Sunday, March 8, 2009

The Case for Working Less

by the Sandwichman

The Sandwichman steps out and guest posts at the Relentlessly Progressive Economics Blog.


Robert D Feinman said...

Three random remarks.

1. At the end of last year I proposed something similar, here's one copy of it:

Dancing in the Streets

Lots of cultures work enough to live, in the Max Weber version we live to work.

2. The idea that working longer leads to more output is only true with assembly line type of work. If you make 10 widgets an hour and work eight hours your output is 80, if you work 100 then your output is 100. Right now we have low factory utilization, so working more is fairly pointless.

In areas where output is not related to material products workers have developed their own ways to resist. One can see this in the way people now do chores at work via their computers: answering email, shopping and just plain goofing off. Before this we had meetings around the water cooler. Then there are the immeasurable ways, how much code does a programmer write in a day?

3. One of the more novel ways to deal with work hours was proposed by Edward Bellamy in "Looking Backward". Everyone earned the same amount, but the rate of pay was inversely proportional to the distastefulness of the job. So those who clean muck from sewers might only work two hours per week, while economists would have to work 100 (wink!).

In our society those with the most distasteful jobs usually not only get the lowest pay, but work harder as well. Why they stand for it remains one of the mysteries of the age.

Sandwichman said...

Also, cleaning muck from sewers is more socially useful than spewing ideological muck.

Sandwichman said...

Stephen Gordon asked, “just what is the coordination problem that generates this bias?”

Chapman presented a diagrammatic summary of his argument in a footnote to his “Hours of Labour” article published in the September 1909 Economic Journal. I transcribed that footnote and broken down his single diagram into four at the following URL:

The Government of the State of Queensland summarized Chapman’s analysis (based on my account of Chapman’s theory) in their submission to the Australian Industrial Relations Commission on the “Reasonable Hours Test Case.” I included a scan of the pages from the Queensland submission as an appendix to my submission to the White House Task Force on Middle Class Working Families, available at the following URL:

Finally, here is the argument as reproduced in the Wikipedia entry on Sydney Chapman:

The main points of this argument can be summarised as follows:
* a mass of evidence indicating that reductions in hours of work had not led to proportionate declines in output;
* modern industry fatigue was less physical in nature and more a combination of psychological and physiological as a result of specialisation and increased need for mental concentration;
* the reduction of hours allowed better-rested workers to produce as much or more in the shorter hours;
* the total value of the output would initially rise as the working day increased but eventually the total output as well as the output per hour would decline as the working day became so long that it prevented adequate recovery from fatigue for workers;
* this is the case because, beyond a certain point, each additional hour of work would be contributing to the output of the current day’s total output but at the expense of the following day’s output capacity; and
* the intensity of the work involved would dictate the point at which total output begins to fall and thus the length of the ‘optimal’ working day.
The second half of this argument explores whether the free market can arrive at the ‘optimal’ length of day, and can be summarised as follows:
* the maintenance of a long-term optimum by employers would require short-term restraint;
* each individual employer could never be certain of reaping the benefit of their restraint as another firm could potentially entice the employer’s well-rested workers away with a wage premium;
* therefore the optimal output work time is a form of investment without equity;
* simultaneously, Chapman (1909) assumed that workers would choose a longer working day than was prudent (although not as long as the working day preferred by employers), primarily because of a general short-sightedness that would mean workers would consider their immediate earning capacity more than their longterm earning capacity1; and
* the outcome in a free market situation would therefore be one where employers and employees acting in self-interest would each tend to select a working day that was longer than the ‘optimal’ hours.

Chapman (1909) considered three elements in gaging the optimal day for the worker;
1. the wage,
2. the marginal value of leisure and
3. the disutility of work.

Sandwichman said...

Marc Lee asked: “The big issue is how we get there, or what this means in terms of policy. I was hoping Tom would address this… So Tom, what’s the action plan? Is there any public opinion research that points to where people themselves would like to go in terms of hours of work?”

This is indeed a big, big issue. As Gerhard Bosch has pointed out, the design and implementation of work time reduction policies are critically to their effectiveness.

Marc Linder has written comprehensively on the problems inherent in the traditional overtime penalty/premium approach. I’ll defer discussion of that angle to his thorough volumes.

In my view, there isn’t one “silver bullet” policy that slays this vampire. I have argued vigorously, in the past, for a review and modification of existing policies that create perverse incentives for longer hours of work. The February 1998 issue of the CCPA Monitor includes an article by me on “closing the overtime loophole.” Lars Osberg, in his contributions to the Canadian Federal government’s 1998 “Collective Reflections on the Changing Workplace,” consultation responded to these concerns:

The design of payroll tax-based programs such as Employment Insurance and the Canada Pension Plan now encourages firms, when they need more labour, to increase overtime hours rather than hire new employees. Employer premiums for EI are payable only until workers reach maximum insurable earnings, and employer premiums for CPP are payable only until maximum yearly pensionable earnings are reached. Above those thresholds, each additional hour of work costs the employer nothing in payroll taxation. Payroll taxes, like employer-paid fringe benefits (e.g., supplementary health insurance) are then a lump-sum cost per employee, which can be spread over more hours of employment, hence the benefit to the employer of a longer work-week for covered employees. Government also implicitly encourages businesses to pay part of employee compensation in the form of such fringe benefits by exempting their value from income taxation.

