Five Million Jobs?
guest post by Sandwichman
Five Million Jobs?
“It is remarkable, in view of the virtual unanimity of opinion among economists as to the general shape of the relationship between hours and output, that the effect of hours shortening has received so little attention in published projections. It is often completely ignored even in their description.” – Edward F. Denison, “Employment and Hours of Work: Their Contribution to Past Growth and a Projection of the Future” in The Sources of Economic Growth, 1962.
In the early 1960s, Edward Denison, the founder of growth accounting, estimated that roughly one-tenth of the economic growth that occurred between 1909 and 1958 in the U.S. could be attributed to the “effect of shorter hours on [the] quality of a man-hour’s work.” That would have translated into approximately three million jobs created — except Denison also assumed that the optimal working time for output was 48.6 hours a week, 52 weeks a year (the 1929 annual average)! So he subtracted “the effect of shorter hours on [the] quality of a man-year’s work” from his estimate of growth, leaving an implied net loss of around 200,000 jobs over the 48-year period. What those calculations show, more than anything, is how sensitive any employment projections are to the framing assumptions. We will soon have occasion to tweak these assumptions to generate a range of employment estimates, but first a word about the long-term trend in hours of work.
Joseph Zeisel, writing in the Bureau of Labor Statistics Monthly Labor Review in 1958 called the long-term decline in the industrial workweek, “one of the most persistent and significant trends in the American economy in the past century.” That is, it had been a persistent and significant trend up until around 1940. After a brief spike during World War II, however, the length of the average workweek in manufacturing quickly receded to pre-war levels and then remained essentially unchanged for 65 years, with only minor, short-lived fluctuations reflecting the ebb and flow of the business cycle. By March 2010, the average manufacturing workweek lasted six minutes longer than it had in August 1945.
The chart above shows the decline in weekly manufacturing hours from 1850 to 1950, the levelling off of hours after World War II and a trendline extrapolating from the 1850-1950 rate of decline. In the broader economy, annual hours of work continued to decline after World War II, but at a slower rate than they had previously.
Furthermore, the increased participation of women and students in the workforce, a sectoral shift of employment away from manufacturing and toward services and the expansion of part-time work contributed to the post-war decline in annual hours. Annual hours for full-time workers showed even less movement. The chart below shows “potential” and actual annual hours from 1909 to 1958 as reported by Denison and annual hours from 1950 to 2009 as reported by the Conference Board’s Total Economy Database.
Had the annual hours of work continued to decline at the rate they did from 1909 to 1958, average annual hours in 2009 would have been about 14% lower than they were. What might the effect on job creation have been? Recall that Denison’s estimates were based on his assumption that the optimal length of the workweek for total output was 48.6 hours, 52 weeks a year. He also supposed that maximum productivity would occur at 33.9 hours a week. Below that latter figure, output was assumed to fall faster than hours as hours declined. But is it reasonable to assume that the optimal hours for both output and hourly productivity would remain the same from 1909to 2009? No.
Not unless we are prepared to defend the proposition that technology has remained unchanged or that the optima are unaffected by technology.
To estimate the job creating potential of shorter hours, I assume that the trend of hours of work from 1909 to 1958 approximates the amount of working time that would be optimal for output. This suggests that in 1909 the optimal workweek was indeed 52 hours and in 1958 it was 39.6 hours. Projecting that trend indicates an optimal workweek of 29 hours in 2009 (or, alternatively, 32 hours a week with five weeks’ vacation). Since a longer than optimal week subtracts output from the optimal potential, we can estimate that about six and a half percent of potential output was wasted by excessive hours of work.* That is to say, people were too worn out to produce as much as they otherwise could have. In terms of jobs lost, this represents over five million jobs.
I’ve used some fairly conservative benchmarks to anchor the trendline. If I had chosen 1940, instead of 1958, as the endpoint, then the trend would have indicated an optimal working year of 1400 hours and around 11 million potential jobs foregone. Also, Sydney Chapman’s theory of the hours of labor shows that hours determined in a hypothetical competitive market tend to be longer than optimal with regard to output. So even the pre-1940 trend may overstate the length of working time that would be optimal. The assumption that the given hours of work in 1909 and 1958 were optimal is, in effect, unrealistic. But to produce any estimate at all it is necessary to make such an unrealistic assumption. In the period since World War II, a significant payroll tax and regulatory bias against reducing the standard full-time hours of work has emerged, more or less “freezing” weekly hours at the forty-hour standard established in 1938 by the Fair Labor Standards Act.
