It was actually quite amusing to see an article in my provincial newspaper a while back where two sides were arguing about a reduction in the work week, and you could play bingo with the excuses the anti-side used. There wasn’t an original idea in the whole article, as the pro-side was almost apologizing and got one paragraph of the six on offer. — “Salty,” comment at AngryBear.
|September 22, 1956|
November 7, 1960
QUESTION. This is from Mr. White, Warren, Mich.
What is your stand on the 32-hour workweek?
Vice President NIXON: Well, the 32-hour workweek just isn’t a possibility at the present time. I made a speech back in the 1956 campaign when I indicated that as we went into the period of automation, that it was inevitable that the workweek was going to be reduced, that we could look forward to the time in America when we might have a 4-day week, but we can’t have it now. We can’t have it now for the reason that we find, that as far as automation is concerned, both because of the practices of business and labor, we do not have the efficiency yet developed to the point that reducing the workweek would not result in a reduction of production. The workweek can only be reduced at a time when reduction of the workweek will not reduce efficiency and will not reduce production.
It’s inevitable… but we can’t have it.
Dick Nixon’s turnaround on the issue of the four-day workweek was epic. His original prediction of a four-day week “in the not too distant future” came in a prepared speech, not in some unguarded moment of overheated campaign hyperbole. He even disclaimed that his “projections” were not “dreams or idle boasts” but were based on the continuation of President Eisenhower’s economic policies.
Following up on Nixon’s 1956 prediction, United Auto Workers president Walter Reuther responded with a telegram calling on the administration to outline a legislative program to achieve the shorter workweek. Nixon sent a telegram in reply and President Eisenhower endorsed Nixon’s reply in a press conference on September 28.
Nixon’s reply was that “mere artificial legislation” would not accomplish a four-day workweek. What was necessary was “dedicated joint efforts of labor, management, government and research.” For his part, Eisenhower “saw nothing wrong with” Nixon’s answer, which he thought also represented his own view that it would be “wonderful” to have more leisure time, but that “no man can say it is going to come about because I say so.” A month after his first comment, Nixon reaffirmed his expectation of a shorter workweek, based on partnership between government, business and labor.
The adamant wording of Nixon’s 1960 dismissal of the idea takes on added resonance in the context of Eisenhower’s earlier caveat that “no man can say it is going to come about because I say so.” Four years later, it “just isn’t a possibility… we can’t have it now. We can’t have it now… [because I say so].”
This wouldn’t be the first time that self-contradiction has appeared in the rhetoric of opposition to shorter work time. The Sandwichman has amassed the world’s largest collection of lame excuses offered by opponents. I assembled 21 of them and sorted them into eight categories having to do with productivity, new consumer wants, unsatisfied needs, labor costs, government policy, self-adjusting markets, history and inevitability, and the devious motives of proponents.
To be kind, the rationales are opportunistic. Mostly, they are jejune partial equilibrium statements invoked as if they were eternal verities. More bluntly, they are mendacious. Every single reason given for not shortening the hours of work is complemented by a contradictory reason for not shortening the hours of work. Damned if you do and damned if you don’t.
The Sandwichman commented the other day on The Economist article, “Britain’s Green Party proposes a three-day weekend.” Regrettably, though, I didn’t pay much attention to their “rebuttal” to the alleged assumption of a fixed amount of work:
In fact, if people worked fewer hours, demand would drop, and so fewer working hours would be on offer.
I have seen stupid explanations before of why there is not a fixed amount of work. Layard, Nickell and Jackman argued that if work time reduction and redistribution succeeded in reducing unemployment, it would be inflationary and that would probably cause the central bank to intervene to re-establish the “non-accelerating inflation rate of unemployment.” That’s pretty stupid but not nearly as stupid as what The Economist article claimed as “fact.” Pardon me for repeating the whole dreadful argument:
War is the health of the State. It automatically sets in motion throughout society those irresistible forces for uniformity, for passionate cooperation with the Government in coercing into obedience the minority groups and individuals which lack the larger herd sense. The machinery of government sets and enforces the drastic penalties. The minorities are either intimidated into silence, or brought slowly around by subtle process of persuasion which may seem to them really to be converting them. Of course, the ideal of perfect loyalty, perfect uniformity is never really attained.
