Economics

New California Law Goes after Amazon’s Production Quotas, but Will It Actually Help Workers?

Amazon has long been derided as exploitative and unfair with how it treats its employees. Horror stories about the harsh treatment workers face have been widely circulated, and many have called for regulations to put a check on the company’s warehouse practices.

On Wednesday, California lawmakers heeded those calls by passing a new law regulating working conditions in warehouses.

“California lawmakers have passed a first-of-its-kind legislation that would give Amazon and other warehouse workers new power to fight speed quotas,” NPR reports. “California’s Assembly Bill 701 asserts that productivity demands cannot come at the expense of health and safety, for example by pushing workers to skirt safety techniques or skip rest breaks they’re entitled to. If that happens, the bill would give current and former workers more legal pathways to appeal them.”

The bill also requires companies to disclose productivity quotas to employees and government agencies for the sake of transparency.

As CNBC explains, “Amazon uses sophisticated algorithms to track productivity rates among its warehouse workers, logging the number of packages they pick, pack and stow each hour. If workers take a break from scanning packages for too long, Amazon’s internal system will log it as a ‘time off task’ and generate a warning, which can later lead to firings.” Many critics say these quotas are behind the higher injury rates among Amazon workers. But while that may be debatable, the one thing nobody denies is that Amazon has an obsession with speed.

Helping or Hurting?

With that said, one of the points that never seems to get enough attention in these discussions is the fact that workers always have a choice to leave. Indeed, there are now nearly 11 million job openings in the US, the highest in well over a decade, so it’s not like Amazon workers don’t have options.

Yet clearly, something about Amazon makes these thousands of workers decide to stick around. Maybe it’s the fact that Amazon pays them at least $15/hour. Maybe it’s something else. Either way, the fact that workers continue to stay in their jobs implies that Amazon is a better option for them than anything else on the market. And given how many opportunities are now on the market, that’s really saying something.

Getting back to the legislation, it’s easy to see a bill like this as rather innocuous. After all, who could possibly be against high safety precautions and more breaks?

Well, actually, if they understood the repercussions, the chief opponents of this bill ought to be the workers themselves.

The great economist Ludwig von Mises explained why over 70 years ago.

“In weighing the pros and cons,” Mises wrote in his book Human Action, “of the hiring of workers the employer does not ask himself what the worker gets as take-home wages. The only relevant question for him is: What is the total price I have to expend for securing the services of this worker? … If laws or business customs force the employer to make other expenditures besides the wages he pays to the employee, the take-home wages are reduced accordingly.”

Obviously, workers value safety and breaks, but they also value their paycheck. In fact, many workers are willing to be hyper-industrious because there’s a good chance they will be well-compensated for their efforts. Of course, “skirting safety techniques” sounds like a bad thing, but the reality is that safety techniques are sometimes unnecessary, excessive, and burdensome, so skirting them isn’t always a problem. And if an employee wants the kind of workload where they don’t get breaks (presumably because it pays better), why shouldn’t they be allowed to work for a company that makes that possible?

The point is, by placing a check on production quotas and thus worker productivity, this bill would also place a check on wages and benefits, which would otherwise have more upward pressure.

As Mises explained, the cost of such a policy falls, “entirely upon the wage-earner… Neither is a shortening of the hours of work a free gift to the worker. If he does not compensate for the shorter hours of work by increasing his output accordingly, time wages will drop correspondingly… The same is valid with regard to all other so-called social gains, such as paid vacations and so on.”

Obviously, there needs to be a reasonable trade-off between safety, breaks, and wages, but that’s a discussion that needs to happen between the worker and the employer. The state isn’t actually helping workers by enforcing specific safety standards and breaks. It is merely outlawing arrangements that might have been more beneficial to both parties had they been allowed.

Understanding the Labor Market

The faulty logic behind this bill influences many other areas of the labor market as well. Well-meaning politicians pass all sorts of “protections” meant to help workers, but in most cases they actually do more harm than good.

The reasoning behind this all comes back to an understanding of trade-offs. Since an employer is going to spend the market rate on a worker no matter what, they will inevitably cut pay any time they are forced to give the worker more breaks, benefits, training, or safety equipment. The total amount an employer pays for a worker doesn’t change. All that changes is the allocation. And if the worker actually wanted a higher pay instead of the extra “worker’s rights” they were granted by the state, they are simply out of luck.

So rather than passing more laws that come from a fundamentally misguided understanding of the labor market, the best thing we can do for workers is to give them the freedom to arrange their own contracts with employers as they see fit.

And if workers don’t like the arrangements Amazon has to offer, they have 11 million other jobs to choose from.

The post New California Law Goes after Amazon’s Production Quotas, but Will It Actually Help Workers? was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.

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