A Lesson in the Limits of Employee Costs


Always on the lookout for the practical lessons of economics, I have to highlight an article by Marcia Pobzeznik from Friday’s Newport Daily News even though it’s not online.

The Tiverton Town Council is deciding what to do about trash pickup because the costs are rising, and there are two basic options:

  1. Continue with a system using workers to pick up the trash.
  2. Switch to an automated system that uses machines.

If I’m reading the article correctly, at first, option 2 will be more expensive because the town would buy every household the totes in which the machine requires garbage to be placed, but apart from that initial charge, the price is essentially the same.  The lure of the machines, though, is the expectation for the future of workers:

“I’d like to see us go automated,” said [Director of Public Works Bill] Anderson. That would happen in October if Waste Management wins the bid.

Companies are transitioning to automated pickup because of safety issues for workers and the high cost of Worker’s Compensation insurance, Anderson said.

Like many other rackets in Rhode Island, workers compensation is a private operation but is largely a creature of state law, which is heavily weighted to drive up costs.  On top of every other regulation that lawmakers have decided Rhode Islanders can’t live without, it makes employing people increasingly expensive, which in turn makes automation look increasingly attractive, even with an initial cost for the transition.

That puts people out of work, shifting leverage from all workers in the state to all employers, which suppresses salaries and benefits.  This change in the balance creates incentive for politicians to meddle, which produces new ways in which hiring people becomes more expensive.  And repeat.

  • Diane

    Alternatively, do we know if Waste Management will be in a position to hire fewer employees, thus improving their bottom line by automating? I’m not sold on the Workers Comp argument to be honest.

    • Rhett Hardwick

      I have noticed that Waste Management has a lock on trash pick up in Massachusetts (going out on a limb here, but I understand they were able to “influence legislation” in their favor) I wonder if that could be the case in Rhode Island. An aside. I own property in Attleboro. (Waste Management) The City made it illegal to pick up scrap metal, because Waste Management made it part of their contract (they figured the value of scrap metal in their bid). The theory was that when placed on the sidewalk, it became “property of the city”. I actually know a guy who was arrested for picking up scrap metal from the sidewalk on trash day. He was “scrapping” to support himself while unemployed,. They don’t seem to bother people who ride around on bikes going through “recycling” barrels for cans and bottles with “deposits”