Moral Hazard in The Workplace

Labor Markets Discussion
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Labor Markets Discussion
A moral hazard is a type of behavior in the labor market context that involves taking either insufficient precautions or excessive risks, thus contributing to financial losses or business failure. A lack of effort to mitigate business failure originates from possessing specific security measures against deteriorated performance (Gaweł & Pisanko, 2019). In my previous workplaces, I witnessed two instances of moral hazard. First, the company paid the sales agents a constant salary. The sales agents had insignificant incentives to increase the company’s sales revenues, took longer breaks, and generally showed less motivation to improve their sales figures. Providing constant compensation for the sales agents constituted a significant incentive for moral hazard. In order to eliminate the moral hazard, the employer-provided bonuses for every salesperson who met their targets and generated more sales revenue for the company (Depersio, 2021). The company also provided long-term benefits to encourage sales agents to be loyal and productive.
The second instance involved bank managers having an appetite f...