A second reason for interfering with labor markets is the conviction that there is an imbalance of power between employer and employees. This argument cannot be dismissed out of hand. Memory is long, and in the company towns of a couple of generations ago, the imbalance was only too real.
Even today, labor markets remain "sticky." That is, workers’ ties to communities inhibit their mobility, and information about alternative employers is often imperfect. Moreover, workers often have invested to create skills specific to a particular job, company, or industry, and they may not be able to get rewarded for these if they change jobs. Employers can and do use such stickiness to their own advantage.
These concerns about labor markets are intertwined -- employer power derived from stickiness leads to a sense that intervention is necessary which leads to log rolling. So one of the most interesting dimensions of the new economy is that it forces us to rethink historic positions on these issues. The revolution is improving labor markets just as it is improving the market for goods, and the reasons for many of the existing interventions -- however good or bad they were when adopted -- need re-examination.
Working-class flexibility
Job markets are no longer limited by the classified pages of the local newspaper; they exist nationwide. If bit streams are involved, then physical relocation is unnecessary, whether for hourly workers or for writers, sales representatives, and management consultants. One can work as an Amazon customer rep from anywhere, not just Seattle. Even the new economy equivalent of the assembly line, a job such as data entry, can be performed anywhere in the world, as in the case of the Indian medical note transcribers.
Relocating also entails less psychic trauma than it once did. Moving on speculation is less necessary; the labor market in a new locale can be checked in advance. Information about living in the new community is far more plentiful and accessible. If training is needed, that too is more available than ever, thanks to the Internet.
Even political log rolling may become less resistant to reform. The expansion in the number and diversity of information channels is making the government more transparent. People can use the Internet to learn about such things as the low rate of return on their Social Security contributions, or the special tax breaks given to particular groups.
Recently, a proposed expansion in the regulation requiring banks to nose into the affairs of their customers generated 250,000 e-mails to the federal agencies involved. This campaign was triggered entirely by Internet word of mouth. In contrast, in pre-Internet days, it would have been impossible for word of the government’s telecommuting and stock-options decisions to have spread so quickly or to have aroused such instant and massive opposition.
One possible result of these developments is that the traditional American ambivalence about labor markets may change, too. We may become increasingly willing to accept the bargain whereby people bear the burdens of the market as producers and take the benefits as consumers. But the fate of the Nasdaq over the past year has tempered the hype of 18 months ago, as well as the everyone-a-capitalist-king enthusiasm.
In any event, all that has happened so far is that the professional classes are expanding the flexibility of their working hours and are getting the right to work from home some of the time. The free agent universe of the visionaries is not coming to pass, and is resisted by the labor and tax bureaucracies. But then the war between old labor law and the new economy is only beginning.
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