Working Paper: CEPR ID: DP18155
Authors: David K. Levine; Andrea Mattozzi; Salvatore Modica
Abstract: We develop a model showing that when labor demand is inelastic and individual behavior is easily monitored a firm’s employees may prefer to protect its shirkers. By optimally reducing overall effort and increasing wages for all, a labor association rationally uses its monopoly power as described in the left wing labor slogan “work less so that all may work.” In addition, employees have a strong incentive to conceal information about peers’ performance from firms, what has been infamously known as the blue wall of silence in the case of the police. We argue that a number of recently proposed remedies to this problem are unlikely to succeed and suggest a more promising alternative: increase competition.
Keywords: Labor Associations; Monitoring Costs; Self Organizing Groups
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor Demand Elasticity (J23) | Employee Effort (J29) |
| Labor Demand Elasticity (J23) | Protection of Shirkers (H55) |
| Protection of Shirkers (H55) | Employee Effort (J29) |
| Labor Association Actions (J51) | Employee Effort (J29) |
| Labor Association Actions (J51) | Wages for All (J39) |
| Elastic Labor Demand (J23) | Employee Encouragement of Effort (M54) |
| Elastic Labor Demand (J23) | Sharing Information with Firms (G24) |