Whether you work by the piece
Or work by the day
Decreasing the hours
Increases the pay.
-- Mary Steward
Whether you work by the piece
Or work by the day
Decreasing the hours
Increases the pay.
Study Finds Reduction Won't Necessarily Create Jobs
Special to The New York Times
ITHACA, N. Y. Jan. 4—A reduction in the number of working hours a week in American industry will not necessarily create more jobs, a study recently completed by a former research assistant at Cornell's New York State School of Industrial and Labor Relations has found.In a bulletin, "The Shorter Work Week," issued by the school, Marcia L. Greenbaum has reported that the 40-hour work week is likely to disappear, but much more gradually than many labor leaders seem to want.
Miss Greenbaum notes that many of the nation's labor leaders believe that a 35-hour week with the same weekly pay now earned for 40 hours of work and double time for overtime will help to solve the problem of unemployment. However, she has pointed out that to maintain take-home pay will require a 14.3 per cent wage increase.
In turn, she reported, this will mean an increase in management's labor costs that, in highly competitive industries will require the laying off of workers, increasing productivity and a passing on of costs to consumers.
Her study, she reports, found that management and Government officials contend that a shorter work week at the same pay would probably mean a drop in living standards.
"The 14.3 per cent wage increase is almost five times more than the normal annual productivity increase of 3 per cent," Miss Greenbaum said. "Productivity would have to increase as much as wages increase to prevent inflation."
She added that, as a result, "real wages would be less since rising prices would mean higher living costs." The shorter work week would also lead, Miss Greenbaum reported, to a probable increase in moonlighting and an increase in the labor force of secondary workers such as housewives and retired workers.
"There are other ways of decreasing hours of work, such as longer weekends, longer vacations and' earlier retirement ages," Miss Greenbaum reported. She also suggested sabbatical leaves for older employes.
If this chapter has painted a gloomy picture of the economic implications of the shorter workweek, it is simply reflecting the nearly unanimous opinion of economists outside of the labor movement. Every other labor proposal for coping with unemployment -- such as the AFL-CIO's recommendations concerning tax cuts, public works, aid to depressed areas, and retraining the unemployed-receives support from at least some economists and public officials. In their plea for shorter hours, however, union leaders stand alone, attacked even by the leading officials of a friendly Administration.
Labor's arguments are simple and straightforward. If the government can not solve the severe unemployment problem, then unions must devise some method of inducing individual employers to hire more workers. If an employer can work each employee only 35 instead of 40 hours a week, then it is believed that he will hire more employees to make up the lost production. At the same time, labor claims, purchasing power can be maintained, or even increased, by requiring that weekly pay be kept at the 40-hour level.
The objections to the shorter workweek, we have seen, center almost entirely on its cost impact. If hours are reduced in one large jump, labor's insistence upon maintaining weekly take-home pay means that the employer is faced with a huge hourly wage increase and perhaps some other costs as well. In that event, it is assumed that the employer will attempt to offset these increased costs by raising prices or taking other action that will most likely result in no net employment increase and might even cause a loss of more jobs. On the other hand, if labor asks only that shorter hours be introduced gradually, in step with productivity increases, then again the employer has no incentive to hire any additional workers, for nothing has happened either to his costs or to his demand.
As labor leaders point out, the majority of economists have often been wrong before and perhaps they are wrong again on this issue. Until experience proves otherwise, however, prevailing opinion is that the shorter workweek is not the answer to the very real problem of unemployment which has plagued our economy in recent years.
