An evening with the New Economics Foundation

 

The New Economics Foundation recently revived its idea of restricting working hours to 21 hours per week as a means of creating full employment and achieving the work-life balance that is so cherished by wealthy, middle-aged academics. This idea - which can be most charitably described as ‘eye-catching’- revolves around ‘redistributing time’ to deal with ‘time poverty’. The twist is that, unlike with income redistribution, it is the indolent poor who will be the ones handing over their spare time to the over-worked rich in this zero-sum, leisure-heavy Shangri-La.

I'm as tempted as the next man by the promise of half the work for twice the leisure, and so I couldn't resist popping down to the LSE to hear the plan in full. The flaws of slashing working hours in half are so numerous that it would be an insult to the reader's intelligence to point them out, but in case any pre-schoolers with advanced reading abilities and an internet connection have found this site, I will list a few: a halving of hours means a halving of income - meaning less than £7,000 per annum for those on minimum wage; even those on median incomes would fall below the current poverty threshold; a 50% cut in labour when unemployment is less than 10% will starve the market of workers and destroy businesses; it will require two dentists, doctors, train drivers, farmers, taxidermists, etc. to be trained for every one job; most occupations are not suited to job-sharing; it will cut GDP by approximately half; it will make Britain unable to compete with other economies; and so on.

If one can overlook such discrepancies, the 21-hour week will at least allow people more leisure time. This is a clear benefit, unless you are one of the countless millions who see work as a sanctuary from the drudgery of family life. It might also guarantee full employment (if the unemployed can be trained and forced to do the requisite jobs), and yet the noble left-wing chant of ‘jobs-for-all’ barely featured in this debate. The discussion had barely begun before the NEF's pet theme of reducing consumerism reared its misanthropic head. 

Every panellist - three professors of economics, sociology and 'sustainable development', no less - agreed that our consumerism is now ‘pathological’. Even Lord Skidelsky, who has just written a book about the perils of consumerism, confessed to having bought an iPad. In this foul year of 2012, the iPad seems to have eclipsed the DVD, the widescreen television and the Playstation as the frivolous luxury of London's lecture-going metropolitans; an object to be scorned and lusted after in equal measure. Skidlelsky's admission to having purchased Steve Jobs' final offering whilst penning an anti-materialist tract was greeted with the nervous laughter of two lapsed Alcoholics Anonymous members bumping into each other in Wetherspoons.  

It is an abiding theme of the No Economics Foundation to portray we Britons as being on a hedonic treadmill, working harder and harder to buy knick-knacks and ‘stuff’. ‘Stuff’. The word was contemptuously spat out by every panellist to emphasise the emptiness of our pathological, promiscuous, disposable consumerism. Judging by the appreciative murmurs of the audience, this seems to have struck a chord, but why? Twenty-somethings dominated the crowd. Are these not people with onerous London rents and university debts in the tens of thousands? Do they really think that their prodigious outgoings are mere ‘stuff’? Is it not possible that they rise at 7am to pay their rent, taxes and gas bills before spending what they have left on food and drink?

It is not. They strive only for trinkets and status symbols, but that will all end when our working hours are halved and the arms race of consumerism is brought to an end by those who know better.

Apropos nothing, the discussion soon moves on to advertising. An audience member who describes herself as an Oxfam worker by day and a public health activist by night says she'd like to tax it. Skidelsky goes further and says he wants to ban it (fans of the slippery-slope will be pleased to hear that he cited tobacco as a precedent to clamp down on all advertising). Advertising is the root of all consumerism, says the Oxfam woman, but here she meets resistance from the American sociologist who says that the real root cause of conspicuous consumption is inequality. All the bases are covered tonight.

The American sociologist - Juliet Schor - tells us as fact, and almost as an aside, that Adam Smith's invisible hand is a ‘fallacy’ and then tries to persuade us that we are working harder than we used to even though her own graphs shows us that we are not. The idea that we are ‘chasing GDP’ is repeatedly cited as a reason to sit down and enjoy life in reduced circumstance. Perhaps it is a tribute to the courtesy of the audience that no one mentions that the decline in working hours is hardly indicative of a ‘chase’ and that GDP grows as a result of new technology and greater efficiency - changes from which we are fortunate to benefit from, but cannot take credit for.

