Sunday, October 2, 2011

Why We Work Too Much

In What Are People Good For, I suggested a number of scenarios to deal with the coming tidal wave of mass unemployment. The shared-work scenario argues that if we reduced the number of working hours and distributed them more evenly among the population, unemployment would be reduced. Instead, we have radical overwork alongside unemployment.

This raises the question, "Why do we work so much?" There are several answers to this.

This excellent article outlines one of the trickier reasons to understand, which is the coordination problem:

To properly explain how the coordination problem occurs at a national level, we need an analogy closer to home. Instead of businesses and industries improving productivity across the economy, imagine yourself improving your productivity during your working life. You start on low pay as a youngster, and edge your way up the ladder to better paying jobs over time.

Immediately we can see the analogy is sound. Most people don’t take their gains in productivity (as reflected by increases in their salary) as leisure time. Rather, they continue to work the same hours, or more, and receive the higher income.


The answer is a cooperation problem with striking similarities to the classic prisoner’s dilemma. You see, if you take your productivity gains as leisure time, and the next person doesn’t, they can bid up prices for essential consumer items (such as land). However, if you both cooperate and each take more leisure time, you will both face accessible prices since neither party is capable of paying more.

In our analogy, if everyone took some of the economy-wide productivity gains as leisure time our total production would fall by some fraction of the reduction in work hours, and because each person’s income is lower, there would be less opportunity for people to outbid each other on prices, or out-consume each other in status displays.

Furthermore, as our productivity increases (or our hourly rate of pay in this analogy) the gains at the margin from working just one more hour, or one more day, are far greater, tempting us further to preference work over leisure time. If you make $100 per day rather than $400 per day, your decision to reduce work time comes at a lower opportunity cost.

Of course accompanying this coordination problem and incentive structure are embedded social norms and workplace practices (which Keynes may have expected to be easily overcome).

Prior to that, however, the article says the following:
How is it that we continue to fill our time not with leisure, but with work, study, and household chores?

There are many reasons (as discussed here). I would argue the fatal flaw in Keynes’s comments was the assumption that some kind of consumer satiation would be reached. Although he did acknowledge that there are basic needs, and what he called second class needs:

"Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs-a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes."

We now know that consumer demand is insatiable (though we might debate whether this is the result of our culture or some universal human acquisitiveness). But the most interesting part of the story for me is that we could all work less with very minor reductions to our standard of living but for coordination barriers between households. This coordination problem is a hindrance to individuals seeking to make the choice of leisure over work.

Our needs are unsatiable? Of course not. And that's what we're running up against - consumers no longer have the income to buy back what the economy produces. But far from an innate desire to work ever-longer hours and consume more and more, this choice was forced upon us. In the Great Depression, there was an experiment to resuce the humer of hours worked in a day. This experiment was a great success, but it was strangled in its crib by corporate interests. The tale is told in Jeremy Rifkin's The End of Work, and it is also told in this article in Orion Magazine by Jeffrey Kaplan, whose article is excerpted below (all emphasis mine).

Today “work and more work” is the accepted way of doing things. If anything, improvements to the labor-saving machinery since the 1920s have intensified the trend. Machines can save labor, but only if they go idle when we possess enough of what they can produce. In other words, the machinery offers us an opportunity to work less, an opportunity that as a society we have chosen not to take. Instead, we have allowed the owners of those machines to define their purpose: not reduction of labor, but “higher productivity”—and with it the imperative to consume virtually everything that the machinery can possibly produce.

FROM THE EARLIEST DAYS of the Age of Consumerism there were critics. One of the most influential was Arthur Dahlberg, whose 1932 book Jobs, Machines, and Capitalism was well known to policymakers and elected officials in Washington. Dahlberg declared that “failure to shorten the length of the working day . . . is the primary cause of our rationing of opportunity, our excess industrial plant, our enormous wastes of competition, our high pressure advertising, [and] our economic imperialism.” Since much of what industry produced was no longer aimed at satisfying human physical needs, a four-hour workday, he claimed, was necessary to prevent society from becoming disastrously materialistic. “By not shortening the working day when all the wood is in,” he suggested, the profit motive becomes “both the creator and satisfier of spiritual needs.” For when the profit motive can turn nowhere else, “it wraps our soap in pretty boxes and tries to convince us that that is solace to our souls.”