As I noted in my previous post, the very big government budget deficit in 2010 was largely the result of the recession. That fact is difficult to square with the myth that the coalition government rescued the economy from an impending financial crisis, so it is important to push another explanation for the large deficit: that it reflected the profligacy of the previous government.The Great Recession increased the deficits for a lot of nations including those that undertook the Herbert Hoover economics of fiscal austerity during a period of weak aggregate demand. Over 60 years ago, E. Cary Brown noted that an analyst needs to separate the automatic stabilizer effects on the actual deficit from changes in fiscal policy. This is often accomplished by examining the structural surplus (deficit). Simon also notes:
The only way you can sustain the myth that Labour was fiscally profligate is by suggesting that immediately before the recession the UK was experiencing a massive boom. In an economic boom tax receipts are high and spending on transfers low, so the budget should be in surplus. If it is in fact in significant deficit, that indicates serious fiscal laxity.He continued with a criticism of how the IMF changed it estimate of the UK’s potential output, which we also noted. Simon’s latest continues the discussion:
The first point is to stop talking about GDP, and start talking about GDP per head ... As the chart shows, we have failed as yet to make up for any of the ground lost not just in the 2009 recession, but also ground lost as a result of fiscal austerity in 2010 and 2011 … So we have not really seen a recovery. Maybe the pessimists are right, and we will never recover any of that lost output, but still you do not call it a recovery. I can put it another way. Quarterly growth in GDP per head since the beginning of 2013 has averaged about 2% at an annual rate. That is below the average growth rate since 1955. A recovery from a deep recession would have growth rates well above the long term average … the prosperity of the average citizen in this country has hardly increased over the period of this coalition government - a result that is totally unprecedented since at least WWII. As recoveries from recessions go, this does not seem like a recovery worthy of the name. Yet we keep being told by mediamacro that the Coalition’s strong card is its economic record!As we noted when we presented Bill Martin’s aggregate demand explanation versus the productivity pessimist story: Bill comes down on the latter explanation as does Paul and Simon. The former view is a Real Business Cycle tale of negative productivity shocks. We heard those stories 30 years ago but the US economy finally did fully recover. Let’s hope the same occurs for the UK economy. But let’s suppose for a moment that the productivity pessimists are correct. Then Cameron’s government should cease gloating how well the UK economy is doing as a permanent fall in real income per capita is not good news. Let me just add that if this productivity pessimism argument was valid, the expansionary monetary policy from the Bank of England should have been inflationary. But the record shows it was not. Paul Krugman adds a lot more but I found this part of interest:
Chart 3 shows estimates of our old friend the cyclically adjusted primary balance since 2009. I’ve included three sources – the IMF, the OECD, and Britain’s own Office of Budget Responsibility – just in case someone wants to argue that any one of these sources is biased. In fact, every one tells the same story: big spending cuts and a large tax rise between 2009 and 2011, not much change thereafter.Paul’s chart 3 were drawn from three measures of the cyclically adjusted primary balance that assumed the UK output gap was severely negative in 2007 even if Paul noted why these measures were likely low balling potential GDP. Of course, fiscal impact is about the change in fiscal policy but leave the UK for now. We are having a few debates about U.S. monetary policy and inflation that revolve around low ball estimates of potential GDP. Our two graphs show how I would estimate the output gap for two 7 year periods, which is by using the CBO estimate of potential GDP. John Taylor has been at this argument for way too long:
the Fed has returned to its discretionary, unpredictable ways, and the results are not good. Starting in 2003-05, it held interest rates too low for too long and thereby encouraged excessive risk-taking and the housing boom.There have been a lot of effective rebuttals to this claim. Our first graph suggests that we did not see the output gap disappear until the end of 2005 and the period of excessive demand was very short lived and was already being offset by the FED’s increase in interest rates. Yet we see this canard:
There are multiple measures of the output gap that show the U.S. economy overheating during this time. Below is a figure from this article that compares the real-time and final measures of the U.S. output gap. Everyone shows ex-post an overheating economy during the housing boom.David Beckworth had earlier argued we were witnesses a series of positive productivity shocks and yet he wants to argue the CBO overestimated potential output. Something does not add up. Our second graph relates to something from perhaps the last honest supply-sider - Bruce Bartlett:
In this article, the author reviews the continuing controversy over the Reagan tax cut. Republicans often assert that it was so expansionary that there was no revenue loss, something the Reagan administration itself never claimed. The truth is that the tax cut lost a lot of revenue, but helped the economy transition from high inflation to low inflation at an unexpectedly low economic cost.Paul Krugman rightfully points to the first part of this as evidence that the three stooges (Lawrence Kudlow, Art Laffer, and Stephen Moore) misrepresent the 1980’s record but I would question Bruce’s claim that the economic cost of the disinflation was low. In fact Paul noted that the cost was expected:
Keynesians came into the Volcker disinflation — yes, it was mainly the Fed’s doing, not Reagan’s — with a standard, indeed textbook, model of what should happen. And events matched their expectations almost precisely.Using the CBO measure of potential GDP during the 1980’s, the Volcker disinflation involved what Paul calls a PLOG – a prolonged large output gap.