War is the health of the State. Only when the State is at war does the modern society function with that unity of sentiment, simple uncritical patriotic devotion, cooperation of services, which have always been the ideal of the State lover. With the ravages of democratic ideas, however, the modern republic cannot go to war under the old conceptions of autocracy and death-dealing belligerency. If a successful animus for war requires a renaissance of State ideals, they can only come back under democratic forms, under this retrospective conviction of democratic control of foreign policy, democratic desire for war, and particularly of this identification of the democracy with the State.
War is the health of the State and it is during war that one best understands the nature of that institution. If the American democracy during wartime has acted with an almost incredible trueness to form, if it has resurrected with an almost joyful fury the somnolent State, we can only conclude that the tradition from the past has been unbroken, and that the American republic is the direct descendant of the English State.
And what was the nature of this early English State? It was first of all a medieval absolute monarchy, arising out of the feudal chaos, which had represented the first effort at order after the turbulent assimilation of the invading barbarians by the Christianizing Roman civilization. … The modern State begins when a prince secures almost undisputed sway over fairly homogeneous territory and people and strives to fortify his power and maintain the order that will conduce to the safety and influence of his heirs. The State in its inception is pure and undiluted monarchy; it is armed power, culminating in a single head, bent on one primary object, the reducing to subjection, to unconditional and unqualified loyalty of all the people of a certain territory. This is the primary striving of the State, and it is a striving that the State never loses, through all its myriad transformations.
The President is an elected king, but the fact that he is elected has proved to be of far less significance in the course of political evolution than the fact that he is pragmatically a king. It was the intention of the founders of the Constitution that he be elected by a small body of notables, representing the ruling propertied classes, who could check him up every four years in a new election. This was no innovation. Kings have often been selected this way in European history, and the Roman Emperor was regularly chosen by election. That the American President’s term was limited merely shows the confidence which the founders felt in the buttressing force of their instrument. His election would never pass out of the hands of the notables, and so the office would be guaranteed to be held by a faithful representative of upper-class demands.
It was a dark and stormy global night economy and a spectre task was haunting facing Europe…
A new supply-side agenda for the left
The task facing Europe is to meet the challenge of the global economy while maintaining social cohesion in the face of real and perceived uncertainty. Rising employment and expanding job opportunities are the best guarantee of a cohesive society.
The past two decades of neo-liberal laissez-faire are over. In its place, however, there must not be a renaissance of 1970s-style reliance on deficit spending and heavy-handed state intervention. Such an approach now points in the wrong direction.
Our national economies and global economic relationships have undergone profound change. New conditions and new realities call for a re-evaluation of old ideas and the development of new concepts.
In much of Europe unemployment is far too high – and a high proportion of it is structural. To address this challenge, Europe’s social democrats must together formulate and implement a new supply-side agenda for the left.
— Tony Blair and Gerhard Schroeder, The Third Way/Die Neue Mitte, 1998.
In a 1981 review of George Gilder’s Wealth and Poverty, Anna Weniger and Hank Robinson succinctly described “the essence of supply-side economics” as “simply a campaign to redistribute income from poor to rich, dressed in the garb of economic theory.” Gilder’s economic theory was fundamentally an affirmation of Say’s so-called Law. “The essential thesis of Say’s Law,” he insisted, “remains true: supply creates demand. There can be no such thing as a general glut of goods.”
I’m not going to bother trying to debunk supply-side economics. What would it take to change the mind of someone who “can’t see what’s wrong” with a theory about a monetary economy that is based on the assumption it is a barter economy? What would it take to change the mind of someone whose belief in the theory is intimately tied to their identity?
