Optimal contracting and child labour

I have a problem. I’d like to get the next door neighbour’s teenager to mow our lawn. But I’m not sure whether to pay him a flat fee or an hourly rate (mowing the lawn takes me about an hour). Clearly, the standard optimal contracting issues arise – a piece rate leads to lower quality, while an hourly rate leads to shirking. So if renegotiation was costless, I’d just try both options.* But when you’re dealing with your neighbour’s child, there’s a renegotiation cost, which means I probably need to lock into one type of contract from the outset. So tell me, dear readers, which do you think is a better option? And what is the going rate these days for an hour’s lawnmowing by a 13 year old?

* And perhaps I’ll do this one day – an Adelaide economist friend of mine once put it, "experimenting on your children can be fun".

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6 Responses to Optimal contracting and child labour

  1. Alistair says:

    I’ve always been a fan of performance bonuses, so how about a flate rate plus a performance bonus for good work.

    In my current after school just I get $10 an hour, For a once a week one hour job I’d say about $11-$12 (plus bonus of $3-4 a week). Thats about what I would be happy with.

  2. Don says:

    Does this 13 year old know that you have a blog?

  3. Sacha Blumen says:

    How about a piece rate with a bonus for a good job (eg specify trimming the lawn edges)?

    Are there child labour laws in the ACT? What bargaining position does the kid have in this situation? Is there a kid lawnmowing award?

  4. Give the kid a taste of the real world. Promise a decent wage and an ongoing job, then after the job is done claim the company went insolvent and all the cash had to pay for his exhortionate petrol debts. Offer to pay owed benifits at 13 cents in the dollar.

  5. Sylvia Else says:

    At the moment, you appear to have made the mistake of allowing your neighbour’s kid to have as much market power as you do. What you need is to find another person to exploit, er… I mean employ. Perhaps the son of your other neighbour. Since you want to avoid the renegotiation cost, agree a piecework price with both of them (not necesarily the same), and then play them off against each other over time on the quality aspect.

    Sylvia.

  6. Pingback: The Children Blog

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