Will Markets Provide Humane Jobs? A Hypothesis

Many features of today's jobs have not been produced by market forces emerging in individual private contracts. Instead, they resulted from social struggles and union bargaining, and they appear in collective agreements, labor regulations, and international laws. This paper presents one hypothesis explaining this observation: A negative correlation between workers' taste for amenities and unobserved productivity. I show that such correlation implies a sub-optimal provision of amenities by the market since providing such amenities leads to lower quality workers. Mandating amenities is optimal when the correlation is strong, or the dispersion of worker productivity is large.