Remember, these are not work-shared jobs, created by redistributing a given number of hours of work. They are productive jobs associated with an expanded output. Whether or not that additional economic growth would be a good thing is another matter I will examine in due course. For the present, however, what I want to call attention to is the seeming indifference of conventional economists to a rather considerable untapped potential source of job creation.
*An explanation of how maintaining excessively long hours over the long run actually detracts from total output can be found in Sydney Chapman’s 1909 Economic Journal article, “Hours of Labour.” Initially, an extra hour of working time (beyond the hypothetical long run optimum) adds an increment of output to the daily total, but over time, say a few months, the accumulated fatigue leads to a diminished pace throughout the day and a lower total daily output. The optimum is thus determined by the amount of time and effort can be sustained over the long run.
To estimate how much output is subtracted by excessive hours, we use an idealized, smoothed work curve that assumes a rise in hourly productivity through the early hours of the day followed by a plateau and decline of productivity as fatigue sets in. These changes can be represented by a sine curve, which is convenient for calculation of the area under each segment of the curve, representing the variation in hourly productivity. For example, the diagram below represents work curves for 1909 and 1958. As indicated, the output per worker in 1958 was a bit more than twice the output per worker in 1909. That greater total output, however, occurred in a much-reduced number of hours of work: 2704 hours in 1909 and 2060 hours in 1958. If we assume that annual hours in both 1909 and 1958 were optimal, given the respective levels of technology, then increasing annual hours in 1958 to the 1909 level would have reduced total output in 1958 by around 22%.
This doesn’t, I’m afraid, make sense. Because you have again left out the time spent in household production.
Your whole point rests upon productivity declining as working hours increase.
But if total working hours have been decreasing (as they have been, adding household and market production hours together) then the effects of declining productivity due to long working hours have been decreasing.
“The chart above shows the decline in weekly manufacturing hours from 1850 to 1950, the levelling off of hours after World War II and a trendline extrapolating from the 1850-1950 rate of decline. In the broader economy, annual hours of work continued to decline after World War II, but at a slower rate than they had previously.”
Work hours in the broader economy could have decreased at a slower rate than in the factory sector if hours outside the factory sector had been steady. From the statement, we don’t know if there is any new information in the second sentence. If hours data are disaggregated across productive sectors, do we find out that hours outside the factory sector have declined since WWII?
Sammich
I think what you write here is worth thinking about. Maybe even worth doing something about. But I have two complaints.
The first is probably just a matter of personal taste: I think false precision detracts from the credibililty of any argument. So, “48.6 hours per week” could better be said “about 49 hours..” and similar throughout the article.
The second is more serious: “optimal” begs a lot of questions. Optimal would be “enough.” Enough to produce what we need and want. And what we might want is a great deal more “leisure.” We might want that a lot more than the plastic toys that we produce because the economy is organized in such a way they won’t let us eat unless we produce plastic toys.
I am not sure that Tim Worstall understands this since he seems hung up on “household production” which he introduced in another thread to imply the poor germans didn’t really have a shorter workweek than americans, because they go home and work around the house. There is a huge difference between “working for the man” and working on stuff you care about.
Tim
without rancor, your comment doesn’t make a lot of sense. possibly it would if you filled in the steps, but i think even then it would fail.
anyone who has ever worked for a living knows what the Sandwichman is talking about. For many jobs, most people could get the work done in half the time if there wasn’t some constraint that forced them to fill out the day/week. Some of those constraints are real requirements of the real world. Some of them are mere “traditional.”
And except when the work day/week is really long enough to produce physical/mental exhaustion (slump in front of the TV with a beer), or just eat up all your time, the “work” you do after work starts a whole new “energy curve,” and is indeed what most of us “work for.” We go to work to get the money so we can come home and work on what we care about.
