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« Previous Entry | Main | Next Entry » Would Shortening the Workweek Stimulate the Economy? Name:
Steve Eppley
Wouldn't that be more efficient overall than high unemployment? By tying the length of the work week to the unemployment rate using an automatic formula, a feedback loop could be set up to keep unemployment at a reasonable level. Paul Solman: Because it would seem too radical? Too kooky? Because it wouldn't distinguish between more and less able workers? And yet, maybe not such a hare-brained scheme. Another friend of this page, Dean Baker, wrote the following in the New York Daily News in January: "One innovative policy that would provide a quick boost to the economy and jobs - and lasting gains in reduced unemployment - is a tax incentive for shorter workweeks or work years. No doubt, such a suggestion will make conservatives howl about liberals attempting to turn the United States into France, where in 2000 the government mandated a 35-hour workweek. But I'm not suggesting the government force a shorter workweek; I'm suggesting it create incentives for businesses to make the choice themselves. And in any event, there are worse examples to follow than France's on this score. The reduction in the workweek there created new jobs and improved productivity. Incentivizing a shorter workweek in the U.S. could take different forms. To qualify, an employer who currently provides no paid vacation might offer all workers three weeks a year of paid vacation, approximately a 6% reduction in work time. Alternatively, employers could cut the standard workweek, say from 40 hours to 36 hours, a 10% reduction in work hours. Or they could offer paid sick leave or paid parental leave. How would this help the economy? The tax break would allow the employer to compensate workers for fewer hours up to some limit, say a maximum of $2,500 per worker. That would cut work hours but maintain staffing levels. As a result, workers would be getting just as much money as before the reduction in hours - but putting in 10% fewer hours. If workers have the same amount of money, then demand in the economy will be the same. At the same time, firms would then need to hire more workers to meet this demand, since they would be getting 10% fewer hours from each worker. Such a tax break would stay in effect for just two years. However, if workers and employers liked the new work schedules, there would be a lasting benefit from this job creation measure." -- Posted August 28, 2009 | Comments (4) | Permalink
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This is the kind of proposal that public employees just love. Work even fewer hours for regular pay and then get time and 1/2. The reality is, at least here in California, this is a big game for state and local employees to boost their salaries. Some cities have gone broke here because they were not authorized to hire additional workers, but could increase hours of existing employees. Many city workers were making over a 1/4 million/year plus pension + healthcare. Outrageous! Don't think this is an idea who's time has come!
Regarding Paul Solman's answer: Paul provided no solid reasons against tying the length of the work week to the unemployment rate. That some people would label it "radical" or "kooky" does not mean it's a bad idea. Also, I think Paul is wrong to suggest employers would no longer be able to distinguish between more and less able workers, since employers would still have the same tools--raises, bonuses, promotions, firing--with a shorter work week.
Regarding J Voos' comment: My proposal did NOT suggest keeping the pay of the workers the same while shortening the work week. I presume hourly wages would remain about the same, resulting in a proportional cut in pay (since pay is wage times hours). Time-and-a-half would only kick in for those employers who refuse to reduce the hours of their hourly employees, and I presume that would be a small number of employers since there would be a strong incentive against paying time-and-a-half unnecessarily.
Finally, I'd like to tweak the proposal a bit, to allow exceptions for industries where it would be a hardship to shorten the work week (if there are any such industries). As a possible example, industries that are barely profitable. Those industries might be given the tax credit that Dean Baker mentioned in the article Paul cited. To give the tax credit willy-nilly to all employers (of hourly workers) as Baker suggests, sounds too expensive for the taxpayers to afford; the federal debt is already very high. Baker's proposal may be radical, but mine is very similar to what the government already does; the government already regulates the length of the work week using a time-and-a-half formula.
Regards,
Steve
The French have already tried it [a reduced work week] and it didn't work. It hurt small business and the startup companies that were the real source of new jobs and innovation.
B
9-21-2009
For efficiency--to avoid imposing partial work days--it would be better to use a longer period than a week. Instead of setting the work week to 36 hours (for example), allow employees to work 40 hours one week and 32 hours the next without receiving any time-and-a-half. Instead of setting the work week to 38 hours, allow employees to work 40 hours for 3 weeks and 32 hours the next without receiving time-and-a-half.
To avoid the need to calculate the appropriate work period as a function of unemployment rate, the length of the work period can be periodically nudged downward while unemployment exceeds the target "full employment" rate (approximately 5%) and upward while unemployment is below the target rate. (This is similar to the Federal Reserve Board nudging the interest rate up or down based on inflation and other economic indicators.)
Replying to G Barrett:
1. Another factor that harms small businesses and startups is high unemployment. Lesser of evils?
2. Where are your stats? On a number of measures, France (and Europe) are ahead of the US.
3. French critics of their 35 hour work week (adopted in 2000, a primary goal being to reduce unemployment) have argued that the reason it failed to increase hiring--businesses chose instead to increase production quotas--is because other French regulations make it difficult to lay off workers (during economic downtimes). The U.S. does not have those regulations, so the risk of hiring is lower in the U.S.
4. The proposal doesn't simply ratchet down the work period. As unemployment falls, the length of the work period would increase.
5. The stresses of unemployment and long work weeks damage health, with many negative consequences (including increased health care costs). Fatigue and job dissatisfaction caused by long work weeks reduce productivity.