Labor policy's "unintended consequences"

By: Emily Makings
12:00 am
May 27, 2015

In The Upshot, a New York Times blog, yesterday: “When Family-Friendly Policies Backfire.” These policies aim to help women stay in the workforce after starting families, but they “often have unintended consequences.” The post provides several examples from Europe — women are paid less, get fewer full-time jobs, and are less likely to become managers.

While these effects may be unintended by policymakers, they should not be unexpected. As James Pethokoukis points out, Lawrence Summers said as much in 1989, when he explained how it is “possible that mandated benefit programs can work against the interests of those who most require the benefit being offered.”

L.A.’s minimum wage increase provides another recent example of the unintended consequences of labor policy:

Richard Cohen, who chairs the Los Angeles County Childcare Planning Committee, said child care providers citywide don’t have many options in covering the additional costs, particularly if they receive state payments to provide subsidized care for low-income families. . . .

Another Catch-22 of the minimum wage increase is that families who currently qualify for the subsidized child care because of their low earnings will be pushed above the income requirement in the coming years and so they will lose their child care subsidies.

As Adam Ozimek wrote last year,

Policymakers may find it tempting to try and mandate good jobs through extensive regulation, but the workplace is a complex and constantly changing environment, and the risk of unintended consequences—such as increased unemployment—is high. As with most regulation, there are trade-offs. Demanding that jobs be “good” along some dimension may end up making them worse in other ways.

Categories: Categories , Employment Policy.