This paper explores employment policies in a society which puts social value
on employment. The purpose of this exploration is to show that when we
admit the social value which most societies seem to put on employment
implicitly, we can provide more efficient policy measures as well as a new
theoretical basis for employment policy.
Attaching social value on employment brings about externality in firm’s
employment decision since the social value is non-excludable. Additionally it
can be shown that employment externality has two characteristic features :
duality (positive externality in hiring decision and negative externality in lay off
decision) and counter-cyclical fluctuation in the size of externality.
From these features of employment externality, this paper derives two policy
measures to internalize externality and enhance social welfare, and discusses
their effects : one is a combination of lay-off tax and hiring subsidy as a price
setting policy, the other is employment voucher trading system as a flexible
price/fixed quantity policy. These policies are expected to have comparative
advantages in terms of cost efficiency, low risk, and better addressing
problems related to globalization.