Skidlesky drew cheers when he compared ‘pathological’ consumerism with avarice, but did not pursue the biblical theme by equating the NEF's proposed three-day week with sloth. ‘I think we should have a progressive tax system,’ he says. Clement Attlee should take note. A bit of banker-bashing yielded the one and only round of applause of the night after an elderly gentleman asked how a reduced economy is supposed to pay for geriatric services. Skidelsky side-stepped the question by diverting the discussion towards the evergreen issue of bankers' bonuses, as if these excused the Ponzi scheme of National Insurance. Never mind. It was all good sport and it took our minds off the fact that several hundred reasonably intelligent people were sitting in a room discussing the prospect of making people happier by halving their incomes.

Great post, Chris. The solution to these people's problems couldn't be simpler: Don't like shopping centres? -Stay away from them. (Has worked for me, at least. No ten horses could drag me to Oxford Street.) I guess it's part of human nature to believe the world would be a better place if other people were more like ourselves, and lived accordingly. But I've never seen people putting so much effort into constructing a fake economic theory to rationalise their desire to force their lifestyle on others.
Thanks for your report from the NEF event. A couple of question on the "flaws" you listed re: halving working hours: * A halving of hours means a halving of income: True, but then living costs would fall too, both direct (e.g. commuting, childcare) and indirect (e.g. food, as people would have more time to grow their own). * A 50% cut in labour when unemployment is less than 10% will starve the market of workers and destroy businesses: That assumes the change would happen overnight rather than being phased in. And as people have more time to do things in their spare time (e.g. childcare, food growing), workers in those jobs would then be available to take other jobs. * It will require two dentists, doctors, train drivers, farmers, taxidermists, etc. to be trained for every one job: In some cases, depending on the changes described above. Again, I assume the changes would be phased in over time, so there would be time to train any additional people. * Most occupations are not suited to job-sharing: Can you give us some examples of jobs that can't be shared? * It will cut GDP by approximately half: What would the implication of this be? * it will make Britain unable to compete with other economies: Why would we be unable to compete? Assuming the economy was the same size, wouldn't we be producing the same amount of stuff as now at the same cost with twice as many people working half the time? Cheers, Ali
The point about rent is well made. What Wednesday's talk completely ignored is that for most working people (not only students) the biggest slice of their outgoings is housing costs. It's fine for those who don't have a mortgage or an obscenely inflated London rent to witter on about a 21-hr week, particularly when they're in the upper salary-bracket or funded by a think-tank. I'm in favour of a 4-hr working day but it can't work without a Citizen's (Basic) Income - delighted to learn that Robert Skidelsky supports same, as does FT's Samuel Brittan. This could be funded by a tax on land (LVT) which is needed to help reduce property prices and curb the rentier-mindset. (I'm advised that significant property portfolios aren't uncommon amongst media folk, a bit like the second/holiday 'homes'.) Nef's position is a top-down bourgeois proposal. At least Skidelsky pointed to the inadequacies of GDP as a measure of economic well-being but Nef hasn't even dismounted from the growth steed.
Maybe one way of mitigating the implied reduction in GDP would be to put those who have retired back to work (half-time, natch).
Ali is right, of course. People couldn't afford a lot of food anymore, but they would have time to grow their own. They couldn't afford a washing machine anymore, but they would have time to wash by hand. They couldn't afford new clothes anymore, but they would have more time to mend the ones they have. Trouble with your 'logic', Ali: That it not a 21-hour workweek. That makes an extremely long workweek if you add it all up. So it isn't about reducing working hours at all. It is all about reducing the division of labour.
