Wednesday, October 19, 2005

Plan to set up fund to help unpaid workers :: Gulf News

A colleague sent along this link with the comment "how about this for moral hazard"?

The image of the UAE has been tarnished by employers who have failed to pay wages for employees for months at a time. My recommended solution has been to give the employees more leverage by giving them the right to change jobs. Among the virtues of allowing labor mobility is that the incentive to collect remains with the workers.

Dubai wants to preserve the buzz it has developed and is concerned with the problem of employers failing to pay. Dubai's proposed solution is to create a fund to help workers when their employer fails to pay. The downside of such a plan is that it undercuts the incentives of potential employees to choose reputable employers. And it encourages employers to gamble on riskier ventures without fear that this would mean they would have to pay workers more to participate in these ventures - the workers would calculate that if the firm fails they will still get paid for services performed; the firm will calculate that if the venture succeeds it will not have to share its gain with the fund.

Labels: , ,


Post a Comment

Links to this post:

Create a Link

<< Home