Tom,
It is good to see a post from you here at AB. I think you are unfortunately banging your head against a wall with your thesis concerning the value of a general reduction in the hours of work. Here at AB you are nearly preaching to the choir. However in our great country, wherein greatness has come to be measured in assets acquired, reductions in the hours of work are only justified as a cost cutting maneuver, especially in the public sector. Rather than a general tax increase, one that might possibly have a progressive structure, it is deemed more appropriate to simply lower the income of workers by reducing their working hours. It’s a form of through the back door tax increase, but limited to the working class.
Sammich
and you need to justify your remark about “a significant payroll tax…freezing working hours.”
that significant payroll tax is what allows average working people to stop working at a reasonable age if the want to or need to.
what does this say about the highly touted “produtivity gains” of the alan greenspan era
well, nothing actually. Here’s the problem with “productivity gains”: the original analysis of these was started in the 1930s by left economists (e.g., Harry Magdoff) at the WPA who were convinced higher wages led to productivity gains so they wanted to document it. The stats they relied on were physical units of output. By the 1950s, economists were using income accounts (GNP) instead of physical outputs because the data was more readily available. But here’s where you run into problems of aggregation, imputed values, inflation and deflators, etc., etc. Productivity just ain’t what it used to be. With the growing financialization of the economy, the expansion of whiz-bang bubble-blowing financial instruments counts as output, so some Bernie Madoff gets to be the most productive worker bee in the hive until the bubble bursts.
See Fred Block and Gene Burns, “Productivity as a Social Problem: The Uses and Misuses of Social Indicators” American Sociological Review, Vol. 51, No. 6 (Dec., 1986), pp. 767-780.
Abstract
The study of social indicators is valuable for understanding the role that the social sciences play in the political arena. One common pattern is for a particular social indicator to become frozen in place once it takes on political significance, and this can result in ironic consequences. This study traces out the case of indicators of aggregate productivity trends in the United States. These measures were initially developed as part of an underconsumptionist argument that was linked to the political left, but there was considerable debate over different measurement schemes. Over time, one particular measure of trends in aggregate productivity became central for wage negotiations and for government policy. This created a context in which the slower rates of growth of this measure of productivity in the 1970s helped to validate the views of those on the political right who saw the need for greater restrictions on wage gains and government civilian spending. The paper raises questions about the value of this particular measure and ends by emphasizing the problems of locking in place an “objective” social indicator when the reality being measured is in continual flux.
That last paragraph is all in quotes — it’s the article abstract. The inherent problems with all social indicators, suggested by Block and Burns makes Tim Wostall’s frantic efforts to enshrine his idiosycratic interpretation of the Time Use surveys even weirder. I’m wary of the statistics I cite and try my best to use them responsibly rather than cherry-picking some outliers that seems to cement my case. In a sense, what I’m saying in the above is not “X + Y/Z = 5,000,000” but “isn’t it odd that the economists who are so enamored of growth and productivity have overlooked such a vast continent of potential employment gains?”
Two thoughts:
1) Does technology and/or other productivity improvements move the maximum of the curve to the left? Comparing the 1909 and 1958 curves suggests so. This seems counter-intuitive, since there is less exhaustive physical/manual labor involved in the later period.
2) The steepness of the ’58 curve suggests a kind of Laffer-curve concept. Going to the right of the maximum leads to a sub-optimal result in either case – which does make sense. Would a modern curve be steeper still? The steepness difference seems counter-intuitive to me also.
Cheers!
JzB
1. If we were talking about physicaql exhaustion, the move of the curve to the left wouldn’t make sense. Fatigue, though, has to do with the amount of specialization and concentration required and with the fact that higher incomes make leisure time itself more attractive (thus a greater opportunity cost to work).
2. The steeper curve represents the much greater output per worker in 1958 and has nothing to do with the intensity of fatigue experienced by the worker. Here’s what the 2009 curve looks like compared to 1909 and 1958.
Note: the 2009 curve is for the projected “output optimal” trend, not for actual average annual hours.
sandwichman:
thanks dude. you did well here. I hope you hang around.
It always amazes me that “lefties” seem impervious to this point. So let me try and make it in a very different way.
