Thursday, November 27, 2008

2.5 Million Jobs IV

From: AFL-CIO American Federationist | November 1962, pp. 19-21.

Employment Effects of Shorter Hours

If the workweek is shortened with no loss in pay, what effect will it have on unemployment? There is no firm answer nor can specific estimates be calculated reliably.
The answer depends in good part on how much the workweek is shortened, how and when it is done, how widely the reduction is applied—and on what other economic developments accompany it. Hours reduction will not take place in a vacuum; its effects necessarily are linked to whatever else is occurring before, during and after the reduction.

No one seriously considers it a magic solution to unemployment or the sole answer by itself. Its strongest advocates claim only that it is but one tool although a fundamental one.

There also are different views on whether its principal value is as a defensive or holding measure— one which prevents increased unemployment—or whether it is equally important as a stimulus, one which generates additional employment.

There is wide recognition, particularly at the individual plant level, that shortening of hours will help prevent layoff of more workers (“cutting hours means less cutting of men”). How effectively it does this depends largely on productivity changes and trends in demand.

The extent to which it will lead to hiring of additional workers is a more complex question. It depends on such factors as management attitudes and its judgment about future needs for labor, the level and trend in demand for the company’s products, the nature of its labor requirements and availability of appropriate types of workers in the area or elsewhere.

But under the most typical and likely circumstances, a company reducing its workweek by several hours ordinarily will have to immediately hire additional workers to provide those hours of work if it wants to maintain approximately the same output or service as before.

The longer-run effects then hinge on productivity movements and whether demand for its products increases sufficiently to enable savings from economies of increased production to finance continued payment to workers. In principle, the combination of the new hiring by this and other companies will build aggregate worker income and, in turn, demand for the products.

The pivotal question, of course, is to what extent, by serving to maintain and often to increase employment, shorter hours will be the dynamic new ingredient needed to bolster demand and increase it to the point where more and more companies have to expand employment further and thereby carry along an accelerating rate of economic and employment growth.

Although no reliable answers can be offered, some rough statistical estimates may be useful to show the potential magnitude and significance of hours reduction in relation to current unemployment levels.

Consider the most recent data available at the time of this calculation. Total employment of non-agricultural wage and salary workers in mid-1962 was 51.3 million (not counting the self-employed, domestic servants or unpaid family workers). Many of these workers (11.2 million) were on workweek schedules under 40 hours for various reasons. This left 40.1 million on workweeks of 40 hours or longer.

For every hour cut from the workweek of this fulltime wage and salary workforce, the number of new employees required to provide the same national total workhours is roughly one million. If 2.5 hours were cut from the workweek, the number of additional employees needed at a 37.5-hour week to maintain the same total workhours would be 2.7 million.

There obviously are many practical limitations in such calculations. It would not be feasible, for example, to reduce hours in all non-agricultural industries uniformly or at the same time.

There also are many factors affecting the actual number of new hires likely to take place immediately upon reduction of hours. The number of new hires would be reduced, for instance, to the extent that some companies made up lost hours by putting involuntary part-timers back on fulltime or by working present employees overtime. Another limitation on hiring is that reduced hours of present employees are not always directly replaceable by new employees. Much would depend on the extent to which work needed in the reduced hours coincided with the skills and geographical location of idle labor. Other significant factors also are involved, some making for even greater hiring. To the extent that new hiring occurs, for example, it would quickly increase demand and touch off additional production and hiring.

But even if the rough ratio of a 1-hour cut in the workweek to 1 million new jobs may be too high for practical purposes, it demonstrates the enormous potential of revision of the workweek as a force for enlarged employment.

If reduction took place for only half the fulltime non-farm workforce, for instance, the rough replacement ratio would be halved: One hour’s cut equals half a million new employed workers. A 5-hour cut to a 35-hour week for only half the workforce would release enough workhours for over 2.5 million jobs. [s-man: the punchline!]

What if similar rough calculations are made for manufacturing alone? There are roughly 14.3 million fulltime wage and salary workers on schedules of 40 hours a week or more (of 16.7 million total employment). The replacement ratio for a 1-hour cut in the workweek for these fulltime workers is 3 65,000 additional workers. For a 2.5-hour cut, it is 950,000 employees. For a 5-hour cut to a 35-hour week, it is over 2 million new employees.

In construction, comparable figures are more difficult to calculate because data on hours worked are often affected by weather and other factors. But very rough estimates indicate about 3 million construction industry workers are on workweeks of 40 hours or more. A 1-hour cut in their workweek would be equivalent to fulltime jobs for about 75,000 additional workers. A 5-hour reduction would be replaceable by over 400,000 new jobs.

In broad summary, then, reduction in hours without curtailment of weekly pay is looked to by the labor movement as a vital new tool to swing into action against excessive and rising unemployment.

Since 1953, after Korea, unemployment has doubled, from less than 3 percent then to nearly 6 percent today. For the decade ahead, with the labor force due to grow at a faster rate and advance in technology gaining momentum, unemployment is threatening to mount even more. If the economy does no better in creating new jobs in the 1960s than it did in the 1950s, the decade would close with an unemployment rate of nearly 10 percent—at least 7 to 8 million fully unemployed.


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Happy thanksgiving!

Anonymous said...

Just as we enjoy a day of turkey and cheap prices at the pump OPEC is planning another huge cut in production to raise prices.

his is probably going to be one of the bleakest holiday seasons most of us have seen in our lifetimes. Not enough credit is being given to the high gas prices this past year and it's serious damage on our economy and society. That one factor alone has caused serious stress in both individuals and businesses. A record number of homes and jobs have been lost as a direct result. And, while we are doing the happy dance around the lower prices at the pumps OPEC is announcing cuts to manipulate the prices upward again. We must get on with becoming energy independent.We can't take another year like this past. There is a wonderful new book out about the energy crisis and what it would take for America to become energy independent. It covers every aspect of oil, what it's uses are besides gasoline, our reserves, our depletion of it. Every type of alternative energy is covered and it's potential to replace oil. He even has proposed legislative agenda's that would be necessary to implement these changes along with time frames. This book is profoundly informative and our country needs to become more informed and move forward with becoming energy independent. Green technology would not only provide clean cheap energy it would create millions of badly needed new jobs. The Book is called The Manhattan Project of 2009 Energy Independence NOW. Our politicians all need to read this book.
Time to follow through on those campaign promises and get this underway. Our country is in a sad state of affairs!