(1) The consumer is king;Stated somewhat more evasively, these also happen to be the tenets of the dominant frame in contemporary economics -- the "equilibrium price-auction view of the world" (aka subjective preference theory or conservative ideal). Surprise, surprise!
(2) The process of production is none of the public’s business;
(3) The economy is driven by great business leaders and entrepreneurs;
(4) The workplace is a meritocracy; and
(5) Collective economic action is bad.
The idea that austerity during the first two years of the coalition government was vindicated by the 2013 recovery is so ludicrous that it is almost embarrassing to have to explain why … imagine that a government on a whim decided to close down half the economy for a year. That would be a crazy thing to do, and with only half as much produced everyone would be a lot poorer. However a year later when that half of the economy started up again, economic growth would be around 100%. The government could claim that this miraculous recovery vindicated its decision to close half the economy down the year before. That would be absurd, but it is a pretty good analogy with claiming that the 2013 recovery vindicated 2010 austerity.This FRED chart shows what Simon is referring to. A deep recession followed by a partial recovery with real GDP at only 1.037 of its 2007 level and real income per capita still below its level from 7 years ago. The UK economy is imitating the US macroeconomic performance 30 years ago. In 1983, we were still far below full employment but Cameron has found a bogus estimate of potential output in the UK that say they are just fine. Paul Krugman explains:
these estimates are now based on estimates of potential output, which purport to show that the British economy in 2006-7 was hugely overheated and operating far above sustainable levels. But nothing one saw at the time was consistent with this view. In particular, there was no sign of inflationary overheating. So why do the usual suspects claim that Britain had a large positive output gap? The answer is that the statistical techniques used by most of the players here automatically reinterpret any prolonged slump as a slowdown in the growth of potential output — and because they also smooth out potential output, the supposed fall in current potential propagates back into the past, making it seem as if the pre-crisis economy was wildly overheated.Bill Martin has been following this debate for a while:
There are two sharply contrasting explanations for the continuing malaise. The conjunction of weak activity, persistent inflation and disappointing trade performance adds weight to the common view that the economy has become bound to a lower trajectory, the result of a permanent loss of productive capacity. Others believe the economy is primarily constrained by weak demand, the result of a private debt overhang and a contraction in the flow of bank credit, deflationary forces made worse by an upsurge in world commodity prices.Bill comes down on the latter explanation as does Paul and Simon. The former view is a Real Business Cycle tale of negative productivity shocks. We heard those stories 30 years ago but the US economy finally did fully recover. Let’s hope the same occurs for the UK economy. But let’s suppose for a moment that the productivity pessimists are correct. Then Cameron’s government should cease gloating how well the UK economy is doing as a permanent fall in real income per capita is not good news.
"Economists call this the lump of labor fallacy, which holds that the amount of available work is fixed. If one person gets a job, another loses it. But the addition of new workers into a market, especially skilled workers, can increase the productivity of companies in a way that expands the supply of work for everybody." -- Wall Street JournalExcept, of course, when economists "call this the lump of labor fallacy," they do not do so as economists. They are performing as hack propagandists. When "more doctors smoke Camels than any other cigarette," they are not offering a medical opinion.
"People everywhere confuse what they read in newspapers with news." -- A. J. "Joe" LieblingTwo somber thoughts. First, economics is not only not a science; it is not even a scholarly discipline. It is a subsection of journalism. There is the style section, the sports section, the front pages and economics. The academic jargon mills with their fancy maths are there solely to lend a cachet of prestige to the front line hacks. Case in point: Henry Hazlitt.