On both equity and efficiency grounds, it would be desirable to level the playing field. We do not allow, much less encourage, employers to pay different compensation packages to individuals of different ages, and we should not create government policy incentives that encourage different packages for full-time and part-time workers.

In response to this issue, recommendation #3 of the consultation stated:

Public policy should not create artificial incentives for a longer work week or for creating part-time jobs at the expense of full-time ones.

Currently, public policy sometimes creates artificial incentives for employers to hire part-time instead of full-time workers, and to increase significantly the weekly number of hours worked by existing employees.

In the decade since that recommendation was made, I don’t reckon a lot has been done to remove those artificial incentives from existing policy and certainly nothing comprehensive.

It would be naive to rely entirely on government action to address working time and there are approaches that unions could take. For example, instead of simply having wages go up by annual or semi-annual increments in a pay grid, wage increments could be matched by work-time reductions. That proposal was outlined in a 1998 “World’s Greatest Ideas” submission that received honourable mention.

Let’s face it, the big issue today is the collapse of the economy, followed by the prospect of human activity induced climate change. Or maybe it’s the other way around. As long as we’re talking “stimulus packages,” why shouldn’t we be talking about measures that reduce working time as the same time that they protect incomes, especially of the most vulnerable? My own proposal, offered half tongue in cheek simply because of its magnitude, was to establish a kind of guaranteed annual leisure income. In essence the government would pay everyone, at the median wage, to take a day off every week. People could work longer hours if they chose, but the supplemental payment would be clawed back in proportion to the number of hours they worked above an annual ceiling.

Soon after that Dean Baker suggested in the Guardian a somewhat more modest but similar proposal. Dean’s idea is to give employers a tax credit if they reduce the work week or grant vacations with no loss in pay:

That’s enough for now. I’ll go into the 1994 Donner task force recommendations in a later comment. I want to finish off with a final observation that Dean’s proposal and others like it are routinely pooh-poohed on the basis of objections that, for example, assume that fixed per-employee costs are a natural fact of the world rather than being policy-induced perverse incentives (see the Lars Osberg quote above). Or they assume that output and thus wages vary proportionately with hours worked, contrary to the Chapman theory discussed in the post and my previous comment.

Is there any public opinion research? Yes. But again these things have to be looked at with a keen methodological eye. When asked if they would like to work fewer hours, the majority of people say "yes." When asked if they want to work fewer or more hours assuming a proportionate cut in pay, most people say "no." Both questions contain hidden assumptions that are serious enough to skew the results enought to throw into question the surveys themselves. It would be possible to design a survey that mitigates the hidden assumption problem but to my knowledge it hasn't been done. Hey, it isn't rocket science... but then it isn't routine market research either.

Also, with regard to policies, there are a number in place in the Netherlands and the Scandinavian countries that provide for flexible time off, parental leave and reduced work time schedules. Some of these, for example, are discussed in the UNEP Green Jobs report.

wellbasically said...

"modern industry fatigue was less physical in nature and more a combination of psychological and physiological as a result of specialisation and increased need for mental concentration"

But is it worse overall? Is working 40 hours technologically worse than working 80 hours manually? And isn't the question how much should somebody who works 80 hours sacrifice in income to gain the leisure time?

Or are we just expecting some super-productive person to make up the fall in income by paying the worker who reduces his hours more for less work, either through taxes or in higher prices for the same good?

Sandwichman said...

But is it worse overall?

What does 'worse' have to do with it?
Could you state your question about 'sacrifice' more clearly? It seems to imply a lot of assumptions that go unstated. Is it a rhetorical question? Is it a loaded rhetorical question? 'fraid so. & Who is this 'super-productive' person you have in mind? A CEO?

wellbasically said...

Worse as in worse for happiness. Such does a tech worker die sooner because of a heart attack, instead of getting hit by a combine, or just wearing out from shovelling all day.

I think that a few people arrive at your formulation of working time by themselves -- if they can, if they have the power. I think they get that power by holding various kinds of capital such as special knowledge acquired over time, or maybe they own the business, so they have physical capital.

That leads me to suspect that you were right a few posts back. Those who expect stimulus to produce growth can't answer your challenge of does it produce happiness. I can explain that because the stimulus people don't apply the money to the most productive use, which would lower the hours worked and the "jobs created". That's not their object.

BruceMcF said...

Well, so would some of you lads work less so I can work more?

No time to talk about it now, got to go off and do some more unpaid marking ... hey, wait a minute, maybe I'm already working more, I'm just not counting it because I only get 1 hour prep per 4 hour class, no matter how much work I do over 1 hour (and of course, its a good school as business colleges go, so doing merely 1 hour prep per 4 hour class and you are not long for the job).

wellbasically said...

"I think Bernanke is saying that we will never return to that subtle economic stability the Cleavers enjoyed after WWII where we had one breadwinner, a stay-at-home wife, a better chance of lifelong employment, and safe company-sponsored retirement plans. Bernanke seems to think that we have such a "dynamic economy" these days that Mrs. Cleaver wants to go back to work, and Ward, Wally & the Beaver will want to change jobs every few years. I wouldn't call this a "dynamic economy", it's more like the chaos economy because of the havoc of a floating dollar which creates extreme "business cycles". Bernanke never mentions that the Cleavers lived with a dollar tied to gold, and today we don't."

Dear Tom, I pass this along to you for fun.