tag:blogger.com,1999:blog-2277215496195926573.post2462994534368323663..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Lump of labour fallacy fallacies.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2277215496195926573.post-51250368616848738642010-08-14T11:16:16.584-07:002010-08-14T11:16:16.584-07:00Ralph,
I'm pleased you took the time to read ...Ralph,<br /><br />I'm pleased you took the time to read and respond to my thoughts on this issue. Your reply is thoughtful and I wouldn't want to argue over our different interpretations. Your views are "fair enough". <br /><br />I too am in favor of a voluntary working out of hours, although I am much more skeptical of the likelihood of this occurring satisfactorily under current "rigged market" conditions. This is not to say that rigged regulation would be any better, though. <br /><br />Even if I were to accept your contention that most people freely "choose" to work 35-40 hours a week, this still leaves the absurd conclusions that the unemployed choose to work 0 hours and the underemployed choose to work fewer hours than they desire to work. In my view, the reality of unemployment casts serious doubt on any presumption of choice.<br /><br />The conventions of wage labor place an inordinate amount of emphasis on the individual sale of labor and consequently on an illusion of individual achievement. The actual organization of work is highly collective and co-operative. The supposed individual contribution to this collective output is derivative and relies excessively on averages and conventions. But if twelve people can lift a heavy weight two feet, it doesn't follow that one person can lift the same weight even two inches!<br /><br />I want to reiterate that the claim about productivity leading in the long run to employment is not mine. It is a truism among economists. I would see it as an article of faith rather than a scientific statement. I only use it in the sense of "if you're going to insist on x, then you have to admit that y follows..."<br /><br />Whether the 40-hour level is an arbitrary plateau or some kind of enduring optimum can't be determined from the data or a trend projection. It is instead a matter of judgment. Ultimately, in my judgment, the <i>number</i> of hours I work is irrelevant. What really matters is the quality of those hours. If I'm doing work that I enjoy, that I feel is meaningful and that doesn't wear me out physically or mentally, 35 or 40 hours a week may well be TOO FEW!Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-58623854808630766312010-08-14T00:25:58.884-07:002010-08-14T00:25:58.884-07:00Sandwichman: I had a look at your Power Point pres...Sandwichman: I had a look at your Power Point presentation on working hours (and other publications). Working hours is obviously your speciality, so I’ll be careful what I say!<br /><br />I agree that shorter working hours can lead to improved output per hour. I actually made that point above (point No 3 near the end).<br /><br />But as you rightly point out, the exact effect depends on the “state of technology”. It doubtless depends on numerous other things: the type or work, plus the effect will vary from individual to individual.<br /><br />Thus I’m in favour of each employer (and employees) working out for themselves what is best in each case, rather than across the board measures. If someone wants to work 60 hours a week, let them. Ditto for someone wanting to work 20 hours.<br /><br />I don’t agree with your claim that “an increase in productivity leads in the long run to expansion of employment.” We have had astronomic improvements in productivity over the last century, yet employment levels are much the same now as a century ago.<br /><br />Also I don’t agree with your claim that “an increase in labor quality reduces labor costs relative to the cost of potential substitutes.” Reason is that the cost of the substitutes (capital equipment and materials) is itself very largely and ultimately made up of the cost of labour. E.g. if everyone’s wage was doubled in dollar terms tomorrow, the price of everything else from cars to timber would also quickly double as well.<br /><br />I’ve seen evidence that when people raise hours worked from about 40 hours a week to 60, most people initially produce more, but after a few weeks they get knackered, and output per week declines to the original 40 hour level. However I’m doubtful about reducing hours to 20 (except for those who WANT to work part time). This idea gains support from your “US weekly hours 1850-2010” chart, which shows hours declining from 65 in the 1800s to about 40 in about 1940, and then staying at that level. <br /><br />My guess is that that is explained by the fact that in the 1800s people had to work about 60 hours to get the basic essentials. Nowadays, there is not that pressure, so people work the hours they want, more or less. And most choose about 35-40 hours.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-76859797881635683052010-08-13T08:10:05.834-07:002010-08-13T08:10:05.834-07:00Ralph,
Congratulations! You are half way there in...Ralph,<br /><br />Congratulations! You are half way there in recognizing that the lump of labor fallacy is a poor way of criticizing shorter working time. Now let's see if you can make the next step. <br /><br />Shorter working time is NOT fundamentally labor supply reduction (LSR) but labor QUALITY enhancement (LQE). Of course this only applies within certain parameters, which in turn depend on the current state of technology. In the late 19th century and early 20th, it was often found that a reduction in the hours of work led to an actual increase in total output per worker without any other change in technology (See John Rae, Sydney J. Chapman, Josephine Goldmark and Philip Sargent Florence). Even if total output per worker declines somewhat as the result of shorter working time, as long as output per hour increases there is still an enhancement of labor quality (See Edward Denison on this point).<br /><br />So, what is the theoretically likely outcome of labor quality enhancement? It is generally agreed among economists that an increase in productivity leads in the long run to expansion of employment. I won't pass judgment on whether this is always necessarily true. But it IS the consensus of economists.<br /><br />But wait, there's one more effect to consider. Ceteris paribus, an increases in labor quality reduces labor costs relative to the cost of potential substitutes. And therein is the undeniable contribution of work time reduction to job creation. Again, this effect only applies within a given range of hours where the LQE exceeds the LSR. At an extreme there will be a reduction in both labor supply AND labor quality. <br /><br />Where would that golden range fall? We don't have the data but we can do trend projections. Assuming that the trend in hours reduction in the first half of the twentieth century was roughly in line with the optimal hours for output, projection of that trend over the subsequent 50 years would suggest average annual hours in the U.S. of approximately 14% less than the current average. The job creation potential continues, however, to the point of maximum hourly productivity, which I would estimate at around 75% of the optimal hours for total output. <br /><br />The reasons for assuming the earlier trend to be optimal but the last fifty years to be a "deviation from trend" is that up until mid-century shorter working time was a priority for labor unions and the hourly wage was the preponderant form of employee compensation. In the second half of the 20th century, unions abandoned the shorter working time strategy and "quasi-fixed" per employee benefits rose sharply as a component of total compensation. <br /><br />Hypothetically, then, given current technology, there could be an hours reduction of nearly 36% before the LSR effect would overtake the LQE effect. Such a reduction would presumably be far in excess both of what would be culturally acceptable to most Americans and of the potential unemployed and inactive labor supply that could be attracted into the labor force by the expanded labor demand. Therefore the "problem" of LSR doesn't really appear until well beyond any reasonable proposal for work time reduction.<br /><br />See my related PowerPoint presentation that reviews the theoretical arguments, historical trends and projections of those trends, "Climate change, growth and the productivity/employment dividend from shorter hours":<br /><br />http://www.scribd.com/doc/35562753/URPESandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.com