@ali I can understand why people are frustrated at the length of time they have to work to pay rent and so on. And, I can understand why people might think that, if only everybody worked less, then rents and house prices would be lower - though these rents and house price increases really involve transfers between generations (effectively between owners and non-owners of property) rather than real ecoomic losses. But, it would be better if this were resolved through liberalising the planning system. But, putting that aside, if people work half as long then roughly half as much will be produced. It might be a bit more than half as much because productivity might be higher or it might be a bit less than half as much because there will be less opportunities for division of labour in essential jobs (e.g. if you double the number of dentists, some of them will not be as good). But the basic fact is that, broadly, we can take our own decisions about these things. Hours worked per person are falling. But more women are working and they are buying labour-saving devices. Both of these trends result from rational decisions. If we had more leisure time and worked less, we would spend more on essentials and, because our leisure time would be less valuable at the margin, we would not buy so many labour saving devices, we would make our own bread rather than buying it from the baker, we would stop buying ready meals and takeaways and cook our own food, we would have older cars and repair them ourselves. In fact, I do some of these things for fun in a crowded weekend with the family already. But, the fact that so few people choose the lifestyle of my late grandma and people have to talk about imposing it really does suggest that there is something not very attractive about this sort of lifestyle as anything other than a hobby.
Ali, *Living costs would fall to some extent, but not by half or anything close to half. Like the vast majority of city dwellers, I doubt many people in the LSE on Wednesday night have the land available to grow their own food. * "And as people have more time to do things in their spare time (e.g. childcare, food growing), workers in those jobs would then be available to take other jobs." - But the NEF's point is they shouldn't be taking other jobs. They should limit themselves to 21 hours a week. * "It will require two dentists, doctors, train drivers, farmers, taxidermists, etc. to be trained for every one job: In some cases, depending on the changes described above. Again, I assume the changes would be phased in over time, so there would be time to train any additional people." - It is not so much the time as the cost of training that is the problem here, as well as the lack of workers available to fill the vacancies. The economy would have to contract so that there are fewer jobs to do. NEF presumably sees this as a benefit, which is why they are not worried that there are nowhere near enough unemployed people to fill the vacancies of a part-time culture.I suppose they think the 'unnecessary' or 'undesirable' occupations would disappear or be banned. * "Most occupations are not suited to job-sharing: Can you give us some examples of jobs that can't be shared?" - The only jobs that are really suited to job-sharing are menial, production-line tasks or labouring, cleaning etc. Working in an office wth people on flexi-time is, in my experience, inefficient and inconvenient to both staff and customers because the left hand never knows exactly what the right hand has been doing. * "It will cut GDP by approximately half: What would the implication of this be?" - Half as much income, half as much income tax, less purchasing power and worse public services. * "it will make Britain unable to compete with other economies: Why would we be unable to compete?" - Most people would earn less than the £14,000 that the Joseph Rowntree Foundation considers to be necessary for a basic standard of living. Although NEF side-steps this issue, this kind of mass poverty would not be tolerated for long and wages would have to rise, probably through legislation. The effect would be a less efficient workforce (see above) being paid more than its worth. Inflated labour costs would inflate prices of export goods and make industry uncompetitive. Foreign investors would also be unwilling to operate in a country wedded to a 3 day week.
Excellent article, Chris. I get the impression that you really enjoyed the lecture, in the way that one enjoys a shockingly awful film or watching an Ed Milliband interview. I am genuinely surprised by Skidelsky, I must say. He's supposedly the biggest Keynesian east of Paul Krugman, but Keynes, for all his faults, was still a liberal, and would have been appalled to hear his vicar on earth suggesting that government should ban advertising and stop chasing GDP. As for the wider topic, it's all based on the Lump of Labour fallacy, which is a Marxist invention that is no longer supported by any economist in the world (except, it appears, Lord Skidelsky).