So let’s assume that anyone I could persuade with the following argument is already inclined to agree with Weniger and Robinson’s assessment of supply-side economics as mere pretext. Theoretical flimsiness is no problem for conservatives because the argument is, after all, consistent with their values and objectives. Supply-side rhetoric is their sales pitch.
But what about “the left”? If we take Blair’s and Schroeder’s representation of their position on the left at face value, the question arises of what in Hell did they think they were selling? A social democratic redistribution of income from the poor to the rich? It appears they were selling the supply-side rhetoric to themselves and to corporate media and campaign donors as “realism.”
The old ideas that were thinly veiled ends in themselves for conservatives were to be repackaged as new concepts that would enable electoral success in an environment that was inhospitable to the Labour Party’s own “old ideas.” Whether the “new concepts” could somehow deliver social cohesion and expanding job opportunities as well as redistribution of income from the poor to the rich was seen by Third Way acolytes as strictly a matter of cleverness. Third Way proselytizers were supremely confident of their cleverness.
You Don’t, Say?
On the assumption that those who believe Say’s Law — or those who cling to the argument as a ready-made justification for their preferred policy outcomes — will not change their minds, I would like to present what might be described as Say’s other law:
Misery is the inseparable companion of luxury.
A position Say proclaims “as false in principle, as it would be cruel in practice” is that misery and want are indispensable as incentives to work:
The apologists of luxury have sometimes gone so far as to cry up the advantages of misery and indigence; on the ground, that, without the stimulus of want, the lower classes of mankind could never be impelled to labour, so that neither the upper classes, nor society at large, could have the benefit of their exertions.
Of course the Third Way manifesto didn’t overtly “cry up the advantages of misery and indigence.” The phrasing was more subtle and nuanced:
But providing people with the skills and abilities to enter the workforce is not enough. The tax and benefits systems need to make sure it is in people’s interests to work… Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs. … The labour market needs a low-wage sector in order to make low-skill jobs available.
I think we have three really important functions.
First, to explain our basic concepts and most important insights in plain English. Famously, Paul Samuelson, the founder of modern macroeconomics, was asked whether economics told us anything that was true but not obvious. It took him a couple of years, but eventually he gave an excellent and topical example – simply the theory of comparative advantage.
Similarly, I often say that the most useful thing I did in my 6 years as Chief Economist at DWP was to explain the lump of labour fallacy – that there isn’t a fixed number of jobs in the economy, and increased immigration or more women working adds to both labour demand and labour supply – to six successive Secretaries of State. So that’s the first.
Second is to call bullshit.
O.K. I call bullshit. What Portes explained “to six successive Secretaries of State” was a figment of the imagination of a late 18th century Lancashire magistrate, a self-styled “friend to the poor” who couldn’t understand why poor people got so upset about having their wages cut or losing their jobs — to the extent they would go around throwing rocks through windows, breaking machines and burning down factories — when it was obvious to him that it was all for the best and in the long run we would all be better off… or else dead.
I call bullshit because what Portes explained to six successive Secretaries of State was simply the return of the repressed — the obverse of “Say’s Law” (which was neither Say’s nor a Law) that “supply creates its own demand,” which John Maynard Keynes demolished in The General Theory of Employment, Interest and Money and that John Kenneth Galbraith subsequently declared “sank without trace” in the wake of Keynes’s demolition of it.
I call bullshit because when Paul Samuelson resurrected the defunct fallacy claim that Portes explained to six successive Secretaries of State, he did so on the condition that governments pursued the sorts of “Keynesian” job-creating policies that the discredited principle of “supply creates its own demand” insisted were both unnecessary and counter-productive.
But the lump of labor argument implies that there is only so much useful remunerative work to be done in any economic system, and that is indeed a fallacy. If proper and sound monetary, fiscal, and pricing policies are being vigorously promulgated, we need not resign ourselves to mass unemployment. And although technological unemployment is not to be shrugged off lightly, its optimal solution lies in offsetting policies that create adequate job opportunities and new skills.
