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Chapter Nine: Nuts and Bolts of the Shorter-Workweek Proposal

 

What is the shorter-workweek proposal? How might it affect the economy? The principal mechanism to reduce work hours is the Fair Labor Standards Act passed by the U.S. Congress in 1938 and signed into law by President Franklin D. Roosevelt. This law prescribed a “standard” workweek of forty hours that would go into effect in October 1940. The law applied mainly to hourly workers in offices and factories; those who were managerial or professional employees or who worked on the farm or in certain other occupations were exempt from its provisions.

The significance of the forty-hour standard was that employers were required to pay covered employees one-and-one-half times their normal hourly rate of pay for each hour which these people were required to work in a week beyond the standard. The Fair Labor Standards Act did not prohibit scheduling more than forty hours a week but made it financially less attractive for employers to do so. Overtime hours would cost 50% more than hours worked within the standard schedule. If employers needed extra work, they would be motivated to hire an additional worker, who would work up to forty hours a week and be paid straight-time wages, instead of scheduling overtime work for their current work force.

The 1930s were an unusual time for the U.S. economy. Most Depression-era workers were already working less than forty hours a week. With U.S. involvement in World War II, government deficits financed war production. Young men went into military service while some women became factory workers. Consumer goods were rationed. Unspent wartime wages and lack of consumer products created a pent-up demand for these products after the war.

It is difficult to judge how the Fair Labor Standards Act affected employment under those circumstances. Compared with the years following World War I, there was a smooth transition to a peacetime economy. Conditions of low unemployment and a boom in production and spending carried through most of the 1950s. One might say that the standard week and overtime penalties enacted in 1938 prevented the workweek from rising to a higher level than forty hours after the war. That, in turn, brought a strong demand for new workers which kept unemployment from rising in response to productivity gains. This historical experience provides negative evidence to suggest that shorter workweeks do strengthen employment though other factors are, of course, involved.

Karl Marx noted in his writings that after the 10-hour day was adopted in England in the late 1840s, a great prosperity ensued. The expected drop in production and decline in living standards never took place. When the British government adopted an emergency 3-day workweek during the 1973 coal miners’ strike, economists were surprised to learn that industrial production declined by only 6%. Improved productivity and reduced absenteeism took up most of the slack. There were, again, enormous gains in productivity as Japanese employers reduced working hours in the late 1960s.

Forced to generalize, I would cite a French study which determined that “a 1 per cent cut in weekly hours of work would lead to an average fall in production by 0.6 per cent.” That means that, typically, 60% of the production-shrinking effect of shorter work hours will be made up by increased employment and 40% by improved productivity. Cuts in work hours tend to stimulate both productivity and employment, in a 40%-to-60% ratio. Basically the trade unionists’ argument that shorter workweeks can relieve unemployment is correct, though part of the job-creation potential is offset by higher productivity.

There is another factor in this equation: consumer spending. If shorter work hours reduce unemployment, then more people are employed and have money to spend on consumer products. Consumer confidence rises if workers no longer fear for their jobs. That means that the demand for consumer products will increase and, with it, employers’ need to employ people to make those products.

Henry Ford, the automobile manufacturer, cited another advantage of shorter hours. He argued that, as working people have more leisure, they will perceive a greater need for various consumer products since it is mainly in one’s spare time that one uses these products. He pointed out, for instance, that if workers had to be in the shops from dawn to dusk, they would have little use for automobiles. Most people would be too tired to do anything but work. With time off on weekends or at certain times of the year, Americans will want to purchase cars to drive around town in shopping errands or for leisurely visits or to travel to more distant places during their vacations. There is a direct economic benefit to businesses engaged in providing goods or services related to those purposes.

Although the U.S. business community has steadfastly opposed proposals for reduced work hours, this change would, in fact, stimulate business by creating a stronger market for consumer products. Obviously, it would not be in an individual employer’s interest to hire more workers for the purpose of strengthening the general market; but this would be to the advantage of the business community. A creative business leader such as Henry Ford let his vision of a better society guide business decisions. With respect to shorter hours, he was willing to back this up with action.

Today’s business leaders who are engaged in siphoning off wealth for themselves from corporate entities have a more short-term perspective. They feel little responsibility for nurturing the consumer market. If, however, we want to revive our anemic economy, it would be well to listen to what its creators had to say. Henry Ford observed that “it the influence of leisure on consumption which makes the short day and the short week so necessary. The people who consume the bulk of goods are the same people who make them. That is a fact we must never forget - that is the secret of our prosperity.”