"We need campaign finance reform. We do not need 'heroes' who take meaningless flights of fancy." -- Marsha Mercer, Richmond Times-DispatchHave you ever wondered what politicians do with all that campaign finance money? They don't keep it (or at least not most of it). They spend it. On campaigning. A lot of it on advertising. Which means buying time and space in the media. Including the Richmond Times-Dispatch.
Consider the following statement by John Kerry in his farewell speech to the Senate —
"The unending chase for money I believe threatens to steal our democracy itself. They know it. They know we know it. And yet, Nothing Happens!" — John Kerry, 2-13
In a July 2012 Gallup poll, 87% tagged corruption in the federal government as extremely important or very important, placing this issue just barely behind job creation. According to Gallup, public faith in Congress is at a 41-year record low, 7%. (June 2014) Kerry is correct. The popular perception outside the DC beltway is that the federal government is corrupt and the US Congress is the major problem. As a voter, I'm a member of the only political body with authority over Congress. I'm demanding reform and declaring a voter's rebellion in a manner consistent with Jefferson's description of rights in the Declaration of Independence. As a member of Congress, you have three options.
- You may pretend corruption does not exist.
- You may pretend to oppose corruption while you sabotage reform.
- You may actively participate in real reform.
If you're considering option 1, you may wonder if voters really know what the 'chase for money' is. Your dismal and declining popularity documented by Gallup suggests we know, but allow a few examples, by no means a complete list. That these practices are legal does not make them right! Obviously, it is Congress who writes the laws that make corruption legal.
1. Dozens of major and very profitable corporations pay nothing in taxes. Voters know how this is done. Corporations pay millions to lobbyists for special legislation. Many companies on the list of freeloaders are household names — GE, Boeing, Exxon Mobil, Verizon, Citigroup, Dow …
2. Almost half of the retiring members of Congress from 1998 to 2004 got jobs as lobbyists earning on average fourteen times their Congressional salary. (50% of the Senate, 42% of the House)
3. The new democratic freshmen to the US House in 2012 were 'advised' by the party to schedule 4 hours per day on the phones fund raising at party headquarters (because fund raising is illegal from gov't offices.) It is the donors with deep pockets who get the calls, but seldom do the priorities of the rich donor help the average citizen.
4. The relevant (rich) donors who command the attention of Congress are only .05% of the public (5 people in a thousand) but these aristocrats of both parties are who Congress really works for. As a member of the US Congress, you should work only for The People.
1. Not yourself.
2. Not your political party.
3. Not the richest donors to your campaign.
4. Not the lobbyist company who will hire you after your leave Congress.
There are several credible groups working to reform Congress. Their evaluations of the problem are remarkably in agreement though the leadership (and membership) may lean conservative or liberal. They see the corrupting effect of money — how the current rules empower special interests through lobbyists and PACs — robbing the average American of any representation on any issue where the connected have a stake. This is not democracy even if the ritual of elections is maintained.
The various mechanisms which funnel money to candidates and congress-persons are complex. It happens before they are elected, while they are in office and after they leave Congress. Fortunately, a solution to corruption is not complicated. All the proposals are built around either reform legislation or a Constitutional Amendment. Actually, we need both — a constitutional amendment and legislation.
There will be discussion about the structure and details of reform. As I see it, campaign finance reform is the cornerstone of building an honest Congress. Erect a wall of separation between our elected officials and big money. This you must do — or your replacement will do. A corporation is not 'people' and no individual should be allowed to spend hundreds of millions to 'influence' an election. That much money is a megaphone which drowns out the voices of 'We the People.' Next, a retired member of Congress has a lifelong obligation to avoid the appearance of impropriety. That almost half the retired members of Congress work as lobbyists and make millions of dollars per year smells like bribery, however legal. It must end. Pass real campaign finance reform and prohibit even the appearance of payola after retirement and you will be part of a Congress I can respect.
The states have the power to pass a Constitutional Amendment without Congress — and we will. You in Congress will likely embrace the change just to survive, because liberals and conservatives won't settle for less than democracy. The leadership and organization to coordinate a voters revolution exist now! New groups will add their voices because the vast majority of Americans believe in the real democracy we once had, which Congress over time has eroded to the corrupt, dysfunctional plutocracy we have.