@Ali: I can’t speak for Chris, and I didn’t attend the lecture, but I might be able to help with some of your questions. You say that “halving of hours means a halving of income… but then living costs would fall too”. I’m not sure that that is true. At least, there is no reason to believe that it would fall in proportion. After all, resource costs would not change – we’d still have the same quantity of resources, so the cost of any resource would be the same. A car built by two people doing 21-hour weeks instead of one person doing a 42 hour week would not be any cheaper. However, the 21-hour worker would have half as much money with which to buy the car. The same is true for any product that you choose. You say “as people have more time to do things in their spare time (e.g. childcare, food growing), workers in those jobs would then be available to take other jobs.” However, that overlooks what is probably the single most important lesson of economics, and indeed what made Homo Sapiens superior to Homo Erectus, which is the division of labour. It is more efficient if a few people specialise in growing food, and a few in childcare, and a few in making cars, than if the car manufacturer spends time growing their own food. In fact, it would be really hard for a person to become self-sufficient while holding down a 21-hour a week job, and would require a lot more land and be quite environmentally harmful (as somebody whose wife has an allotment, I know the limits of growing one’s own). As for childcare, children can benefit a lot from professional childcarers, who are often trained and skilled at providing early years education. You seem to question the fact that it will take two people to do certain jobs, and that this will require training twice as many people. If anything, I think that Chris underplayed this aspect by focussing only on dentists and doctors. Just about any job above the most basic manual labour requires time to train staff; this burden is clearly doubled if the job is shared. I think Chris may have exaggerated by saying that “Most occupations are not suited to job-sharing”, but clearly many are. Any job with a creative element resists job-sharing, for example, as anybody who has ever tried to co-author something will know! The biggest issue, however, is not addressed by either you or Chris. Surely there is a fundamental freedom to consider, here. It should be up to the individual to decide what the division is between work and leisure; if you, or I, or Chris want to work a 42 hour week, nobody should be allowed to forbid us from doing so. We do live in a free country, after all. Right?
Wages invariably match close to the cost of living. For if they did not, then people would not work. If the government halves the working week, then the jobs people will get out of bed to go to must pay twice as much as their old ones, else they wouldn't bother. This would mean real wages would double. Compared to other countries who had not imposed this arbitrary restriction, UK exports would be highly uncompetitive. It's worthwhile asking what the NEF truly envisages will happen during this new found 'leisure time'. Ali, writing above, implies that people will spend more time doing household chores or engaging in back-breaking labour such as planting your own crops in your garden (an interesting assumption, I wonder how many Londoners have back gardens with sufficient fertile soil to feed themselves and a few home-reared livestock). This sounds more like a return to Victorian house routines than a new found dose of freedom. This whole thing seems to me to be a mad scheme to push people out of the jobs which they have chosen and forcing them to do tasks which they dislike and can only do less efficiently than the professionals!
@CB: "Wages invariably match close to the cost of living... If the government halves the working week... This would mean real wages would double." I'm not sure that that is true. Wages should equal the marginal product of labour. If everybody starts working half-time, there is no reason why that would make their labour more productive. Their real (hourly) wages would remain the same; their income would therefore halve. You're right about the "return to Victorian house routines", though. It's just bizarre that the NEF want people to make-do-and-mend and grow their own vegetables. It's as if they think that poverty is in some way noble. @Philip: "if people work half as long then roughly half as much will be produced" To be fair to the NEF, they are suggesting that twice as many people work half as long, which (ceteris paribus) means that the same amount is produced. Now, I admit that ceteris is most definitely not paribus in this proposal, but I think it's wrong to accuse the NEF of suggesting that half as much work will lead to the same product.
Chris is right to tag them the "No Economics Foundation". It is annoying to see whatever crazy scheme they are currently pushing referred to in the media as "Economists say.....". The idea of limiting working hours in this way was exposed as a fallacy more than a century ago. A far less extreme version, the 35 hour week in France, has not succeeded in its own terms and is unpopular amongst some groups of workers who would prefer longer hours and more pay. In practice, restrictions on employment of this kind would lead the bulk of the workforce to take on a second job. This would be inefficient. If the government tried to prevent it they would end up making criminals out of a large chunk of the population. Incidentally, what of the already self-employed? If the NEF can fill a hall to listen to this sort of stuff, it must have been a very bad night on telly.
