Thursday, November 20, 2008

Unions, Unemployment & Shorter Hours

by the Sandwichman

What's up? Unemployment is up. What to do about it?

Samuel Gompers said, in 1887, "The answer to all opponents to the reduction of the hours of labor could well be given in these words: 'That so long as there is one man who seeks employment and cannot obtain it, the hours of labor are too long.'"

In 1932, President William Green of the A. F. of L., "estimated that if the hours actually being worked at the present time were distributed on the basis of thirty hours a week among the working population the 12,000,000 now unemployed could be put to work."

In 1962, the AFL-CIO Federationist put the case this way:

The case for shorter hours does not rest on the notion it is the best way. It is based rather on the view, supported by ample evidence in the past decade of mounting unemployment, that: (1) other economic measures to achieve full employment are not being applied and perhaps cannot be applied; and (2) even if other economic policies are successful in stimulating greater growth in the period ahead, the rate of advance in technology and other labor-displacing changes is gathering such momentum that, unless part of the gains in efficiency are distributed in reductions in hours, it is virtually inevitable that it will show up in persistent and increased unemployment.
"There's no question that the long-term salvation of work lies in reducing working hours," said Thomas R. Donahue, secretary-treasurer of the AFL-CIO in 1993.

So today, 2008, with unemployment on the rise, what's the word from the AFL-CIO on shorter hours?


TheTrucker said...

I am absolutely convinced that the path to shorter hours and full employment runs through nationalization of the health insurance system. Until that happens the employers and the unions will hold a very large club to beat the workers into whatever arrangement they (actually the financiers) might choose. What matters is labor mobility and choice within the US sovereignty.

Given that health care is not tied to "full time" employment then the most costly of benefits are not tied to "full time" jobs. The fixed cost per employee is greatly diminished. Only when that cost is diminished or removed will labor enjoy anything like the same mobility as finance.

Sandwichman said...

You're right that health insurance is important, Trucker. It may be necessary but it is not sufficient. There also has to be direct pressure for shorter hours and full employment.

Anonymous said...

The first two posts are right on the money ... Kudos to Sandwichman for the blog ...

Indeed this area of labor law needs to be explored. VW tried this in Europe and it didn't work as far as I can tell. This was however because the competition didn't follow suit, in my opinion.

The corollary to this is of course the 60-80 hour workweeks workers in other countries work, most without healthcare.

As our economy unwinds from a 30 year credit bubble measures such as shortening the workweek should be seriously considered.

TheTrucker said...

Sandwichman is located in Canada and does not fully appreciate the problems created by employer provided health insurance. And shorter hours need not be mandated by government. The threat of a "general strike" is also unneeded in the effort to bring about a better environment for the working people.

Labor laws that demand overtime rates of pay to workers if the work week or work day exceeds a certain amount are a middle ground. But in the 1970's we had such laws and companies had so many managers that there were no "workers" left.

Allowing the market to work to the advantage of the workers is a better prescription. That would entail socialization of health insurance and pensions while taxing the employers to provide such safety nets. Laws that place a tax burden on the employers to support the general pension and insurance funds are the only real answer to the labor problems we face in the United States. General Motors and others currently drowning in employer provided health a retirement plans show us that the private sector is simply not capable of providing for these needs.

The tax that supports the general pension and health insurance fund should not be based on number of employees but on gross revenue or gross profit. In the USA the FICA tax should be abolished and corporate taxes and progressive income taxes should be used instead. In this way the working poor are not taxed as they are now with FICA taxes and they would receive medical insurance regardless of whether they work or not. Surprisingly, when the workers are allowed to keep all their wages or to keep all the funds realized from direct relationships with the public (small sole proprietorships), they are much more inclined to contribute to the economy by dent of their efforts (work).

Such adjustments do not preclude the realization of income inuring to division and specialization of labor and resources (returns to organization and scale) or to investments in _real_ capital (plant and equipment). These returns are the return to true capitalists.

These suggested adjustments remove the disincentive for more employees at shorter hours. I am aware that this is heresy and that the Sandwichman is proposing that the output of the corporations would be higher even if more employees were not brought in to do a "lump of work". My response is that if you remove the obstacles to flexible hours while redistributing a larger share of the economic rent (government supplied safety net funded by taxation) then simple profit maximization by the employers will produce the proper results. If the Sandwichman is right (and I suspect he is) then reduced hours would be the natural outcome of the proposed adjustments.

Labor unions are ineffective in a global economy.

"Social Democracy" seems to be the current terminology to express the ideology I am professing. In Canada the effort to revise first past the poll elections is a very large part of getting around corporations and dealing more directly with government.

In the USA we would do better to double or quadruple the membership of our lower house because the electoral process (IRV or first past the post) is determined by each state while rules concerning equally populous single member districts are determined by the Supreme Court.

Sandwichman said...


My being located in Canada gives me a deeper appreciation of the problems created by employer-provided health insurance. Especially because I've also been researching the issue for ten years. I grew up in the U.S., so I'm very aware of the differences. This is a major topic of conversation when I visit my family in the US. In fact, I'll be down in Olalla for Thanksgiving.