There was, for a time, a visionary alternative. In 1930 Kellogg Company, the world’s leading producer of ready-to- eat cereal, announced that all of its nearly fifteen hundred workers would move from an eight-hour to a six-hour workday. Company president Lewis Brown and owner W. K. Kellogg noted that if the company ran “four six-hour shifts . . . instead of three eight-hour shifts, this will give work and paychecks to the heads of three hundred more families in Battle Creek.”

This was welcome news to workers at a time when the country was rapidly descending into the Great Depression. But as Benjamin Hunnicutt explains in his book Kellogg’s Six-Hour Day, Brown and Kellogg wanted to do more than save jobs. They hoped to show that the “free exchange of goods, services, and labor in the free market would not have to mean mindless consumerism or eternal exploitation of people and natural resources.” Instead “workers would be liberated by increasingly higher wages and shorter hours for the final freedom promised by the Declaration of Independence—the pursuit of happiness.”

To be sure, Kellogg did not intend to stop making a profit. But the company leaders argued that men and women would work more efficiently on shorter shifts, and with more people employed, the overall purchasing power of the community would increase, thus allowing for more purchases of goods, including cereals.

A shorter workday did entail a cut in overall pay for workers. But Kellogg raised the hourly rate to partially offset the loss and provided for production bonuses to encourage people to work hard. The company eliminated time off for lunch, assuming that workers would rather work their shorter shift and leave as soon as possible. In a “personal letter” to employees, Brown pointed to the “mental income” of “the enjoyment of the surroundings of your home, the place you work, your neighbors, the other pleasures you have [that are] harder to translate into dollars and cents.” Greater leisure, he hoped, would lead to “higher standards in school and civic . . . life” that would benefit the company by allowing it to “draw its workers from a community where good homes predominate.”

It was an attractive vision, and it worked. Not only did Kellogg prosper, but journalists from magazines such as Forbes and BusinessWeek reported that the great majority of company employees embraced the shorter workday. One reporter described “a lot of gardening and community beautification, athletics and hobbies . . . libraries well patronized and the mental background of these fortunate workers . . . becoming richer.”

A U.S. Department of Labor survey taken at the time, as well as interviews Hunnicutt conducted with former workers, confirm this picture. The government interviewers noted that “little dissatisfaction with lower earnings resulting from the decrease in hours was expressed, although in the majority of cases very real decreases had resulted.” One man spoke of “more time at home with the family.” Another remembered: “I could go home and have time to work in my garden.” A woman noted that the six-hour shift allowed her husband to “be with 4 boys at ages it was important.”

Those extra hours away from work also enabled some people to accomplish things that they might never have been able to do otherwise. Hunnicutt describes how at the end of her interview an eighty-year-old woman began talking about ping-pong. “We’d get together. We had a ping-pong table and all my relatives would come for dinner and things and we’d all play ping-pong by the hour.” Eventually she went on to win the state championship.

Many women used the extra time for housework. But even then, they often chose work that drew in the entire family, such as canning. One recalled how canning food at home became “a family project” that “we all enjoyed,” including her sons, who “opened up to talk freely.” As Hunnicutt puts it, canning became the “medium for something more important than preserving food. Stories, jokes, teasing, quarreling, practical instruction, songs, griefs, and problems were shared. The modern discipline of alienated work was left behind for an older . . . more convivial kind of working together.”

Our modern predicament is a case in point. By 2005 per capita household spending (in inflation-adjusted dollars) was twelve times what it had been in 1929, while per capita spending for durable goods—the big stuff such as cars and appliances—was thirty-two times higher. Meanwhile, by 2000 the average married couple with children was working almost five hundred hours a year more than in 1979. And according to reports by the Federal Reserve Bank in 2004 and 2005, over 40 percent of American families spend more than they earn. The average household carries $18,654 in debt, not including home-mortgage debt, and the ratio of household debt to income is at record levels, having roughly doubled over the last two decades. We are quite literally working ourselves into a frenzy just so we can consume all that our machines can produce.

