What’s a Good Employee Worth?

This post offers commentary on an interesting story out of Germany that has apparently captured the German public’s imagination.  It’s become a big story against the backdrop of an upcoming German election.  Here’s the link to the full story.  For those that don’t click the link for additional background, here’s the summary:

• A Berlin cashier who has worked for a supermarket for 31 years was recently fired.
• The reason given for the firing was that she withheld/stole $1.65 worth of bottle receipts.
• The cashier denies the charges.
• Politicians for both parties are commenting on the issue, and the case has “drawn extensive television and print media coverage.”

I don’t know whether she stole the money or not (no one made the security cameras available to me).  But I know that I was appalled by the following comment coming from a leading politician: “Horst Seehofer, leader of the Christian Social Union, said the case raised questions about capitalism, which has come under attack in Germany in the wake of the global financial crisis.  ‘I don’t understand how a cashier can be fired because of 1.30 euros while managers who lose billions of euros can keep their jobs,’ Seehofer told a rally in Bavaria on Wednesday.”

Well I have a few thoughts for Mr. Seehofer.  First, the managers who lost billions of euros may be guilty of mismanagement, bad judgment, poor business sense, weak leadership…any number of things.  But terrible performance is not the same as stealing, it is not the same as fraud, and it is not the same as dishonesty.  If the cashier did actually intentionally, willfully steal, then we’re talking about something fundamentally different than losing money.  This, in no way completely exonerates managers whose bad judgment costs shareholders (and taxpayers) money.  But Mr. Seehofer makes a profound error in pretending that bad business decisions are morally equivalent to the conscious choice to steal.   

Second, this firing should absolutely not raise questions about capitalism.  Almost any time someone loses his/her job, it is a sad thing.  No dispute there.  But of all the systems devised by man, none has a better automatic check/balance to protect individual workers than capitalism.  I’ll repeat that one more time, this time in the positive rather than the non-negative: capitalism is the best possible economic arrangement to protect labor because it has an automatic check/balance.  What is that check and balance?  It is this: if managers and owners expect to be rewarded for strong company performance, they have every incentive to keep the best possible employee in every position for the price (salary) they are willing and able to pay.  Similarly workers are absolutely free, if they believe they are underpaid, underappreciated, or underutilized  to seek employment elsewhere.  The free market lets labor’s price get set by supply and demand.  It is not only efficient…it is moral.  Does this mean that there are never any “unfair” firings?  Clearly there are.  Managers may have vendettas.  There may be personal conflicts.  Any number of things may occur which lead to companies and individuals going their separate ways.  But when a manager dismisses an employee who is highly qualified and appropriately paid, then the market ultimately punishes that manager.  He/she experiences:

• Lost productivity until someone new is hired
• The actual costs of finding and hiring someone
• Uncertainty associated with replacing a known skill-set with an unknown one
• “Getting-up-to-speed” time during which the new employee learns the ropes
• The possibility of having to pay a higher wage for the same skill set

This brings me back to the case of our cashier.  If she’s a great employee and if she didn’t steal, her employer has no incentive to unfairly terminate her.  It is a sad fact of capitalism that sometimes in order to maintain viability and/or preserve profits, companies do sometimes need to fire people.  But it is that very dynamism that enables capitalism to create new jobs as well.  It is also the flexibility to fire, that gives capitalists the freedom to hire easily too.  Greenspan’s said it before, and it’s logical too. 

Want to see what happens when you can’t fire?  Remember the riots in that rocked France a few years ago?  That audaciously capitalistic stronghold tried to actually pass a law letting employers fire young employees, at will, during their first two years on the job.  So, without that law, employers who hired had to keep  their employees for two years.  What a surprise that the Under-25 unemployment rate in France was hovering at 22%.  If that’s morality, I want no part of it.  If I’m a good worker, I’ll take the free market every time.

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