[Incidentally, as Robert Schiller has noted, the promised prevention of mass unemployment by vigorous policy intervention did not imply the preservation of wage levels. Schiller cited the following passage from the Samuelson textbook, “…a decrease in the demand for a particular kind of labor because of technological shifts in an industry can he adapted to — lower relative wages and migration of labor and capital will eventually provide new jobs for the displaced workers.”]
I call bullshit because what Portes explained to six successive Secretaries of State was not even Paul Samuelson’s policy-animated zombie lump-of-labour fallacy but a supply-side, anti-inflationary retrofit cobbled together by Richard Layard and associates and touted by Tony Blair and Gerhard Schroeder as the Third Way “new supply-side agenda for the left.” Central to that agenda were tax cuts to promote economic growth and “active labour market policies” to foster non-inflationary expansion of employment by making conditions more “flexible” and lower-waged:
Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs. …
Encourage employers to offer ‘entry’ jobs to the labour market by lowering the burden of tax and social security contributions on low-paid jobs. …
Adjustment will be the easier, the more labour and product markets are working properly. Barriers to employment in relatively low productivity sectors need to be lowered if employees displaced by the productivity gains that are an inherent feature of structural change are to find jobs elsewhere. The labour market needs a low-wage sector in order to make low-skill jobs available.
Dean Baker’s screed, Bill Gates Is Clueless On The Economy, keeps getting recycled, from Beat the Press to Truthout to Real-World Economics Review to The Huffington Post. Dean waves aside the real problem with Gates’s suggestion, which is the difficulty of defining what a robot is, and focuses instead on what seems to him to be the knock-down argument:
Gates is worried that productivity growth is moving along too rapidly and that it will lead to large scale unemployment.
There are two problems with this story: First productivity growth has actually been very slow in recent years. The second problem is that if it were faster, there is no reason it should lead to mass unemployment.
There are two HUGE problem with Dean’s story. First, aggregate productivity growth is a “statistical flimflam,” according to Harry Magdoff, who pioneered productivity measurement in the 1930s. In the 1980s, Magdoff co-authored a Monthly Review article with Paul Sweezy, “The Uses and Abuses of Measuring Productivity,” detailing the methodological problems of aggregate productivity measurement. After discussing “phantom statistics” in the reporting of construction industry productivity, and the technical problems of aggregating productivity statistics, Magdoff and Sweezy explained why “there is no such thing… as a ‘true’ measure of productivity”:
One reason for including this somewhat technical discussion is to drive home the point that there is no such thing as straightforward or “true” measure of productivity. And if this is so even in the realm of commodities where a reasonable, limited, meaning can be given to the concept, what can said about the productivity of service workers? There are of course service jobs that consist of routine, repetitive operations — e.g., in typing pools — where productivity measures may have some meaning. But how would one go about measuring the productivity of a fireman, an undertaker, a teacher, a nurse, a cashier in a supermarket, a short-order cook, a waiter, a receptionist in a lawyer’s office? It is in the very nature of the case that in most services qualitative changes are intertwined with quantitative changes; hence there is no continuity in the “output” from one period to another with which changes in employment can be compared. Moreover, it is typical of many of the service areas that the “output” cannot be separated from the labor engaged in the performance of the service; for that reason too there is no sensible way of comparing changes in output and labor. In other words, the notion of a productivity measure for most service occupations is nonsensical and self-contradictory.
Unfortunately, such considerations of elementary logic have not prevented statisticians and economists from producing a whole array of productivity measures, applicable not only to the private economy (combining commodity-production and services) but in some cases to government as well, useful for ideological and policy-making purposes. And by dint of endless repetition and selective emphasis, these statistical phantoms (to use Business Week’s apt expression) have attained the status of indisputable facts and have entered into the realm of scientific discourse. What is in reality nothing but a crude fetish has thus become one of the most potent weapons in capital’s struggle against labor and in support of an increasingly irrational and destructive social system.
