midtown)! Bell Labs/AT&T was based in Manhattan before moving to New Jersey and obviously is still in the NYC are. And that goes back to the 20s I think.

Not to mention other NYC and NYC adjacent companies like GE. So we’re going back 100 years or more for NYC and 80 for SV.

Xerox’s history combines both areas.

And as you said, Texas has a strong history too with the Motorola stuff and Silicon Prairie.

Historically speaking, Seattle is a relatively new entrant in computing and innovation, only really being a hub for 40 years or so (unless you count Boeing and then it back over 100 years), but is the home of two of the biggest companies of the last 50 years, Microsoft and Amazon.

Dozens and dozens of cities all over the world have tried to be the Silicon Valley of X and none have succeeded. And New York is extremely unique as a global center in dozens of different industries from finance to media to fashion to the arts.

Obviously things could be disrupted. But both of these areas have been innovation hubs for over 100 years, which given the short history of this country, is remarkable.

What employee protections are you talking about in California and New York?

Both are at will states. So easy to hire, easy to fire.

The WARN act for one, which Musk may have violated. California also mandates sick leave and family leave for both parents of a newborn child.

When California says you can fire an employee for any reason, what they really mean is any reason except for a bunch of reasons we've decided are unacceptable.

We have already seen what the world is like with no employee protections - exploitation of children for labour, like in the British coal mines. Unsafe working conditions in Victorian workhouses, leaving men without hands and without means to feed their family, and with no compensation because 'you agreed to it'. Bosses extorting sexual favours from employees, i.e. Hollywood casting couch.

You can still see this in many developing countries, children on assembly lines in China, or how a clothing factory in Bangladesh caved in killing most women working there.

TANSTAAFL is obviously and demonstrably false - child labour leaves them without education and traps them in poverty. Their creativity and future potential is lost to society. Employees without hands are an obvious loss to society. But the employer doesn't care, he saved a few bucks on safety. He isn't paying the cost. This argument further extends to education and beyond.

The argument of TANSTAAFL was used by coal companies in the 1920's. At the time they used to hire assassins to murder Union leaders and even killed the local sheriff. https://www.youtube.com/watch?v=vg9xywAxb10

This also sometimes happens in developing nations today, sometimes at the behest of western companies.

What is the 'argument of TANSTAAFL' here? It just means there are hidden costs to things that appear free. From that coal video, when the coal companies gave the miners the clothes and gear for 'free', but there were all the hidden costs- that would be an example of TANSTAAFL, but it's not being used as an argument.

Sure, it's a spectrum.

People use the same argument to justify removing minimum working age laws, weekend laws, OSHA laws, EPA protections, retirement, healthcare etc.

In a pure unregulated market, employers would be able to offer employees much higher salaries!

The reality is somewhere in the middle. Though what America thinks is reasonable is very different than what the rest of the developed world thinks is.

Indeed! Harder to hire, harder to fire. Like most such schemes, it advantages those already inside at the cost to those looking in from the outside; see also rent control.

>the salary to be offered is reduced to cover the estimated current value of the future employee protections.

This is a fallacy. Companies will pay employees as little as possible. Why would they pay you more just because employee protections were removed?

Competition? If everyone is paying an extra 20% in overhead, then that’s an extra 20% they can’t put down as competing bids for the resource in question

And vice versa… if multiple companies want that resource.. they all have 20% more to bid with

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