Sunday, July 8, 2012

Why Americans Should Work Less

Finally cool enough to blog. Dean Baker in The Guardian:
We can deal with unemployment every bit as effectively by having people work fewer hours, as we can by increasing demand.

The most important point to realize is that the problem facing wealthy countries at the moment is not that we are poor, as the stern proponents of austerity insist. The problem is that we are wealthy. We have tens of millions of people unemployed precisely because we can meet current demand without needing their labor.

This was the incredible absurdity of the misery that we and other countries endured during the Great Depression, and which Keynes sought to explain in The General Theory. The world did not suddenly turn poor in 1929, following the collapse of the stock market. Our workers had the ability to produce just as many goods and services the day after the collapse as the day before; the problem was that after the crash, there was a lack of demand for these goods and services.

... But there is another dimension to this issue. It's great for the government to generate demand insofar as it can productively employ people. This means either providing immediate services, like healthcare and education, or in investing in areas that will provide future dividends, such as modernizing the infrastructure or retrofitting buildings to increase their energy efficiency.

However, it can also employ people by encouraging employers to divide work among more workers. There is nothing natural about the length of the average work week or work year and there are, in fact, large variations across countries. The average worker in Germany and the Netherlands puts in 20% fewer hours in a year than the average worker in the United States. This means that if the US adopted Germany's work patterns tomorrow, it would immediately eliminate unemployment.

Of course, it is unrealistic to imagine such large changes occurring overnight, but governments can certainly attempt to encourage employers to shorten workweeks and increase vacation and other paid time-off. In fact, this is the real secret of Germany's post-crisis recovery. Germany's growth has been no better than growth in the United States since the start of the downturn, yet its unemployment rate has fallen by 2.0 percentage points – while unemployment in the United States has risen by almost 4.0 percentage points. The difference is that Germany encourages firms to reduce work hours rather than lay off workers.

Since workers in the United States put in the most hours, the US has the greatest potential gains from shortening work years...
It would pay off other dividends too - more time for volunteering and child care, less congested roads, better health outcomes due to less stress, etc... This post has some good ideas:

A third major way to determine employee compensation, in addition to a monthly salary or hourly wages:

The first 20 hours are paid at 1.2 times the normal hourly rate for full-time work.


Work beyond 20 hours in a single week is paid at 0.8 times the normal hourly rate.

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