Chris in todays world full time is 21-24 hours a week as part time is all anyone can get,so you work 2 part times to equal one full time. Obama and his minions call these folks the under employed or some such baseless economists double speak to atone for a destroyed world economy. Each week we get fed a dose of blind lies to reality by the federal govmnt to the economies getting better, look and see we changed the calculations yet again on how we determine the unemployed numbers and voila unemployment fell yet again........... Oh pay no mind to the man pulling the strings on my body and brain....all you need do is click the ruby red bernakes together and repeat 3 times. Theres no place like OBAMAVILLE! Most folks already know the mouse click and print cash game thats been going on and Ive read where many investors now figure that bernake and geithner have dumped nearly 50 trillion dollars into the dow markets since 2007 to keep it above water and values in tact. I believe if we dig,we will find its the same thing the FED did prior to the great depression when the FED had printed so much cash they had to recall 2/3rds of it to maintain its value and then the rush on the banks hit followed by the great depression! Todays actual unemployed in america is nearer 17-25% and has been as they dont count people who have exhausted all their unemployment benefits.....
Chris, More on the NEF’s comedy economics here.
Im confused isn't Lord Skidelsky a Keynesian who keeps telling us aggregate demand is too low? How then can he be opposed to consumerism? How does one end consumerism while boosting aggregate demand?
"The idea of limiting working hours in this way was exposed as a fallacy more than a century ago..." To be precise, the CLAIM of a fallacy is nearly 180 years old. The refutation of that claim as itself a fallacy is nearly a hundred, having been made in 1913 by Cecil Pigou in "Unemployment." It all sounds so "self-evident": "cut the hours of work in half and you are left with half the income." It's not "a simple sum in arithmetic", though, as John Rae pointed out in 1894. Although he was an advocate of the eight-hour day, Mr. Rae, too, thought that it was a fallacy that limiting working hours could expand employment. Charles Beardsley (an economics professor) demonstrated why Rae (a journalist) was wrong in his assertion of a fallacy. Isn't it odd how the journalistic allegations have become the economic conventional wisdom and the analytical refutations of those claims have been forgotten? Well, it's all so "self evident," you say! No, it's not. I suppose I should identify myself as one of those "pre-schoolers with advanced reading abilities and an internet connection." I have just returned from a week in Blighty trolling through the archives at the LSE, Cambridge, Manchester, Bolton and Sheffield. I don't really mind the ridicule because that means that at least we've moved beyond the "first they ignore you" stage. But it occurs to me that a lot of avoidable economic suffering is going on in the world whilst you smirking school boys are relishing your hardy-har-hars. Let's try to be a bit less arrogant and a bit more inquisitive, shall we?
Sandwichman, I read your lengthy open letter to Paul Krugman on another blog. While you have certainly dug out a lot of interesting references to this issue over the last century and more, I remain unconvinced that you (or Pigou for that matter) have made a case for limiting hours of work. The lump of labour fallacy you refer to in your letter is a very simplified version of a more complex analysis. In some sense yes, if you imposed this restriction on hours, and if all labour was suitable for any half-time job freed up by your diktat without loss of productivity and there were no additional costs of recruiting and training and so on then arithmetically you might be able to share the existing work around. But is this remotely plausible? And how would firms, employees and the unemployed themselves react to this? Behaviour would change in ways which would thwart the aims of the NEF: individual employees would moonlight, firms would sub-contract, work would shift abroad...
@sandwichman - fundamentally the decision to work is a decision (which is sometimes taken implicitly - I realise many people's hours of work are relatively fixed in the short run) between whether whether we value the things we buy with another hour of work more or less than an hour of leisure. It can also reflect a decision between different types of work (do I work and buy a dishwasher or do I have to wash up the dishes by hand - in my household: we feel that we would rather do a bit more of the work that we are best at doing and buy a dishwasher with the money). If we all worked 20 hours a week, then we would end up doing much more work in the home (just like my grandma - though she had a job as well as working every other non-sleeping hour within the home: things have improved!). The state already puts a huge tax wedge in the way of taking this decision efficiently, though the income effect of that tax wedge may lead some families to work more than they would like to.
