January 05, 2016
Dean Baker
Democracy, January 5, 2015
View article at original source.
The next Administration should make reducing work time a major focus. In addition to mandated paid sick days and paid family leave — proposals that have received some welcome attention thus far on the presidential campaign trail — policymakers should go much further and enact measures aimed at shortening workweeks and work years. Reducing our workweek and work years will lead to a whole host of benefits, including reduced stress and higher levels of employment.The United States has become an outlier among wealthy countries in having had little reduction in the length of the average work year since 1980. According to the OECD, between 1980 and 2013, the number of hours in an average work year fell by 7.6 percent in Belgium, by 19.1 percent in France, and by 6.5 percent in Canada. By comparison, it declined by just 1.4 percent in the United States. The average worker puts in 26 percent more hours a year in the United States than do workers in the Netherlands and 31 percent more hours than workers in Germany, a difference of more than 400 hours a year.
This gap is partly due to the fact that every other wealthy country requires employers to give workers paid family leave and paid sick days. But an even more important factor in this gap is vacation time. Other wealthy countries now mandate four to six weeks a year of paid vacation. Our government, of course, does not mandate any. As a result, 23 percent of American workers have no paid vacation. Moreover, some European countries have also taken steps to shorten the workweek, most notably France, with its 35-hour workweek. Here in the United States, workers must put in 40 hours to be entitled to any overtime premium, and many salaried workers can be forced to work even longer hours with no premium.
The lengths of the workweek and work year are not just the result of the natural mechanisms of the market. The government has had a big thumb on the scale pushing in the direction of longer work hours by promoting employer-based benefits, notably health care and pensions, as an alternative to providing such benefits through the government. These benefits amount to large overhead costs for businesses that are incurred on a per-worker basis. As a result, it is often cheaper for an employer to pay a worker already on staff an overtime premium than it is to incur the costs of paying for a new worker’s health care and pension.
A more active government push to reduce work time will help counteract trends that have been hurting workers for decades. In general, higher productivity has led to higher wages and more leisure. This is the pattern in the rest of the world and was the pattern in the United States through much of the last century. But the last four decades have seen a widening gap between productivity and worker pay and also little expansion of leisure time. Pushing for shorter work time means workers can get some of the benefits of productivity growth in the form of more leisure time.
Reducing the workweek can also have another benefit: It will bring us to full employment faster. The economic collapse in 2008 and the weakness of the subsequent recovery have led many economists to recognize that persistent demand shortfalls — or “secular stagnation” — could be a real problem. As a logical matter, it is not difficult to overcome a shortfall in demand; governments just have to spend money. However, the politics around increased government spending and deficits have been extremely difficult, and that path seems closed to us.
In this context, policies that seek to reduce supply by getting workers to put in fewer hours may be the most promising path to full employment. At the start of the recession in 2008, Germany quite explicitly promoted a “short work” policy, encouraging employers to cut hours rather than lay off workers. As a result, the country’s unemployment rate actually fell during the recession, dropping from 7.2 percent at the end of 2008 to 6.5 percent at the end of 2010.
Critics may say that the government should not be telling employers how long people should work. But that ignores all the government policies that pushed in the direction of longer hours. This idea is really just an effort to level out the incentive structure. Others argue that workers can’t afford to work fewer hours. That is undoubtedly true in many cases, but nothing will prevent workers from seeking additional hours of employment, though admittedly some may find it difficult to make up for lost pay. Still, missing a few hours is better than being unemployed.
The best path to ensure that workers can secure a share of the gains in economic growth is a full-employment economy, like the one we saw in the late 1990s. Shortening work time is not just good, family-friendly policy — it might be the quickest path to full employment.