In short, there is no reason that productivity growth should ever be viewed as the enemy of workers. We just need the right set of policies to ensure that they share in the gains.
Leaving aside the benefits and risks of technological advances themselves, Block and Burns chronicled how the concept of productivity growth — and its faux measurement — has been used as a political weapon against workers, unions and collective bargaining. The use of productivity data had initially gained prestige for its role in providing a “rational and objective” basis for wage negotiations, but in the late 1970s, business and political leaders,
…seized on declining rates of productivity growth as proof of the need for national policies to restrain wages and limit the growth of state spending. The decline of productivity growth was attributed to inadequate levels of investment and it was argued that only measures that increased the flow of resources to business and the rich could possibly facilitate adequate levels of new investment. It was simultaneously argued that excessive government regulation was also responsible for the slowing of productivity growth leading to stronger demands for deregulation of the business community. The culmination of these efforts was the Reagan Administration’s dramatic reversals of long standing tax and regulatory policies which were justified as providing solutions to the productivity crisis.
While the productivity concept had initially been elaborated by the WPA’s National Research Project to provide justification for more generous wage settlements and government public works programs, by the late 1970s, it provided a critical justification for getting tough with labor and for dismantling key parts of the American welfare state. The process of institutionalization had resulted in a reversal of the political implications of this particular indicator.
In a comment on Nineteen Ninety-Six: The Robot/Productivity Paradox, Jeff points out a much simpler rebuttal to Dean Baker’s and Jared Bernstein’s uncritical reliance on the decline of measured “productivity growth”:
Let’s use a pizza shop as an example. If the owner spends capital money and makes the line more efficient so that they can make twice as many pizzas per hour at peak, then physical productivity has improved. If the dining room sits empty because the tax burden was shifted from the wealthy to the poor, then the restaurant’s BLS productivity has decreased. BLS productivity and physical productivity are simply unrelated in a right-wing country like the U.S.
Jeff’s point brings to mind Walter Reuther’s 1955 testimony before the Joint Congressional Subcommittee Hearings on Automation and Technological Chang:
Every tool on every operation has a green light, a yellow light, and a red light; and when all the green lights are on, it means that all the tools at each work station are operating up to standard. When a yellow light comes on, on tool No. 38, it means that the tool is still performing, but the tool is becoming fatigued and that is a warning sign, so that the operator sitting there looking at these panels will know that he has to get a replacement tool for tool No. 38. He stands by at that position on the automated machine, and at the point the red light would kick on, on the board, he walks over — the machine automatically stops — he puts the new tool in the place of the tool that is worn out, and automatically the green light comes on and the machine goes on.
When I went through this plant the first time I was told by a top official of the Ford Motor Co.: ‘Mr. Reuther, you are going to have trouble collecting union dues from all of these machines.‘
And I said: ‘You know that is not bothering me. What is bothering me is that you are going to have more trouble selling them automobiles.‘ That is the real significance. We have mastered the know-how of mass production, and what we need to do is to develop comparable distribution know-how so that we will have markets for the tremendous volume of production that automation now makes possible.
At the beginning of 2007, net worth of households and non-profit organizations exceeded its 1947-1996 historical average multiple, relative to GDP, by some $16 trillion. It took 24 months to wipe out eighty percent, or $13 trillion, of that colossal but ephemeral slush fund.
From 1996 to 2015, GDP grew at a compound annual rate of 2.3% while Net Worth increased at the rate of 3.6%.
Responding to an editorial in the New York Times, Jared Bernstein reprised a theme that Dean Baker has been stressing for a while — that productivity and investment measures don’t support the “robots are stealing jobs” story. I agree with Jared and Dean that it is policy, not robots that are stealing the jobs. But I am skeptical about using productivity numbers as evidence against the role of labor-saving technology in displacing people from employment.
