Can lower working hours beat unemployment?

Question

The common sense reasoning is downright simple: if X hours of works are needed per month, and Y people are available to work, give each person X/Y hours of work each month.

I understand that there are generic frictions that prevent this:

• people not being qualified to do some jobs
• people not wanting to do some jobs

And also specific frictions:

• people not wanting to get a lower salary because of lower working hours.

Without being as extreme as in the introductory example: In a given sector, where there is a surplus of qualified people willing to do a specific job, and whose average salary is higher than the minimal salary necessary to live above the poverty threshold: It makes sense to reduce at the same time salaries and working hours, in order to allow more people to get a salary.

However, except from France which has reduced working time from 39 to 35 hours per months, such measures are not widespread, and seem scarcely considered.

Therefore one wonders whether such measures can actually work. If they do, why are they not more widespread? If they don't, what is the issue preventing them from being effective?

Answer 1

In Germany in crisis times working shorter hours (short-time work, Kurzarbeit) can be used by firms to prevent layoffs. There are legal regulations how labor unions need to be consulted on how this is done. It has been argued that this has helped to overcome the 2008 crisis better than some other countries, e.g.: "What Explains the German Labor Market Miracle in the Great Recession? The Evolution of Inflation Dynamics and the Great Recession", Brookings Papers in Economic Activity, Spring 2011, Michael C. Burda & Jennifer Hunt; "Explaining the German Employment Miracle in the Great Recession – The Crucial Role of Temporary Working Time Reductions", Alexander Herzog-Stein, Fabian Lindner, Simon Sturn, June 2013

Answer 2

Your question seems to be asking from a social planner perspective, as if the economic system could be freely designed. Let me offer you one from a Marxist perspective.

There is no interest from the capitalist class (very bluntly speaking, business owners + right-wing politicians + an important sector of the media) in lowering unemployment, because the latter acts as a check to the power of labour, and in favour of the power of capital. This enable the latter to appropriate a higher proportion of total surplus (value added), known as the capital share (opposite to the labour share).

Therefore, a fall in unemployment it is not in the interest of those with the largest influence in regulation and politics in general.

Historically, at the beginning of industrial capitalism up until the introduction of labour laws in the early twentieth century, the working week was of six days, and the working day was of 12 hours. Even children worked. The reduction of such patters to modern ones could be argued to have reduced the rate of profit of the capitalist class (an empirical question).

You can read more about this perspective here, and (a more bizarre argument) here.

PS: surely, some could argue that a more healthy and happy workforce is more productive, to the benefit of businesses, and so there are incentives within the system for it to move towards a lower working week. My (limited) knowledge of history tells me that most of the reductions in worker week have come through labour movements and not businesses initiatives nor through right-wing government.

Answer 3

No, it will not works without subsidies in place.

There is no causation-correlation between a lower working hour and unemployment rates.

Employment, as in ideal fundamental economic conditions, is allocated suitable task for a person to produce the output that benefits others, which "rewards" is given accordingly.

in labor intensive economy, employments are created by the supply and demands of the economy. In such environment, it is possible to "scale down" workforce by cutting work hours and adjust the paycheck accordingly. However, this will not work to save "employments" if the production replaces by game changing technology advancement/product obsolescence. Another reason that forbids short work hour is the environments cause. Let see some example:

• a farmer cannot afford to work "shorter hour" on various task. However, automated agriculture equipment might be splinter to shorter work hours to watch out equipment breakdown alert.
• Lots of machinery need a dry run before starting the actual production. A frequent restart to accommodate the shorter working hour is not practical and it is costly.

Ironically, lower working hour to prevent immediate layoff works on the bureaucrat, e.g. many developing countries are using such strategy to prevent immediate cut down of the workforce due to automation task, cutting down of red tapes. However, this comes into expenses of tax payer money. Some countries even resort to printing money to support such policies(i.e. the infamous Zimbabwe).

For developing countries, the "head count" subsidies are done by creating various grants for research and developments. But this depends on the socio-economy-knowledge structure, i.e. you cannot create a grant that one doesn't have enough knowledgeable personnel(with related knowledge on such fields) to move around.