A question often asked in response to such proposals is what impact shorter work hours might have upon wages. Would workers have to take pay cuts? The answer is that it varies according to the situation. During economic recessions, companies sometimes introduce work-sharing arrangements. Employees work shorter hours and take corresponding cuts in pay. This is an unwanted, albeit altruistic, short-term move by the workers on reduced work schedules. It does save a few jobs. In the long run, however, reduced workweeks do not reduce income, because they create more favorable market for labor. Work hours are a component of labor supply. If the government causes average work hours to decline, labor supply therefore drops and the price of labor tends to rise.

A French economist, F.S. Simiand, found, contrary to expectations, a “ negative correlation between wages per hour and the number of hours worked” in the 19th Century French coal-mining industry. Paul Douglas, an economist who became a U.S. Senator from Illinois, studied the relationship between hours and wages in seventeen U.S. industries in three periods of time: 1890, 1914, and 1926. He wrote: “The industries with relatively high hourly earnings tend to be those with a relatively shorter week than the average, while the industries characterized by a relatively low hourly wage scale tend to be those with a longer than average working week.” Douglas’ and Simiand’s work has been updated and substantially confirmed by more recent studies in the 20th Century.

Now we come to the big question: What would happen to the U.S. economy if the federal government cut the standard workweek to 32 hours? Legally, employers would be required to pay overtime wages to covered employees who worked more than 32 hours a week. Does this mean that average hours would actually be reduced? Not necessarily. Several evasions are possible:

First, because the fixed-cost component of employment (in the form of pensions, vacations, training costs, etc.) has risen in comparison with the direct hourly cost of labor, some employers might continue to schedule workweeks beyond 32 hours and pay the extra money. The 32-hour workweek law would then become a vehicle for a disguised pay hike. The workers would like that, of course. The employer might try to make it up by offering a lower rate of straight-time pay, which the workers would not like but still might accept. Because of this possibility, I support increasing the rate of overtime pay from time-and-one-half to double-time; and, lest chronic overtime become a substitute for higher straight-time pay, I favor taxing away the additional premium which the employer has to pay. The disincentive to the employer should be increased without creating a positive incentive to the employee to work long hours.

A second type of evasion has to do with classification of workers covered or not covered under the law. If a shorter workweek is imposed on employers, some might try to reclassify previously covered employees to be exempt from the law, calling them managers or professionals. Employees who aspire to be promoted into management positions might find the reclassification hard to resist. To combat this type of evasion, federal enforcement agencies should adopt clear criteria for coverage. It is reasonable to say, for instance, that an employee who does not supervise another employee is not a manager or a management employee. The employee is probably not a professional if his or her salary is less than the firm’s median. Finally, some employers might simply ignore the law as many already do. Tougher, more consistent enforcement is needed to stop that. Government leaders also need to communicate the importance of reduced work hours in their scheme of community improvement.

Assume that these obstacles have been overcome. Employers face higher payroll costs if they continue the existing work schedules. Most employers would try to arrange for the work to be completed within 32 hours each week. Firms which are overstaffed or which have tolerated loose work behavior might still be able to get the work done in a shorter time without hiring new employees. They would tighten up or restructure operations for greater efficiency. Some employers, facing higher labor costs, would invest in labor-saving equipment. Others would crack down on the abuse of sick leave or unexcused absences.

While these productivity-enhancing moves would be the employers’ first reaction, the plan is that eventually they would be forced to hire new people to satisfy their production requirements. Employers would be seeking employees wherever they might be found. The pool of unemployed workers would be an obvious source of labor. Those “not in the work force” - retired persons, housewives, students - who had the time and needed extra money, might be offered special incentives to work. Some workers might be lured to better-paying jobs from positions with other employers. As the labor market tightened, employers might be forced to hire people with lower job qualifications or to improve pay.

How might a shorter workweek affect GNP and the mix of industries and occupations comprising the economy? We do not know. Parkinson’s Law states that work expands to fill the time available for it. I think that is what has happened in the macro economy. Productivity increases have increased the “time” available for work and the economy has filled up with wasteful enterprise. How would Parkinson’s Law look in reverse? What would happen if “time” shrinks? One would hope that the economic functions would prevail over the political.

