This paper examines some implications of two postulates for firms' wage and employment policies. The first is that firms, or stockholders, have easier access to capital markets at lower costs or higher returns than do small investors, such as workers. Second, there are important mobility and turnover costs incurred when a worker moves from one firm to another. The existence of mobility costs means that the labour market is not a perfect market. Each firm is not restricted to taking as given some exogenous market wage, period by period, but has some amount of freedom about the wage strategy it sets. The firm cannot choose any wage-employment path it wishes, however, and I shall assume that in the long-run the firm must offer the same (expected) utility as that available elsewhere. In the short-run there is a constraint that the wage offer must never be so bad that all the firm's workers will quit and incur the mobility cost. There are solid grounds for believing that great differences exist between stockholders and workers with regard to capital markets. The majority of stocks are held by very wealthy persons indeed, who also hold almost all the state and local bonds and large proportions of the property and other assets.3 In addition, stockholders are frequently company executives or professionals with greater financial expertise and salaries many times that of the average industrial worker. The worker typically has a rather small net worth. His assets are durable goods and a rather small holding of money. He frequently has consumer credit liabilities outstanding.4 He also has much less knowledge of financial assets and institutions. A principal function of capital markets is to allow wealth-holders to diversify their holdings and so reduce the risk of their total portfolios. Stockholders, through their greater wealth and expertise, are much better able to bear risks than are workers.5 The difference in ability to bear risk between the two groups immediately suggests an opportunity to trade. In deciding what wage-employment strategy to set, the firm will be willing to reduce worker risk. By doing so, the firm is offering a joint product, employment plus an insurance or financial intermediation service. The firm does not do this simply because workers prefer it. Risk-reducing policies are the cheapest and hence most profitable way of attracting any given work-force. The choice of a risk-reducing policy by the firm will have an important impact on both the wage set and on employment variations-and hence the probability of unemployment. The firm will, in general, wish to reduce the uncertainty of the workers' incomes. An important feature of the model presented here is that the tendency of the firm to reduce risk has an asymmetrical effect on the wage strategy and on the employment strategy.