The reason for my skepticism is that labor productivity is a ratio between two very broad aggregates — GDP and hours worked — that lump together a myriad of disparate economic factors. Here is the argument I made to Dean back in December. He was not persuaded:
The difficulty I have with the evidence you [Dean] use for your argument has to do with the changing composition of the aggregate measures that make up the productivity calculation and the possibility that confounding variables in each of those aggregates may be “compounding the confounding” when used for year-to-year comparison.
As Block and Burns pointed out, the National Research Project that developed the original productivity estimates argued that “no such thing exists in reality” as the productivity of a group of diverse products. Instead they presented two calculations of productivity, using different weighting, to show that the “measurement” depended in part on the weighting of the variables.
The shift from physical output to GDP measures obscured the fact that there is “no such thing” as the productivity of a diverse collection of products. Monetary value converts those diverse products into so much “leets” — to use Joan Robinson’s sarcastic term. Obviously the mix of goods and services that make up the GDP differs from year to year. The GDP deflator is intended to adjust for price changes and quality improvements but doesn’t deal with distributional changes and product substitution.
The government services component of national income has been a particular issue, the critique of which goes back to Kuznets’s 1947 criticism of the Commerce Department’s GNP and Kaldor’s statistical appendix to Wm. Beveridge’s Full Employment in a Free Society. Kuznets argued that much of government services should be treated as intermediate goods rather than final consumption goods. Kaldor considered the inflationary affects of government deficit spending, arguing that some of that “inflation” simply reflected the increased share of collective consumption. Warsh and Minard offered a critique of “inflation” in the 1970s that could easily have referenced Kuznets’sand Kaldor’s arguments. Their idea was basically that as government expenditure increases as a percentage of GDP, much of the taxation to pay for it is passed on to the consumer in the form of higher prices. It is an argument about the incidence of taxation.
Finally, there is the question of the “productivity” of hours of work themselves. Presumably there is an optimal length (or innumerable optimal lengths) of the working day, workweek or year and variation above or below that optimum will result in lower output per hour. Aggregate hours of work and average annual or weekly hours do not reflect changes in the dispersion of hours of work that may in turn be affecting the productivity of hours. Computationally, this injects a circular reference into the measurement of productivity. If you tried to do this on an Excel spreadsheet you would get an error message. It is only by ignoring the feedback effect of changes in hours and changes in dispersal of hours that productivity can be calculated as GDP/Hours.
By definition, new technology introduces changes in product mix and changes in work arrangements. But also, by definition, the two components of the productivity calculation assume “no change” in product mix or work arrangements. So I’m having trouble seeing how a ratio that relies on an assumption of no change could be adequate to measure the effects of change.
When Jared posted his commentary, I wanted a quantitative illustration of the point I was trying to make. I had already been wondering about the question raised by Bill Gates about taxing robots and the idea that wealth creation might be “bypassing” income, so I looked up the net worth statistics.
After a bit of number crunching, I am astonished at what I see in the numbers. It is not just the discrepancy between GDP and net worth that impresses me but also the long period prior to 1996 during which the two numbers grew at a very similar rate. In the chart below, I have indexed both series to 100, with 1996 as the reference date. The smooth curve is actually two trend lines based on the 1947 to 1996 trend for each series:
Logically speaking, and using the plain language meaning of the terms, wealth is something that is produced. So increases in wealth presumably are predicated on increases in production. It makes intuitive sense that over the long run there would some sort of stable relationship between the growth rates of GDP and of wealth. I was not anticipating, however, such a close fit between the two series from 1947 to 1996. It only accentuates the disjuncture between GDP growth and growth of Net Worth after 1996.
The above chart only goes to the end of 2015, so it doesn’t include the recent stock market boom. Nevertheless, it presents an unsettling picture.
Returning to the puzzle of productivity, the point that I was trying to illustrate is that the comparability of the productivity measure requires a good deal of faith in the proportional stability of the economic relationships over time. If there are significant shifts in employment by sector, technology, resource availability, trade arrangements and/or consumption tastes, then comparing productivity between periods is futile. There is too much noise in the component aggregates to begin with — but using a ratio between them amplifies the noise.