People need to eat food, wear clothing, live in houses, drink clean water, and so on. They do not need to go to war to defend their political or religious values, sue each other over racial or gender discrimination, or advertise commercial products to the hilt. If there is a shrinkage of time available for work, I would imagine that a massive restructuring of industries might take place in the direction of what people need for their daily lives. All the unneeded, unwanted things produced by our bloated economy would tend to fall by the wayside or, at least, be reduced in scale. I am imagining, in other words, that patterns of growth over the past half century will be reversed and our economy of waste will revert to an economy of sensible, needed production.

Concretely, how might this economy look? Maybe some people would go back into agriculture, mining, and manufacturing as shorter workweeks depleted the time which existing work crews had to handle their production. Because people had only to work 32 hours a week, they could work harder, with less illness and stress, and still produce all the things which human beings need for a healthy and happy life. The shorter hours would be purchased at the cost of giving up many wasteful things currently being produced.

I am not so naive as to think that defenders of the status quo would give up without a fight. What about the two million persons in U.S. jails or prisons? If society cannot afford to keep them there any more, we may just have to find a way to release these people regardless of what the courts have decided. Maybe if this nation offered reasonably good jobs to members of the underclass, fewer young people would be attracted to a life of crime. Maybe the big payoffs from gambling will seem less attractive if a better life is available right now from honest work.

Maybe it won’t be necessary for the U.S. military to “protect American interests” in the Middle East and elsewhere if Americans learned to enjoy the simple things in life and required less oil brought from afar. If we had more free time, we could cook our own meals, mend our clothing, repair broken-down products instead of buying new ones, and live in the real world instead of consuming Hollywood-produced fantasies in the short snatches of time that we have between one frenzied activity and another. A shorter workweek offers a way to have full employment and fuller lives without expanding material production and depleting the earth’s limited resources. Why on earth would we not seize that opportunity?

The reason is, of course, that there are powerful interest groups which prefer the present system. An enormous economic, political, and social structure is supported by the existing financial arrangements. Leisure, while humanly beneficial, has one great drawback: there is no money attached to it. No one stands to make money if you sit on a park bench watching the squirrels instead of renting videos or if you read library books instead of enrolling in school. Thief like, you are getting some of the best things in life for free. Sadly, our society discourages this behavior because, to “make progress”, its economy must grow in dollar-denominated GNP.

The monetarized value of the society’s goods and services must continue to grow to keep financial commitments already made. Various persons and groups have loaned out money at interest and need to be repaid. Repayment of money loaned out at compound interest requires a continually “growing” economy. Government, too, needs economic growth to meet its tax requirements. Since so many powerful groups all have their hooks in the system, we peons must work to earn and spend money. A business which defaults on its loans or a government whose currency is debased loses face. Since that often leads to a loss of power and position, these groups are insistent that mere human happiness does not justify a lack of interest in money and working long hours. The financial bubble must continue to grow. It would take a revolution of sorts for individuals to choose the alternative, the pressures are so great.

If such a revolution is to occur, it will need political support from certain groups. One would think that organized labor would comprise one such bulwark of support. Today, labor is ambivalent about reduced work hours. There remains, however, a core of idealists within the labor movement who would support such proposals. A second possibility, more remote, is support from the business community. Perhaps some modern-day Henry Ford will emerge to champion this approach?

We must also look to the religious community for possible allies. The Jewish Sabbath is a model for a “day of rest”. Because this Sabbath falls on a Saturday, religious Jews were an important base of support for the 5-day week in the 1920s when Saturdays were added to the weekend. Because the Moslem day of rest falls on a Friday, some have suggested that American Moslems might now support a 4-day workweek and a 3-day weekend including Fridays. Some Christian groups - not so much the mainstream churches as the evangelicals - might also welcome more leisure as a statement of spiritual priorities, giving parents more time to spend with their children.

Finally, we come to government and to organized efforts within the larger community to promote reduced work hours. A group known as the Simplicity Forum plans to stage a nationwide demonstration in support of more free time on October 24, 2003. It’s called “Take Back Your Time day”. My own campaign for U.S. Senate, which expressed support for legislation bringing about a 32-hour workweek, was an example of solutions sought through electoral politics.

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