The question is where YOU individually stand. You have three options and you must choose.
Douglas M. Hughes
Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.
"...we demand that Barack Obama ordain a Presidential Commission tasked with ending the influence money has over our representatives in Washington. It's time for DEMOCRACY NOT CORPORATOCRACY, we're doomed without it."As Hillary Clinton said the other day in Iowa, "We need to fix our dysfunctional political system and get unaccountable money out of it once and for all even if that takes a constitutional amendment." (The Guardian observed that "It was a bold stance from Clinton, who has long courted the support of Wall Street hedge funds and is widely expected to benefit from the most expensively financed campaign in US presidential history." I suspect by "bold" they meant "brazen.")
A "soap" salesman offers to give away money wrapped in with the soap packages ( $1 to $100 bill) in order to induce the sales of his wondrous product. Using slight-of-hand the money is extracted so that none of the bars have any money. They are sold for $1 at the start. Shills will use palmed $5 and $10 bills to get sales rolling at which time the soap sales man begins to auction off the remaining packages to the highest bidder.
Consider, on the other hand, the genius of that simple #occupywallstreet hashtag. Three little words, with a call to action built right in. And, also right there was the potential for an articulated brand architecture that any corporate identity expert could envy. "Occupy" sits in the master brand position. Fill in the blanks for a potentially infinite number of user-generated subbrands, from Occupy Amarillo to Occupy Zurich. Elsewhere in the OWS communications arsenal, we find other slogans ("We Are The 99%") and some visual tropes (the Guy Fawkes mask popularized by Anonymous, now an emerging public "face" for the protest). But no typeface guidelines, no color standards, no official logos.Could it be, as Bierut writes in his final paragraph that "Sometimes, the key to political change isn't designing a logo or poster"? He makes the same point several times in his post: "I suspect that many of its supporters would insist that the last thing OWS needs is something as simple and reductive as a logo." "conventional graphic design seems like an inefficient way to make a point, never mind to create or fuel a political movement"
More than 10 years ago, the kinds of investors who seek out weak companies were circulating presentations on Wall Street that argued that General Electric’s enormous lending business was a ticking time bomb. The financial crisis of 2008 proved those skeptics right, and on Friday, they appeared to have the final laugh. General Electric announced that it was selling most of the loans inside its financial division, GE Capital, leaving a G.E. that will be dominated by industrial businesses. The shift, to be completed by 2018, would end one of the riskiest experiments in finance. It also indicates that regulations intended to limit destabilizing financial practices are starting to bite.That Dodd-Frank reforms take away the joys of regulatory arbitrage just bites. And I guess paying U.S. taxes also bites as noted by Steve Goldstein:
General Electric’s deal to sell off real estate and get out of most of the finance business contains a little sweetener for the U.S. government, in the form of up to $4 billion worth of taxes on repatriated earnings. The issue of tax repatriation is arguably the hottest one in corporate tax policy. Right now, U.S.-based multinationals are not taxed by the U.S. government on what they earn overseas — until they bring that money back to the U.S.GE is saying that this repatriation tax might be as much as $7 billion. But the GE Capital alone segment was parking $36 billion overseas. They have paid a modest amount of foreign taxes so they get a Foreign Tax Credit. And its other divisions are still parking a lot of profits overseas, which will likely not be repatriated allowing the effective tax rate for these other segments of their business to remain below 20%. Steve continues:
According to a report in March by Credit Suisse’s David Zion, the cumulative earnings parked by S&P 500 companies overseas is over $2 trillionUnder current law, the repatriation tax would be 35% minus any Foreign Tax Credits. Let’s assume that foreign taxes are 20% of foreign earnings. This would mean the US Treasury could net 15% of this $2 trillion if deferral benefits were ended. And $300 billion could finance a lot of infrastructure investment. But Steve notes that Washington is proposing to change this tax:
President Barack Obama has proposed a one-tax 14% tax on $2 trillion of overseas earnings, followed by a 19% minimum tax on future profit, and former House Ways and Means Committee Chairman Dave Camp proposed a one-time tax of 8.75%.For companies whose foreign earnings are in tax havens, these proposals would raise at least some tax revenues but for companies where the foreign tax rate is above 19%, even the Obama proposal would effectively eliminate the repatriation tax given the Foreign Tax Credit.