Yet we could work and spend a lot less and still live quite comfortably. By 1991 the amount of goods and services produced for each hour of labor was double what it had been in 1948. By 2006 that figure had risen another 30 percent. In other words, if as a society we made a collective decision to get by on the amount we produced and consumed seventeen years ago, we could cut back from the standard forty-hour week to 5.3 hours per day—or 2.7 hours if we were willing to return to the 1948 level. We were already the richest country on the planet in 1948 and most of the world has not yet caught up to where we were then.

Rather than realizing the enriched social life that Kellogg’s vision offered us, we have impoverished our human communities with a form of materialism that leaves us in relative isolation from family, friends, and neighbors. We simply don’t have time for them. Unlike our great-grandparents who passed the time, we spend it. An outside observer might conclude that we are in the grip of some strange curse, like a modern-day King Midas whose touch turns everything into a product built around a microchip.

KELLOGG’S VISION, DESPITE ITS POPULARITY with his employees, had little support among his fellow business leaders. But Dahlberg’s book had a major influence on Senator (and future Supreme Court justice) Hugo Black who, in 1933, introduced legislation requiring a thirty-hour workweek. Although Roosevelt at first appeared to support Black’s bill, he soon sided with the majority of businessmen who opposed it. Instead, Roosevelt went on to launch a series of policy initiatives that led to the forty-hour standard that we more or less observe today.

The war had put people back to work in numbers that the New Deal had never approached, and there was considerable fear that unemployment would return when the war ended. Kellogg workers had been working forty-eight-hour weeks during the war and the majority of them were ready to return to a six-hour day and thirty-hour week. Most of them were able to do so, for a while. But W. K. Kellogg and Lewis Brown had turned the company over to new managers in 1937.

The new managers saw only costs and no benefits to the six-hour day, and almost immediately after the end of the war they began a campaign to undermine shorter hours. Management offered workers a tempting set of financial incentives if they would accept an eight-hour day. Yet in a vote taken in 1946, 77 percent of the men and 87 percent of the women wanted to return to a thirty-hour week rather than a forty-hour one. In making that choice, they also chose a fairly dramatic drop in earnings from artificially high wartime levels.

The company responded with a strategy of attrition, offering special deals on a department-by-department basis where eight hours had pockets of support, typically among highly skilled male workers. In the culture of a post- war, post-Depression U.S., that strategy was largely successful. But not everyone went along. Within Kellogg there was a substantial, albeit slowly dwindling group of people Hunnicutt calls the “mavericks,” who resisted longer work hours. They clustered in a few departments that had managed to preserve the six-hour day until the company eliminated it once and for all in 1985.

The mavericks rejected the claims made by the company, the union, and many of their co-workers that the extra money they could earn on an eight-hour shift was worth it. Despite the enormous difference in societal wealth between the 1930s and the 1980s, the language the mavericks used to explain their preference for a six-hour workday was almost identical to that used by Kellogg workers fifty years earlier. One woman, worried about the long hours worked by her son, said, “He has no time to live, to visit and spend time with his family, and to do the other things he really loves to do.”

Several people commented on the link between longer work hours and consumerism. One man said, “I was getting along real good, so there was no use in me working any more time than I had to.” He added, “Everybody thought they were going to get rich when they got that eight-hour deal and it really didn’t make a big difference. . . . Some went out and bought automobiles right quick and they didn’t gain much on that because the car took the extra money they had.”

The mavericks, well aware that longer work hours meant fewer jobs, called those who wanted eight-hour shifts plus overtime “work hogs.” “Kellogg’s was laying off people,” one woman commented, “while some of the men were working really fantastic amounts of overtime—that’s just not fair.” Another quoted the historian Arnold Toynbee, who said, “We will either share the work, or take care of people who don’t have work.”

In addition, it is the natural order of things for the amount of work needed to slow, not increase. That is because as time goes on, we build up an existing stock of goods that can be used or traded for a long period of time. Once a car is manufactured, it is on the road for a period of time. We do not have to make that car again next year.

This is in contrast to most of human history, where work was agricultural. Because agriculture is based on annual plants, work must be done every year to get the same amount of food. While grains can be stored (and that fact has determined much of human civilization), they can only be stored under specific conditions for a certain amount of time. In reality, most of the surplus is consumed over the course of a year, meaning that the work must be done again the following year to produce that same amount of grain (or animals, or vegetables, etc.), or else starvation will occur. Both grains and animals reproduce on a yearly life cycle.

