"Coercion" is one of those words used by libertarians to distinguish between which human interaction is moral and which is immoral. But the word seems to be used somewhat ambiguously in many cases as to blur the meaning. I intend to clear that up.
by Nick Coons
Coercion occurs when one person presents a set of choices to another person, and all of those options will leave the second person worse off than where he is currently. For instance, if a mugger approaches you with a gun, and says "Give me your wallet or I'll shoot," he's providing you with two choices, and two choices only (you can certainly exercise other options, like fighting back, but the key points here are the choices being provided to you, not what your options are). The first is for you to lose your wallet, which puts you in a worse condition than you're currently in, because you'd be left without a wallet. The second choice is to be shot, which obviously will make you worse off than you are now. There is no option of simply being left alone. This is coercion.
In contrast, let's take an example from the market. If you go into a car dealership and the salesman tries to sell you a used car, he may try to persuade you or push you into making the purchase. But ultimately, you have two choices, to buy the car or not. If you do not buy the car, then you're in the same condition you were in before being presented with the choices; no worse off. If you do buy the car, you're only doing so because you believe it will put you in a better position than you are now. Whereas coercion puts you in a "lose-lose" situation, an interaction in the market puts you in a "win-same" situation.
This can get muddied when discussing something like employment, because the employer/employee relationship is often misunderstood. If the company you're working for is suffering from a loss of revenue and provides you with two options, either take a pay cut or lose your job, this would at first appear to be coercion, because it seems to be a "lose-lose" situation.
The employer/employee relationship is much like the customer/vendor relationship. The only differences are legal, not fundamental. In our scenario, let's say that John is the customer and Steve is the vendor, in this case a plumber. John hires Steve to fix a leaky faucet. Next week, John needs more plumbing work, so he hires Steve again. The following week, John needs no plumbing work because all of his pipes are working properly, so Steve is essentially "fired" in the sense that John no longer needs his services. The status quo in this case is for Steve to not be working for John, and John is providing Steve with a "win" every time he needs his services. So when John doesn't hire Steve, he is not coercing him.
In the case of the employer/employee relationship, the employer is the customer and the employee is the vendor. The employee provides a service to the employer that meets the employer's needs, and in turn the employer pays the employee. If at some point in the future, the employer no longer needs (or cannot afford) the services of the employee, then the employer is withdrawing a "win", which as we can see from our plumbing example is not the same as compulsing a "loss." The employer/employee relationship only continues based on the permission and voluntary agreement of all parties involved. One person may withdraw their agreement at any time, and this does not constitute coercion. Coercion occurs when the action takes place without the voluntary agreement of all parties involved.
No Forced Charity - Nick Coons
I am a voluntaryist and you can be too, if you want. - Ross Kenyon
Seatbelts! Free Choice in the Age of Coercion - Ross Kenyon