Richard Wolff, who for reasons which puzzle me has been
made a professor of economics, has fallen for the old myth that shorter working
hours can reduce unemployment.
You know the argument: if those in
work do fewer hours per week, that leaves “work hours” that can be filled by
the unemployed.
That alleged cure for unemployment is
actually just one of a family of alleged cures which all involve reducing
labour supply. The “family” includes early retirement, delayed entry into the
labour market for youths, longer holidays, etc.
The flaw in the idea is as follows.
Increasing numbers employed is easy:
just bump up demand. But there’s a problem, namely that as demand rises, a
point comes where inflation kicks in a serious way.
Now why does inflation kick in? Well
it’s because the lower unemployment is,
the more difficult it is for employers to locate the types of labour they want
from the ranks of the unemployed, so they resort to out-competing each other
for the services of those already in work: attractive job offers, attractive
pay packages, etc. And that means the price of labour rises: i.e. inflation
kicks in.
That problem is what you might call a
purely “statistical” one: it’s the problem involved in locating suitable labour
from a relatively small pool of unemployed individuals.
Now suppose those in work are forced
to do fewer hours per week: the latter “statistical” problem is not ameliorated
one iota!!!!! For example if there was a shortgage of plumbers in London before
hours were cut, it will be JUST AS DIFFICULT TO LOCATE plumbers AFTER HOURS ARE
CUT.
To take a simple example, if there are
no plumbers amongst the unemployed at all before the cut in hours, there’ll
still be none afterwards. So the contribution to inflation stemming from
plumbers in London will be exactly the same after as before.
QED.
Let’s put all that another way: as full
employment of labour is approached, the factor of production that an economy
runs short of is . . . wait for it . . . labour!!!!
Capital equipment.
Of course you could argue that there
are other factors that exacerbate inflation as demand rises. For example plant
shortages might play a part. One problem with that argument is that plant utilisation
is currently at a record 50 year low.
No doubt plant shortages do play a
part in inflation, but the amount of plant in an economy is simply proportional
to the number of people or size of the workforce in a country (all else equal).
I.e. double the number of people, and the amount of plant will double.
Or halve the number of hours people
can work, and the amount of plant will halve approximately.
Thus plant shortages doubtless
exacerbate labour shortages near full employment, but those plant shortages are
simply a function of the amount of labour or person hours that are available.
Other advantages of shorter
working hours.
And finally, the above points are not
an attempt to imply that there are no merits whatever in shorter working hours.
That is, for example, shorter hours may reduce stress or result in more output
per hour. The latter alleged merits are not dealt with above. It’s just the
“re-allocating hours from the employed to the unemployed” idea which is flawed.
Didn't productivity improve during the "three-day week"? I'd settle for that.
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