Guy Standing on top of an airplane
As a rule, new modes of economy will lead to an increase of consumption, according to a principle recognised in many parallel instances. The economy of labour effected by the introduction of new machinery, for the moment, throws labourers out of employment. But such is the increased demand for the cheapened products, that eventually the sphere of employment is greatly widened....
Now the same principles apply, with even greater force and distinctness, to the use of such a general agent as coal. It is the very economy of its use which leads to its extensive consumption....This theory is known as the Jevons Paradox or the rebound effect. Substitute "fossil fuel" for coal and the theory predicts pretty accurately the results presented in the above table.
And if such is not always the result within a single branch, it must be remembered that the progress of any branch of manufacture excites a new activity in most other branches, and leads indirectly, if not directly, to increased inroads upon our seams of coal.
The moon belongs to everyone,
The best things in life are free;
The stars all shine for everyone,
They're shining for you and me.
The flowers in Spring,
The birdies that sing,
The sunbeams that shine,
They're yours--they're mine.
The sky belongs to everyone...
The lawsuit was brought by the Texas Environmental Law Center, and is part of a court campaign in a dozen states by an Oregon-based nonprofit, Our Children’s Trust. The group is using children and young adults as plaintiffs in the lawsuits — some state and some federal — filed in Alaska, Arizona, California, Colorado, Iowa, Minnesota, Montana, New Jersey, New Mexico, Oregon, Texas, and Washington.As David Morris reported in On the Commons, Peter Barnes proposed treating the sky as a public trust in his 2001 book, Who Owns the Sky. Barnes's idea was the basis for a "cap-and-dividend" bill proposed in the U.S. House of Representatives in 2009.
By relying on ‘‘common law’’ theories, the group hopes to have the atmosphere declared a public trust for the first time, granting it special protection. The doctrine has been used to clean up rivers and coastlines, but many legal experts have been unsure if it could be used successfully to combat climate change.
Finally, there is output growth. In the UK, real (inflation-adjusted) GDP fell by 3.8% from the fourth quarter of 2007 to the second quarter of 2010. It then rose by 8.1% from that point until the fourth quarter of 2014. In the US, real GDP fell by 1.6% from the fourth quarter of 2007 to the second quarter of 2010, and then rose by 10.5% from then until the fourth quarter of 2014. Thus, both countries have experienced moderately high and broadly similar growth rates since May 2010, when Cameron’s government took power.I have no idea what Paul Krugman did to tick off Jeffrey Sachs so I’ll let him speak for himself. But let’s note the fact that the real GDP in the US was a mere 8.7% higher in 2014QIV than it was in 2007QIV. That is by any measure a terrible economic performance. We should also note that real GDP in the UK has increased only 3.7% over the same period. For anyone to suggest that such a dismal economic record justifies fiscal austerity leaves me wondering where this person learned their macroeconomics.
With a few important exceptions (the work of Herman Daly and colleagues, e.g., Daly and Townsend 1993 ; see also Princen et al. 2002 ; Meadows et al. 2004 ; DeGraaf et al. 2005 ; Whybrow 2005 ; Victor 2008 ; Schor 2010 ), most of the research, teaching, and popular discourse on sustainability continues to focus on technological solutions—more energy, more resources, more efficient eco-friendly growth—while the actual leverage point—voluntarily limiting our consumption—remains largely undiscussable, particularly among our business and political leaders.DeGraaf 2005, Victor 2008 and Schor 2010, by the way, all prescribe reductions of working time as key to reducing emissions. Wagner and Weitzman on Sterman's bathtub analogy: "climate scientists -- and the rest of us -- would be well advised to remind ourselves daily of its significance." Paul Krugman on Martin Weitzman's fat tail analysis: "So what I end up with is basically Martin Weitzman’s argument: it’s the non-negligible probability of utter disaster that should dominate our policy analysis. And that argues for aggressive moves to curb emissions, soon "