Employment and Community: Socioeconomic Cooperation and Its Breakdown

We propose a model of the interplay of employment relationships and community-based interactions among workers and managers. Employment relations can be either tough (where workers are monitored intensively and obtain few rents, and managers do not provide informal favors for their workers) or soft (where there is less monitoring, more worker rents, and more workplace favor exchange). Both workers and managers also exert effort in providing community benefits. The threat of losing access to community benefits can motivate managers to keep employment soft; conversely, the threat of losing future employment or future workers' trust can motivate workers and managers to exert effort in the community. Improvements in monitoring technologies; automation, outsourcing, and offshoring; declines in the minimum wage; and opportunities for residential segregation or for privatizing community-provided services can make both workers and managers worse-off by undermining soft employment relations and community cooperation.