We’re all feminists, right? We all agree that running a household is “work”. That meals don’t cook themselves, that washing doesn’t get done on its own, that there is no ironing fairy? We agree that domestic work might be slightly different from work for pay out there in the marketplace but the feminists are right in that this is only a difference of form, not a difference of kind?
And yes, there are equalivalents to this sort of household work that has traditionally been done by men as well (maintenance issues, perhaps stoking the boiler, fixing the car, whatever).
So, have technological changes reduced the time that must be spent on this sort of work, that necessary to keep a household on the road, over the decades?
Sure, really, they have. Go ask G Granma about how long it took to do the family wash. Clean out the coal fire. Cook from scratch on a wood stove.
So, over the sort of timescale that sammichman is talking about here, the past century or so, has there been a reduction in working hours? Well, yes, there really has been, a reduction in household working hours. One of the Fed Reserve banks put out a paper on this showing that since the 70s average total working hours for men have fallen by 8 hours a week (was it a week? Or a month?) and those for women by 6 hours (women have raised their market working hours but not by as much as household production hours have fallen).
So, by only looking at one part of working hours (market working hours, ignoring household production hours) Sammichman is able to leap to false conclusions. That the working week has not been declining: when it has.
So, I’m unemployed, like many of you. And I’ve had a bit of a hard time getting anywhere with monster.com, careerbuilder.com and the likes. So, I started to apply directly to companies around me. Which made things 30 times more complicated and harder to keep track of.
However, because I like to keep organized, I added a page to my personal (resume) website that kept track of the the career and job landing pages for each company. Seeing as a lot of people out there are in similar positions, I wanted to share my webpage with you. I’m still working on making it more user friendly, however, the general idea of the webpage is to go through alphabetically starting at the top and going to each individual company looking for relevant jobs for you. This takes a considerable amount of time, but I’ve gotten more feedback this way then with the other sites.
In a perfect world, you’d be able to check each company (over 150 at last count) each day for new postings. However, this made it easier for me to have stop off points and starting points.
So here’s the page :
http://grantbeehler.net/jobs.html
I have also started to add job fairs (I’m local to Houston, so they are mostly geared towards Houston). But if you find other companies or job fairs you want me to add, I will be more than happy to do so. Anyways, let me know what you think. Suggestions and comments are very appreciated. This doesn’t really yield anything (there is one adsense banner to help with bandwidth) otherwise, it’s pretty much for my convenience and hopefully for the greater good. So, I hope someone else can find use in it!
Anyways, good luck and happy hunting. I hope that we all find jobs soon!
-Grant
So, I’m unemployed, like many of you. And I’ve had a bit of a hard time getting anywhere with monster.com, careerbuilder.com and the likes. So, I started to apply directly to companies around me. Which made things 30 times more complicated and harder to keep track of.
However, because I like to keep organized, I added a page to my personal (resume) website that kept track of the the career and job landing pages for each company. Seeing as a lot of people out there are in similar positions, I wanted to share my webpage with you. I’m still working on making it more user friendly, however, the general idea of the webpage is to go through alphabetically starting at the top and going to each individual company looking for relevant jobs for you. This takes a considerable amount of time, but I’ve gotten more feedback this way then with the other sites.
In a perfect world, you’d be able to check each company (over 150 at last count) each day for new postings. However, this made it easier for me to have stop off points and starting points.
So here’s the page :
http://grantbeehler.net/jobs.html
I have also started to add job fairs (I’m local to Houston, so they are mostly geared towards Houston). But if you find other companies or job fairs you want me to add, I will be more than happy to do so. Anyways, let me know what you think. Suggestions and comments are very appreciated. This doesn’t really yield anything (there is one adsense banner to help with bandwidth) otherwise, it’s pretty much for my convenience and hopefully for the greater good. So, I hope someone else can find use in it!
Anyways, good luck and happy hunting. I hope that we all find jobs soon!
-Grant
So, I’m unemployed, like many of you. And I’ve had a bit of a hard time getting anywhere with monster.com, careerbuilder.com and the likes. So, I started to apply directly to companies around me. Which made things 30 times more complicated and harder to keep track of.
