Using Work Sharing to Improve the Economy and Worker Happiness

An important policy idea of reducing average necessary work hours (with at least similar wage levels ideally due to increased value via more productivity growth) that will keep becoming more important as technology continues to advance.

The United States is very much an outlier among wealthy countries in the relatively weak rights that are guaranteed to workers on the job. This is true in a variety of areas. For example, the United States is the only wealthy country in which private sector workers can be dismissed at will, but it shows up most clearly in hours of work.

In other wealthy countries, there has been a consistent downward trend in average annual hours of work over the last four decades. By contrast, in the United States, there has been relatively little change. While people on other wealthy countries can count on paid sick days, paid family leave, and four to six weeks of paid vacation every year, these benefits are only available to better-paid workers in the United States. Even for these workers, the benefits are often less than the average in Western European countries.

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Part of the benefit of work sharing is that it can allow workers and employers to gain experience with a more flexible work week or work year. It is possible that this experience can lead workers to place a higher value on leisure or non-work activities and therefore increase their support for policies that allow for reduced work hours.

Work Hours in 1970: The United States Was Not Always an Outlier

When the experience of European countries is raised in the context of proposals for expanding paid time off in the United States, it is common for opponents to dismiss this evidence by pointing to differences in national character. Europeans may value time off with their families or taking vacations, but we are told that Americans place a higher value on work and income.

While debates on national character probably do not provide a useful basis for policy, it is worth noting that the United States was not always an outlier in annual hours worked. If we go back to the 1970s, the United States was near the OECD average in annual hours worked. By contrast, it ranks near the top in 2016.

In 1970, workers in the United States had put in on average 3 to 5 percent more hours than workers in Denmark and Finland, according to the OECD data, by 2016, this difference had grown to more than 25 percent. Workers in France and the Netherlands now have considerably shorter average work years than workers in the United States. Even workers in Japan now work about 5 percent less on average than workers in the United States.

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It is also important to consider efforts to reduce hours as being a necessary aspect of making the workplace friendlier to women. It continues to be the case that women have a grossly disproportionate share of the responsibility for caring for children and other family members.

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In this respect, it is worth noting that the United States went from ranking near the top in women’s labor force participation in 1980 to being below the OECD average in 2018. While other countries have made workplaces more family friendly, this has been much less true of the United States.

Shortening Work Hours and Full Employment

There has been a largely otherworldly public debate in recent years on the prospects that robots and artificial intelligence would lead to mass unemployment. This debate is otherworldly since it describes a world of rapidly rising productivity growth. In fact, productivity growth has been quite slow ever since 2005. The average annual rate of productivity growth over the last twelve years has been just over 1.0 percent. This compares to a rate of growth of close to 3.0 percent in the long Golden Age from 1947 to 1973 and again from 1995 to 2005.

So this means that we are having this major national debate about the mass displacement of workers due to technology at a time when the data clearly tell us that displacement is moving along very slowly.[2] It is also worth noting that all the official projections from agencies like the Congressional Budget Office and the Office of Management and Budget show the slowdown in productivity growth persisting for the indefinite future. This projection of continued slow productivity growth provides the basis for debates on issues like budget deficits and the finances of Social Security.

However, if we did actually begin to see an uptick in the rate of productivity growth, and robots did begin to displace large numbers of workers, then an obvious solution would be to adopt policies aimed at shortening the average duration of the work year. The basic arithmetic is straightforward: if we reduce average work hours by 20 percent, then we will need 25 percent more workers to get the same amount of labor. While in practice the relationship will never be as simple as the straight arithmetic, if we do get a reduction in average work time, then we will need more workers.

As noted above, reductions in work hours was an important way in which workers in Western Europe have taken the gains from productivity growth over the last four decades. This had also been true in previous decades in the United States, as the standard workweek was shortened to forty hours with the Fair Labor Standards Act in 1937. In many industries, it had been over sixty hours at the turn of the twentieth century.

If the United States can resume a path of shortening work hours and get its standard work year back in line with other wealthy countries, it should be able to absorb even very rapid gains in productivity growth without any concerns about mass unemployment. While job-killing robots may exist primarily in the heads of the people who write about the economy, if they do show up in the world, a policy of aggressive reductions in work hours should ensure they don’t lead to widespread unemployment.