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Wednesday, October 10, 2007

Bales on Employment at Will

Aa Although it's been at the top of our weekly charts for a few weeks now, some of us have just recently got around to checking out the new paper by Richard Bales (No. Kentucky), Explaining the Spread of At-Will Employment as an Inter-Jurisdictional Race-to-the-Bottom of Employment Standards, forthcoming in the Tennessee Law Review.

One of the problems in explaining the growth of at-will employment in 19th century America is that it originally sprang into existence not in the industrialized states of the North, where factory-owners were increasingly viewing workers as replaceable parts to hire and fire as they chose, but in the least industrialized states.  It was the states of the South and West which were early adopters, while the big industrial states like New York and Pennsylvania came much later.  This fact raises problems for what is perhaps the most widely held explanation for at-will employment, which is that it was a judge-made rule to benefit capitalist businesses at the expense of workers.

But Bales offers a different and ingenious take on the subject.  True, he said, it wasn't the industrialists of the Northeast who pushed the rule through.  (They presumably lacked the political power in the industrialized states to get their own judges to adopt favorable rules.)  But the point of the new rule was still to benefit businesses that were increasing in size and scope.  Courts in Southern and Western states, he theorizes, adopted the rule to attract industry by offering better rules for the capitalists than they were already getting in New York and Pennsylvania.  It was this competition, he argues, that ultimately led the industrial states to go along with the trend.  It's a brief but interesting read.  Here's the abstract:

The at-will employment rule is often attributed to Horace Gay Wood, who described the rule in an 1877 treatise. Over the next forty years, the rule was judicially adopted in most American states. How and why the rule spread, however, has been the subject of considerable academic debate.

This essay argues that the underindustrialized states first adopting the at-will rule likely did so as a means of attracting capital. In any event, and more importantly, this essay argues that once the first underindustrialized states adopted the rule, other underindustrialized states would have been compelled to adopt the rule to remain economically competitive with the early-adopters, and industrialized states would have been compelled to adopt the rule to maintain their competitive advantage in the labor market. The adoption of the at-will rule by a handful of underindustrialized states, therefore, precipitated an inter-jurisdictional race-to-the-bottom in employment standards, culminating in the universal adoption of the at-will rule.

Though the focus of this essay is on labor market conditions that existed as the United States was transitioning from a local to a national economy, the implications resonate today as the United States transitions from a national to an international economy, and attempts to avoid a competitive "race to the bottom" with developing countries that are using low wages and un- or under-regulated working conditions to gain an advantage in the global labor market.

[Frank Snyder]

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