Can’t Have Profit Without Productivity

Over at EconLog, David Henderson has a great post on markets and worker safety where he tries to answer the question “Does the market under-provide safety for the poor?”  The blog post is a good one and I’d like to add my two cents:

From a purely productivity viewpoint, disregard for safety is disregard for profits. If workers are constantly getting hurt on the job, it hinders their productivity. Given that profit is tied to productivity, lower productivity means lower profit. Workers can’t increase their productivity if they are being hurt or killed. Any firm would tell you constant turnover is bad.  You lose intelligence and skill. 

Accidents happen in the workplace, not due to some careless disregard for safety (although I am willing to bet that may be the case in some minority of instances), but because they are indeed accidents.  Any firm looks to protect its investment, whether that be a worker, piece of machinery, or building.  An employer does not subject his investments to unnecessary risk.  or, if he does, he doesn’t stay in business long.  

2 thoughts on “Can’t Have Profit Without Productivity

  1. Don’t you love your tulip bulbs? I love my tulip bulbs. Sure the price fell within a year, but it was the price that mattered, not the function of the good. If profits couldn’t be made in no productivity there wouldn’t be panics, bubbles, and major finance break downs on things as bonds or any assets that has no actual value. It make take a year, five years, or a decade. But you can turn a profit, though its not something you’d wish to have if you held them for your own investment.

    That’s how Amazon functions. High turnover is how the company makes a profit when the goal is to be Neo-Taylorist on time management, with a high turnover rate that’s above what you’d described here. Most mangers don’t have high rate of staying with the company for over two years or less.

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  2. I think you’re being rather naive here Jon.

    Being in a business that requires a fair amount of safety regulations, I have seen my fair share of neglect cause major accidents.

    Often, hugely successful corporations will try and hide potential dangers from their shareholders in order to avoid panic and in turn a drop in stock prices. I’ve also seen companies cut safety corners to save a few bucks. And often it’s the low level jobs that suffer the brunt of these accidents.

    Many businessmen love when economists argue against government regulation because if they don’t have to do something, many people won’t. This goes for environmental standards as well as safety. The low level jobs will have a high turn over rate anyways and major companies don’t see the cost of training new employees as a major expense if they see it as inevitable. Theoretically speaking you’re two cents should be accurate, but statistically speaking there is no correlation between blue collar turn over or safety and success of business. Especially if the business is turning out a service/product people want.

    I do my best to keep my employees safe and positive at the work place, but I’ve been to several factories all over the world that don’t. They’ve all been in business for decades despite several — sometimes major — industrial accidents that were due to neglect and they’ll likely be in business for decades to come.

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