You're Probably Willing to Price Gouge (and That's OK!)

By Christopher Freiman.

"Imagine that Walt is gently swaying in a hammock on a well-deserved vacation day when his phone rings. It’s his boss. She tells him that his co-worker has an emergency and can’t come into work. Although it’s last minute, she asks if Walt would be willing to work today—otherwise, the store will be too short staffed to open.

Walt says, “Look, I’m enjoying my time off even more than I thought I would. And, as you know, I’ve been looking forward to this vacation day for a month and I’d really rather not come in. But I’ll tell you what—if you give me double pay for the day, I’ll put down the lemonade and get to work.” His employer agrees given that the benefit of opening the store exceeds the cost of Walt’s extra pay.

I suspect that most of you can relate to Walt and, indeed, find yourself sympathetic to his situation—it doesn’t seem like it’s wrong for him to insist upon something extra for breaking up his vacation to clock in at work.

Notice, though, that Walt is guilty of “price gouging.” A wage is just the price of labor, after all. And here Walt is taking advantage of the shortage of labor and raising his “price.” But it also seems like he is making a reasonable ask. 

For one, Walt has the right to ask for double pay to come in on his day off. Here’s the argument:

If Walt is within his rights to not work at all on his day off, he is within his rights to work for double pay on his day off.

Walt is within his rights to not work at all on his day off.

So Walt is within his rights to work for double pay on his day off.

What can be said in defense of the first premise? Consider that, from his employer’s perspective, Walt’s offer of expensive labor is no worse, and potentially better, than an offer of no labor. If she rejects his offer of expensive labor because it wouldn’t benefit her, she’s no worse off than if Walt had not offered to work at all. If she accepts the offer because it would benefit her, she’s better off than if Walt had not offered to work at all. 

As for the second premise, I’d imagine everyone agrees that Walt is within his rights to not work at all on his day off. It’s surely generous for him to come him, but it’s not as though his employer (or the government) may force him to come in. So we should conclude that Walt is within his rights to “wage gouge.”

Moreover, allowing Walt to “wage gouge” has good consequences. If he didn’t have the right to ask for double pay, he’d have stayed in his hammock. And this outcome would have left both Walt and his employer worse off. Walt would be worse off because he wouldn’t receive the pay that he values more than his day off and his employer would be worse off because she wouldn’t be able to open the store, which is something she values more than the double pay she’d give Walt.

If you think that these reasons justify Walt in asking for double pay, you should think that they also justify more traditional cases of “price gouging.” For instance, it seems as though people are within their rights to not offer any ice at all to those at a disaster site (although it might be the generous thing to do). That is, the government doesn’t have the right to force Walt off of his hammock to buy and transport bags of ice to the site. And if Walt may offer no ice, he may offer high-priced ice—it either makes prospective buyers better off, in which case they’ll buy it, or no worse off, since they can simply refuse the offer. Moreover, the opportunity to make an unusually high amount of money can motivate Walt to get off the hammock and bring the ice to those who need it. Although we more readily empathize with “wage gougers” than “price gougers,” we have equal reason to permit both."