Your points about the effects per-employee payroll taxes and overtime premiums indicate to me that you've got a pretty high-level understanding of the technical complexities of the working time issue. I don't routinely go into all of these technical matters because I'm afraid they will make my readers' eyes glaze over. I'll make an exception in your case. But I'll be unreasonably brief.

First, with regard to overtime premiums, I think they accomplish the opposite of what they're presumably supposed to do. Rather than discouraging the employers from using overtime, they encourage employees to seek it. And then they pay for it by holding down straight-time wages. Don't take my word for it; see Marc Linder's "The Autocratically Flexible Workplace: A history of overtime regulation in the United States."

Second, with respect to per-employee payroll contributions, the classic work is Walter Oi's 1962? article on "quasi-fixed costs." I'm very familiar with it and with the analysis of cost structure that follows from it. I've done some of that analysis myself.

However, if you dig deeper into the issue of per-employee costs what you'll find is that they are hardly "fixed" per employee. What happens is that health care premiums per employee escalate AS A RESULT of employers trying to shift costs by hiring fewer employees for longer hours in order to evade per employee costs! It sounds perverse -- and it is. What goes around comes around (see John Maurice Clark on the social overhead costs of labor). Of course management doesn't understand this and they usually act as if they're entitled to a free lunch by virtue of being "job creators". See Jeffrey Pfeffer on "Six myths about pay."

This is not to say that I don't think that OT premiums and per-employee payroll contributions are important. I do. I've written about them in the past. I just don't think their effects are necessarily all that straight-forward. And most of all, I don't think they are AS important as the wage, employment and output effects of work-time reduction. In other words, I'd rather not be "penny wise and pound foolish."

Sandwichman said...

Just to clarify the above, I DO think it is a good idea to "remove the artificial obstacles" as Trucker suggests. YES to national health insurance, etc. I do agree that it is necessary. I just don't calculate that it is sufficient.

Exl Blogger said...

One item not addressed is the divergence in working hours between exempt and non-exempt employees. The average US work week has dropped below 35 hours for hourly employees, but it has risen well over 40 hours for salaried workers. The later tend to be politically active, and are generally better paid, but they are more likely to complain about too many hours than too few. They are also more likely to be anti-union.

If this weren't the US, I'd argue that there is a class problem that has to be dealt with. But, of course, the US is a classless society.

Sandwichman said...

re: the divergence in working hours.

This is a big part of the problem. Average hours of work in manufacturing are exactly where they were in 1946: 40.6 hours. Meanwhile manufacturing employment went from 15 million in '46 to 25 million in '79 and back down to 21 million in 2008.

Let's get a bit crude here for a moment. Manufacturing industry is pedal to the metal hours/output territory. Service industry output? Government output? How do you measure it? And what good is it if it consists of cooking up financial derivatives, promoting the consumption of ephemeral status fashions (positional goods) or tapping people's telephones?

Once upon a time, there was a debate about "productive" and "unproductive" workers. The debate got bogged down in definitions and anxieties about the labels being derogatory. But leaving aside any technical precision, part of the problem today consists of a massive shift to what might be considered make-work employment, which is to say jobs that only exist because of the massive design inefficiencies of the present production-consumption system.

In some respects long hours for salaried workers or part-time jobs in retail or hospitality don't really count because they are, in a sense, peripheral to the heavy lifting done in manufacturing. They are thus virtually redundant... but not in any sense actually redundant. Salaried employees and retail clerks are culturally indispensable (to maintaining social domination of capital) -- precisely because of the abstractness of what they do for a living. The divergence of hours, which centers on these kinds of occupations, thus serves to mask an underlying immobility of hours of work in the industrial sphere where such would be meaningful. "Civilization has to defend itself against the specter of a world which could be free."

The figure of the sandwich-man symbolizes the precariousness of the salaried intelligentsia in the age where the linkage between hours of work, value creation and pay break down and where general social knowledge becomes the primary direct force of production.

TheTrucker said...

I wish to make MY, position clear on hours of work. All of these points concerning, for instance, the increase in premiums caused by using fewer employees, are valid points. It is just that they fall into the noise level when compared to the perversity caused by employer provided health insurance and pensions. We currently have a crises in the auto manufacturing business that centers on the inability of the manufacturers to cover their benefit packages. In Canada work hours issues are not in the noise level because you have removed the primary problem (i.e. health insurance premiums subsidized by independent employers). The emphasis here in the USA must not move away from severing any link between an employer and pensions/health insurance. That this is the 500 pound gorilla here in the USA that keeps wages low and hours long.

Sandwichman said...


I think your signal/noise analogy is a good one, but I would argue that the employer-provided health insurance is the noise, the increase in premiums amplifies that noise.

In Canada, we have government health insurance and our hours of work are only moderately better than in the US, mainly because we have legally-mandated vacations. So the bulk of the difference comes from employment standards legislation and not from the improved health insurance scenario. There is, as in the US, a great divergence of hours. I don't want to downplay the improvement. A little better is still better.