Len Shackleton and Philip You are quite right, Len, that the lump-of-labour claim is a simplified version of a complex analysis. The problem is that the complex analysis points in a direction that you (and the conventional wisdom) seem to be unaware of. It's not your fault. History of economic thought has been excised from the curriculum. One should be wary when the 'authorities' in a scientific field presume that it is best not to dwell on the history of their discipline. Sydney J. Chapman's theory of the hours of labour demonstrated that the determination of hours in a competitive market would tend to exceed the optimal. His theory was accepted as canonical and has never been challenged. However the theory introduced an element of uncertainty that, according to Lionel Robbins, made it difficult to estimate the returns to the various factors of production. To overcome this difficulty, John Hicks introduced a "simplifying assumption" that given hours were indeed optimal for output insofar as unions were strong enough to enforce their demand for shorter hours through strike action. That latter premise became the enabling assumption for the post-war labor supply model of income/leisure choice, which Philip relies on sans strong unions enforcing demands for shorter hours. Assume we want to climb up on the roof. Now assume we have a ladder and climb up on the roof. Now forget that we assumed we had a ladder. How do we get down from the roof? We can't. There's no ladder! Except, if don't assume there is a ladder, we are not up on the roof so we don't have to get down. I'm glad you found my Krugman letter interesting, Len. I've continued to trace the history of the fallacy claim and have pushed the timeline back to a 1780 pamphlet, "Thoughts on the Use of Machines in the Cotton Manufacture" by the Bolton magistrate, Dorning Rasbotham. It is worth noting that in its original form the "fallacy" had nothing to do with shorter hours. It had to do with objections to machinery. If I may say so, it had to do with upper class misconceptions of what the real objection to machinery was based on. The objection was to actual harsh conditions endured by the workers, not to erroneous abstract ideas about the cause of those conditions. Me? I love machines. I'm writing this on a machine and sending it to you through a network of machines. On Tuesday, I traveled from Leeds to Sheffield and was booked to continue on later in the day from Sheffield to London. The machine that issues the tickets would not issue the ticket I had already paid for. The clerk at the ticket counter told me that the machine said I already picked up my ticket. I had no ticket. The ticket clerk told me I would have to buy a new one for 60 quid. My advance ticket had cost around 10, if I recall correctly. The ticket clerk insisted that if the machine said it had given me my ticket, I couldn't get a replacement. My quarrel was NOT with the machine. It was with the ticket clerk who insisted that the decision of the machine -- right or wrong -- was final and must not be interfered with. I insisted on speaking with "someone higher up" and was able to resolve the issue satisfactorily. As Len pointed out, the effects of working time arrangements requires a complex analysis. It won't do to pick out some anecdotal objection based on ceteris paribus assumptions that everything else remains the same. It also won't do to ridicule scholars doing archival research at the Marshall Library at Cambridge as "pre-schoolers with advanced reading abilities". I'm amused by such derision because to me it reflects back negatively on the intellectual insecurities of those who rely on insults and bromides to defend their unexamined certitudes.
@Tom Papworth 'Surely there is a fundamental freedom to consider, here. It should be up to the individual to decide what the division is between work and leisure; if you, or I, or Chris want to work a 42 hour week, nobody should be allowed to forbid us from doing so. We do live in a free country, after all. Right? ' I couldn't agree more. But the reality is that the choice is particularly binary depending on your social situation. Why not create a regulatory environment where this choice really exists in setting your own balance - that isnt imposing your world view on anyone but enabling more choice. Many people don't enjoy this fundamental freedom to choose due to societal pressures, employment legislation and the inflated property market which means most of us work to pay bank interest on mortgages or rent to landowners, the 'stuff' you mention is the illusion that keeps us convinced we're benefitting too. PS Can you sort out the formatting of comments on this blog, it makes long comments with block quotes harder to follow and I have a desperately long working week with little time to waste.

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