July 09, 2005
WHY SOME ECONOMISTS DISLIKE SHORTER WORKING TIME (part 6 of 7)
How “fixed” is a fixed amount of work?
The meaning of a “fixed amount of work” may seem self-evident at first glance but, as Daniel Kinderman has pointed out, this fixedness could refer to at least two different things. It could refer to an upper limit on the demand for labor and thus be contrasted with the long term historical record of employment growth. Or, it could refer to a constant demand for labor, unaffected by changes in the cost of labor. Thus, the fixed amount of work could represent either a ceiling or a floor. The various explanations of the fallacy offered by economists are steeped in that ambiguity.
For some economists, the fallacy committed by advocates of shorter working time dwells in the failure to subscribe wholeheartedly to the dictum, derived perhaps from a fundamentalist reading of Say’s Law, that job losses from new technology are temporary and local because any increase in supply automatically stimulates a compensatory increase in demand. For others, the fallacy consists of not noticing that the increased costs per employee associated with a reduction in working time must inevitably lead to a fall in demand for labor. Yet others are eager to go in both directions at once, contrasting the presumably automatic growth of employment over the long term with the deplorable decline in demand for labor that would result from an arbitrary restriction of the hours of work.
Those economists might be surprised to learn that in drawing attention to fixedness they are following the rhetorical precedent of Karl Marx’s 1865 address to the General Council of the First International on Wages, Prices and Profit Marx derided John Weston’s argument against demands for higher wages with characteristic polemical panache:
If our friend Weston’s fixed idea of a fixed amount of wages, a fixed amount of production, a fixed degree of the productive power of labor, a fixed and permanent will of the capitalists, and all his other fixedness and finality were correct, Professor Senior’s woeful forebodings [regarding his “last hour”] would have been right…
But if the critics’ rhetoric superficially resembles Marx’s, their logic more fundamentally echoes Weston’s (and, by implication, Senior’s). To paraphrase Marx: if before a reduction in working time the total demand for labor was variable, and not fixed, it will continue to be variable and not fixed after the reduction in working time. Which is to say that a fall in demand for the presumably more costly labor is no more automatic than is an increase in employment from the shorter hours. There are several variables at play beside the hourly wage rate that economists single out for attention, a fact that Beardsley had stressed long ago in his rebuttal of Rae.
Similarly, to suggest that the past record of employment growth demonstrates that a job creation strategy based on reduced working time is unnecessary sidesteps the relevant fact that job growth since the middle of the nineteenth century has indeed been accompanied by a substantial reduction in the hours of work. Although the historical record does not itself establish that reductions in working time directly caused the employment growth that did occur, it does draw attention to an implicit and rather dubious assumption underlying this version of the lump-of-labor fallacy claim: that an equal or greater amount of employment growth would have occurred even if the hours of work had remained unchanged since 1850. Chart 1 shows that work hours in the US fell from an average of more than 3,500 per worker a year in 1850 to fewer than 2,000 today.
According to Bosch, “the reduction of working time over the past 100 years has not only constituted a form of redistribution, but has also, through its effects on work organization and operating hours, provided much of the impetus behind productivity growth and economic growth.” It is indeed hard to imagine how much of modern technology could have been introduced were it not for previous reductions in working time. Summarizing research studies of working time reductions, Bosch concluded that most work time reductions show positive employment effects ranging from 25 percent to 70 percent of the “arithmetically possible effect.” Only a few find no positive effects. As Bosch cautioned, though, the gains are "not just a question of 'whether' but also of 'how' the reductions are implemented."
Posted by sandwichman at July 9, 2005 06:24 PM