The Social Cost of Labor
For a profit-maximizing firm pursuing a reduction in its costs, it is equally "efficient" to (1) develop a process that will economize on the quality or quantity of inputs necessary to produce a given level of output; (2) purchase the same quality and quantity of inputs at a reduced price; or (3) adopt a new process that shifts a portion of the firm's production costs to some other person or entity or the environment. When economists speak of "technical change," the first of these approaches is almost always implied. The second is, to a degree, covered when the analysis of "factor markets" is covered. The third option, cost shifting, is almost always downplayed or neglected.1 Despite its neglect by professional economists, cost-conscious firms have been most attentive to the possibilities of cost shifting. It follows that economists' tendency to neglect this variety of cost savings is unwarranted. As an example, consider a situation in which some unique characteristic of a workplace necessitates the wearing of a specialized garment. Examples may include a protective suit in the case of a hazardous workplace or an idiosyncratic costume that "fits" with the theme of a restaurant or place of entertainment. Now, further suppose that this industry's conventional practice is that changing into and out of these specialized garments takes place on company time. Clearly, if the firm can modify this convention to one in which employees change on their own time, then a savings on labor cost can accrue to the firm. Naturally, employees and employers will disagree on the merits and desirability of such a modification of the work rules. Moreover there is no obvious "resolution" to this quandary other than what follows from the bargaining process.2 Unless the labor market approximates the specific and largely implausible qualities of "perfect