Data on Day Labor

The results of A National Day Labor Survey were recently made available, bringing data to a subject often covered by anecdote. The survey was made of more than 2600 day laborers at more than 200 hiring sites in 20 states. The results have been interpreted in at least a couple of publications.

One was put out by Abel Valenzuela, Nik Theodore, Edwin Melendez, and Ana Luz Gonzalez, "On the Corner: Day Labor in the United States" (UCLA Center for the Study of Urban Poverty 2006). Valenzuela and his co-authors reported data on the dangers faced by day laborers. In the two months before the survey was taken, at least half of the participating day laborers had experienced wage theft or underpayment. Twenty percent had been injured on the job. Eighteen percent had been subjected to violence by their employers. From this the authors concluded that day laborers and their employers need to be regulated. They advocated the expanded use of formal hiring centers. These centers often require employers to register and assist day laborers in taking action against employers who fail to live up to their contractual or other legal obligations.

A similar conclusion was reached by Arturo Gonzalez in "Day Labor in the Golden State," in volume 3 of the publication, "California Economic Policy" (2007). Gonzalez is somewhat less enthusiastic in his support of formal hiring centers. He does believe, however, that centers, coupled with ordinaces controlling day labor behavior on the street, can be carefully designed for the good of everyone. Along the way Gonzalez points out some gems in the data. One interesting fact concerns the relative earnings of vendors who look for work primarily in informal markets on the street and those other vendors who look for work in formal hiring centers. Both informal and formal vendors spend the same amount of time looking for work, but informal vendors are more successful finding it. It seems that contractors, one of the principal employers of day laborers, don't like hiring centers. They prefer to find day laborers on the street. Informal day laborers earn more money than their counterparts at the hiring center, who wind up sitting around more waiting for someone to walk through the center's front door.

These authors respond to the dangers of informal day laboring by wanting to stamp it out and bring it inside. But it seems to me that the data on the wage differential between informal and formal day laborers shows that the market has already sorted this out. There are two kinds of day laborers: those who play it safe, and those who embrace risk. The play it safe crowd goes to hiring centers. With the center's backing they have a better chance of not getting ripped off or busted by the police for loitering. But this comes at a cost. We always knew that these centers were costly to set up. But now this data shows that the day laborers at the center pay a price, too. They earn less money.

The risk taking day laborers prefer the street. They want to make their own deals, and do so where the action is. Employers want freedom, too, and if you want to play ball with them and have a better shot at maximizing your daily take, you'll hustle business outside. And why not let them? The informal day laborers know what their getting into. Why not let them decide whether they are cautious or risk averse?

This reminds me of investing. Some play it safe and put their money in government bonds. They have a low rate of return, but are pretty safe investments. Other folks invest in stocks. These are much more volatile, but hold out the potential for higher return. We don't prevent investors from buying stocks. Why should we protect the day laborers from themselves by keeping them off the street? Of course selling labor on the street may be a problem for the neighbors-- and that might be grounds to regulate behavior on the sidewalk. But if the point is to help the day laborers, taking away their choices doesn't help them at all.