However, because I like to keep organized, I added a page to my personal (resume) website that kept track of the the career and job landing pages for each company. Seeing as a lot of people out there are in similar positions, I wanted to share my webpage with you. I’m still working on making it more user friendly, however, the general idea of the webpage is to go through alphabetically starting at the top and going to each individual company looking for relevant jobs for you. This takes a considerable amount of time, but I’ve gotten more feedback this way then with the other sites.
In a perfect world, you’d be able to check each company (over 150 at last count) each day for new postings. However, this made it easier for me to have stop off points and starting points.
So here’s the page :
http://grantbeehler.net/jobs.html
I have also started to add job fairs (I’m local to Houston, so they are mostly geared towards Houston). But if you find other companies or job fairs you want me to add, I will be more than happy to do so. Anyways, let me know what you think. Suggestions and comments are very appreciated. This doesn’t really yield anything (there is one adsense banner to help with bandwidth) otherwise, it’s pretty much for my convenience and hopefully for the greater good. So, I hope someone else can find use in it!
Anyways, good luck and happy hunting. I hope that we all find jobs soon!
-Grant
Earth to Timmy:
This just in from those lefties at the Canadian Index of Wellbeing. Front page story this morning in the Globe and Mail:
TORONTO, June 15 /CNW/ – Canadians, especially women, are caught in a time crunch and the problem has been getting worse over the past 15 years, says a new report by the Canadian Index of Wellbeing (CIW), Caught in the Time Crunch: Time Use, Leisure and Culture in Canada.
“People are struggling to meet the competing demands of a workplace that can reach out to them 24/7, caring for children and aging parents, and their own need to refresh body and mind. As individuals and as a society we are paying a steep price for this time crunch. We’re less healthy, both physically and mentally and we have less time for leisure and relaxation with family,” said The Honourable Roy J. Romanow, Chair of the CIW Advisory Board.
The Report concludes with a call for a national dialogue on how Canadians can lead more balanced lives. “This is not just a simple case of individuals needing to better manage their time,” Romanow said. “We need family-friendly policies for all workers and more community resources and supports for seniors. We need governments and public policies that support leisure and culture activities and venues – ensuring that equity and inclusion are overarching principles in our approach.” The report and a quiz on how you fare on the time crunch continuum are both available at http://www.ciw.ca.
The Canadian Index of Wellbeing (CIW) is a new way of measuring wellbeing that provides unique insights into the quality of life of Canadians – overall, and in specific areas such as: standard of living, health, the quality of the environment, education and skill levels, time use, community vitality, democratic engagement, and the state of leisure and culture.
Tim Worstall
since I don’t get it, does that prove I am a leftie?
failing to make a distinction between “work for pay” and other work is simply to miss the whole point of any discussion of the conditions of “work for pay.”
now if you could show a direct trade off between work for pay and, say, “housework”, you might have the beginning of a case. and i hasten to add… a “direct” trade off, not a vague… oh well, the invention of the washer and dryer gives the lady more time, so she can go to work to earn the money to buy a washer and dryer. yes, we know that. but does it really change the fact that, as I think the sandwichman is arguing, a shorter workday can lead to higher productivity, if not more actual production?
hint: from my experience, of course it can.
jazz
physical fatigue may not be the important factor. there is something about “time” itself, spent doing someone else’s work that is fatiguing. i would think that sitting in front of a computer screen all day would produce terminal fatigue.
jamzo:
Spencer says it best here:
http://2.bp.blogspot.com/_Zh1bveXc8rA/SuddUhLWUaI/AAAAAAAAA7M/iU2gefk317M/s1600-h/Clipboard01.jpg Labor’s Share
“it will be interesting to see how the libertarian and/or conservative analysts who keep coming up with all types of excuses to explain away the weakness in real labor compensation in recent years explain this away. If you really want to raise a stink you could look at this as a great example of the Marxist immiseration of labor that Marx believed was one of the internal contradictions of capitalism that would eventually lead to its self destruction.”
as taken from here: http://www.angrybearblog.com/2009/10/labors-share.html
I can imagine Tim Worstall’s rebuttal: since non-market work time has decline so precipitously since 1982, the productivity of non-market work must have risen so enormously that labor’s imputed income from non-market work more than compensates for the loss in share of market income. Yeah, workers are just raking it in off the books!
Why did that post three times? That’s frightening..