Why Not Protect Workers from Customers? By Bryan Caplan

Most countries have a long list of “worker protection” laws. Laws protect workers against low pay, lack of benefits, discrimination, sexual harassment, overtime at normal pay, and much much more. Basic labor economics teaches us to view these laws with skepticism: When you force employers to increase one kind of compensation, they can usually just cut another. And if perchance the law genuinely increases overall compensation, it would be amazing if employment didn’t fall.

Suppose, however, that worker protection laws function as intended: Shielding workers from unfair treatment with zero negative side effects. A strange anomaly remains: Why does the law try so hard to protect workers from unfair treatment by employers, without making even token efforts to protect workers from unfair treatment by customers? If a restaurant manager makes unwanted advances on a waitress, the law gives her the right to sue. But if a dozen customers a day make unwanted advances on the same waitress, the law is basically silent.

This lack of symmetry is even more puzzling when you consider the economics of repeated games. A manager interacts with each employee day after day. A mistreated employee can therefore informally retaliate against an unfair manager in countless ways. Indeed, fear of such retaliation is the chief explanation for ubiquitous nominal wage rigidity.

Many customers, in contrast, never interact with the same employee twice – or at least interact with the same employee so rarely that amnesia sets in. As a result, customers can mistreat employees with impunity, scoffing at the karmic adage, “What comes around, goes around.”

This isn’t just abstract theory; you can hear it with your own ears. Everywhere I go, I overhear employers treating workers with respect – and customers treating workers like dirt. Most customers, to be fair, are vaguely civil. But if 5% of your customers are rude, emotionally abusive, or worse, you probably have a bad day. And to repeat, the law does essentially nothing to help you.

Yes, if the same diner sexually harasses the same waitress every day, she could complain to her boss. Under the logic of “hostile work environment” doctrine, she could threaten to sue the restaurant unless it bans the harassing customer. But this does nothing to help the waitress against the endless stream of one-off pick-up artists who harass her daily.

You could say that the law can’t protect workers from customers. But that’s not true. The law could treat every worker-on-customer complaint like a traffic accident: You must share your identity on request to allow the legal process to move forward. If a customer accused of sexual harassment flees the scene, the law could treat his dine-and-dash like a hit-and-run. A less Orwellian option is to require firms to accept only credit card payments, then identify customers using their card numbers.

Now you could object that the market has already solved the problem. When workers have to interact with unpleasant customers, employers pay extra to attract and retain workers’ services. Economists call this a compensating differential: All else equal, unpleasant jobs pay more. That’s a major reason why garbagemen are low-skilled yet well-paid.

Whatever your view, though, it’s hard to grasp the logic of the status quo. The economics of repeated games and first-hand observation both tell us that customers are more poorly-behaved than employers. If you don’t take compensating differentials seriously, the government is misdirecting its resources – attacking petty employer offenses while ignoring serious customer offenses. And if you do take compensating differentials seriously, the government is absurdly trusting the market to handle the serious problem of customer-on-worker unfairness, while loudly “doing something” about the petty problem of employer-on-worker unfairness.

What gives? The real explanation, once again, is probably the popular double standard in favor of indirect coercion. When customers treat workers badly, legal remedies would be direct coercion. Most people would recoil: “Noxious customers ought to mend their ways, but it would be brutal, unfair, and wrong for the law to impose good manners.” When firms treat workers badly, legal remedies are mere indirect coercion. Most people effuse: “Unfair businesses ought to mend their ways, and government has the right – nay, the duty – to make them do so.” Since the law coerces businesses, which in turn discipline managers and other employees, no normal person bats an eye.

You could object that “Businesses are people.” When the business is a sole proprietorship, the claim is undeniable. But you won’t get far with these truisms, because dehumanization of businesspeople is a key tenet of our secular religion.