Durable goods in antiquity were relatively rare. Most were painstakingly made by craftsmen one-by-one. Also, durable goods wore out over time much faster, since they were made of natural materials. Manufacturing for goods did not exist in the ancient world. Water wheels, where they existed, were mainly put to use in agriculture as well - principally grinding grain for bread.

Yet, in our economy, we need to create more and more activity. Let's look at an example from my own profession. In order to keep all architects employed, we need to build as many buildings as we did last year. In fact, to deal with new entrants into the profession, we need to build more than we did the previous year. Yet all the buildings built over the previous decades are still there! Theoretically, we should need less and less, not more and more as time goes on. In fact, buildings from hundreds of years ago are still standing in some cases. And it's not only architects - everyone involved in the building trades, from developers to contractors to construction managers to carpenters and electricians need there to be as much or more economic activity next year than this one.

Imagine a group of people happening across an uninahbited land. The most activity they would have to do was when they first arrived. They would build houses first, for survival, and maybe a town hall. The next year, maybe they build a school and a police office and jail. But the houses and town hall would still be there. The next year maybe they build a theater and a museum. But the houses, town hall, school and police office would still be there. With every passing year, they need to do less and less to have a functioning society because they are not starting from scratch - at the beginning of each year they are starting off with more than the year prior.

The only way this breaks down is if all the exisitng stuff is destroyed. Barring that, economic activity depends on doing ever more, even if there is no inherent need for it! Construction is based on speculation, not need. Yes, certain buildings are based upon need, but this is not the majority. Even hospitals, which one would think are built based on needs, are built on the anticipation of future patients, or, more properly, the future revenues that those patients will bring in. Those future revenues are, in turn, based upon assumptions that the future will be like today (i.e. Medicare will still be paying out, etc.) Thus, if and when this future speculation goes wrong, they are as vulnerable as speculative office space owners when the renters fail to arrive. Becasue of this, once speculation goes wrong, everything goes bust and the dominoes start to fall. This is why construction under capitalist systems is a constant boom-and-bust cycle. Prior to capitalism, buildings were built for need. There was no need to put up more and more every year. Rather, the extra labor went into the building itself, which is why ancient buildings are so much more handcrafted and ornate than buildings today. Excess labor went into quality, not quantity.

The same is true with durable goods. Theoretically, a lot of durable goods can last a long time. If I put a million cars on the road a year for each year over the course of a decade, at the end of the decade I will have ten million cars (minus some lost due to accidents, etc.). The cars I build in year eleven will have to compete with those ten million or so cars. Doesn't it stand to reason that I should eventually have to make less cars over time, not more? And is that a bad thing? When will there be enough? When we have as many cars as people? Or when we have two cars for every person? I could use the same analogy for DVD players, cell phones, blenders, microwave ovens, washing machines - well, you get the idea.

Goods have to compete against what is already out there. This has been a notable problem for software developers, since their products do not decay over time. To entice new buyers they need to keep making software improvements and add more bells and whistles. But eventually, consumers have what they need and there will be diminishing returns. To combat this, software companies are attempting to create artificial scarcity through the use of subscription services - you have to pay up every year, or the software self-destructs. It's harder to do that with cars and buildings. However, maybe you've noticed that most durable goods are far less durable than they used to be. That's not accidental - now you know why. The other tool that has been used is fashion. Last year's mode may work just fine, but this year's model looks different. Time to get a new cell phone!

So the sytem falls back on us creating endless novelty - hooking people onto things they never needed before. Endless digital doodads are now marketed as "must-haves." It also depends on us making quantum improvments to products constantly to make people want to buy newer versions. We can't keep doing that forever. Eventually, a point of diminishing returns is reached.

That's why all the economic activity has moved to developing countries where markets are not saturated. People don't have cars or cell phones or microwave ovens yet. But eventually they will. Then what? And what will we in the "developed" world do in the meantime while we wait for all our stuff to explode, wear out or decay? Starve?

So slower growth is in fact, natural, not exceptional. But with all of our livelihoods dependent upon growth, how will we survive when it goes away? If we do not work less, what alternative is there?

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