Sunday, February 24, 2013

Absentismo: El derecho de los caraduras

Absenteeism: The right of cheeky bastards
by Luis Garicano and Jesús Fernández-Villaverde

One of the most amazing (and unjustifiable) provisions of our dysfunctional regulation of the labor market has become subject to significant change, discussion and finally abandonment in the final version of labor reform legislation (for a general overview of labor reform, have a look at this excellent post by Samuel Bentolila). Prepare to be amazed. The workers' statute, in article 52 (concerning firing of employees) said that "contracts can be terminated" before reform:

d) For missing work, even justified but intermittent, 20% of business days over two consecutive months or 25% over four non-consecutive months within a period of twelve months, given that the total rate of absenteeism of the others at your workplace is greater than 5% over the same period of time.

For the purposes of the previous paragraph, don't count the following as absences: missing work due to a legal strike, excercising legal obligations ((jury duty? -trans.)), work accidents, maternity, risk during pregnancy (?), sickness due to pregnancy, childbirth or breastfeeding, leave and vacation, sickness or non-work related accidents, when the illness have been certified by the official health service and is at greater than twenty consecutive days, nor leave motivated by financial situation or psychological issues due to gender violence certified by the social care services or health services, as appropriate.

This provision is so terrible that I don't have words to describe it. Given the number of logical and sensible exceptions to the definition of absence (sickness, maternity, pregnancy, legal strikes, etc.), it's amazing that one still needs to miss 20% of the working days in two months in order to be fired: it's more or less missing 8 days out of only 60.

But this is not the most incredible thing. What's crazy is the phrase "given that the total rate of absenteeism at the workplace exceeds 5% in the same period of time". Consequently, if we want a good business culture, a culture of compliance, where coworkers are serious and go to work every day, the cheeky bastard who doesn't remains protected as long as the overall rate of absenteeism is too low for them to be fired. Instead of rewarding good business cultures, article 52d punishes them.
A more formal way of seeing this is that the requirement of 5% is the only thing that is, in a game of the Prisoner's Dilemma, reducies the punishment of those that choose the strategy of "no cooperation" or, put another way, gives them an incentive to deviate ((from the nash equilibrium ?)). As Kreps explains well in a classic article, in the world of incomplete contracts and inseperable contingencies, we can't expect a contract to cover all of the obligations that we have. The function of corporate culture (one of the functions, see this Survey by Ben Hermalin for a complete treatment) is to give us a guide to show us what is expected of us when the unexpected happens, and what we should expect from the company. Corporate culture defines what is considered good behavior in each organization, and what is considered deviation. Although there is always an incentive to take advantage (on the part of the company and the employee), captured by the prisoner's dilemma, we know that if we "do the right thing" even though no one can force us to, the company will as well and the game will be in equilibrium.

What is necessary for this to work? Basically, that the incentive to deviate and take advantage - the difference between the value of behaving and not behaving - is the amount I win in the first period and how much I am punished in the future. The lowere the punishment for deviating will be, the more incentive I have to take advantage and break away from the equilibrium.

Consequently article 52 contains a rule that encourages workers to break the good equilibrium -- to move away from the equilibrium in which everyone is doing what they should because it is our job. Reducing the punishment where there is a good work atmosphere increases the incentive to ruin the atomsphere.

Well, in labor reform, the Governor proposed in Congress a small change in this regulation: to decrease the absenteeism limit from 5% to 2.5%. Like many of the changes that have been made in the first revision of 2010, it is a change in the right direction but too weak -- insufficient.

The PNV, in the Senate, took the necessary steps to remove this connection. Well, the Socialist Party has make it incomprehensible in the final version. It still contains the 2.5% limit but it at the end.

Is there some justification for this requirement of 2.5%? What market failure does this clause address? What increase in wellbeing of anyone (except those who don't go to work) follows from it? What right is being defended other than that of people to be cheeky bastards? As much as we think, we can't come up with any justification - be it strange, twisted or empirically irrelevant - for this requirement of 2.5%.

No comments:

Post a Comment