Wednesday, February 10, 2010

Staying Open in the Snow: Differing Incentives for Workers and Owners

The view outside my apartment at 8 p.m. Wednesday.

Because of record snowfall in the Washington, DC, region, federal offices have been closed for a fourth straight day. However, quite a few private sector businesses have remained open.

To the owner at most large private sector businesses, staying open means making money and closing means losing money (assuming that customers will want to come to his store that day). So the decision to stay open is obvious.

To the worker, getting to work with such poor road conditions and the other inconveniences caused by the snow might not be worth it. But he may take a "loss" for the day--for example, earning only $100 for the day but incurring $200 worth of "costs" (including effort to get there) to do so--in order to keep his job for the long run.

The analysis differs, however, for smaller businesses. For one thing, the owner may also have an active management role, or his job may be very similar to that of his underlings. His calculus is the same as the worker's: he may be willing to forgo the day's profits if it means that he doesn't have to make the drive on snowy roads, either. In addition, the owner of a small business is more likely to have a personal relationship with his workers; it's easier for a CEO to insist that thousands of workers in a faraway branch show up than it is for a small-business owner to order in his workers, who also may be among his closest friends.

So, we would expect large businesses to be more likely to stay open than small businesses during a snowstorm.


Josh Hattersley said...

I wonder if there's also a question of workers compensation liability when conditions are so bad? I did a bit of Googling, and while it would seem that generally an injury sustained during a worker's commute is not considered to be eligible for workers comp, there have been exceptions on a state-by-state basis. Forcing workers to expose themselves to an increased risk of personal injury due to inclement weather and poor road conditions seems like it could prompt just such an exception, hence some employers' reticence to remain open for business during snow storms.

As far as I can tell, though, this specific liability has not yet been tested in the courts.

Greg said...

That's a good consideration. There are certain weather conditions that are legitimately dangerous, and there are some that just annoying to deal with. My analysis is more appropriate for the latter, I suppose.