Friday, July 10, 2015

People Need to Work Longer Shorter Hours

Dean Baker at the Guardian: The Hard Work Election:
Historically, the benefits from higher productivity are higher pay and more leisure – if we go back a century, for instance, work weeks of 60 or even 70 hours a week were common. But while the American work week has been largely fixed at 40 hours a week for the last 70 years, other countries have pursued policies to shorten the work week and/or work year through paid sick days, paid family leave, and paid vacation. 
Several European countries have actively pushed policies of work sharing as an alternative to unemployment: the government compensates workers, in part, for a reduction in hours rather than paying unemployment insurance to someone who has lost their job. Germany has led the way in pushing work sharing policies, which is an important factor in its 4.7% unemployment rate. And, as a result of work sharing and other policies, the average worker in Germany puts in almost 25% fewer hours each year than workers in the United States, according to the OECD. Most other wealthy countries are similar to Germany: in the Netherlands, the average work year is 21% shorter than in the US and, in Denmark, it is 20% shorter.
Alan Pike at Think Progress: What’s Missing From The Media Scrum Over Bush’s Call To ‘Work Longer Hours’:
But that back-and-forth over the “work longer hours” line misses the bigger, subtler error in Bush’s diagnosis of the economy’s present underachiever status. 
Bush claimed that if workers were able to get scheduled for more hours, they would “through their productivity gain more income for their families.” Obviously more hours would equal a larger paycheck. But Bush’s suggestion that being more productive will produce individual prosperity for American workers in the 21st century is flat wrong. 
The relationship between American workers’ industriousness and their economic security has eroded so severely in recent decades that the two concepts aren’t even on speaking terms these days.
Sandwichman at EconoSpeak: People Need to Work Longer Shorter Hours

It's great to see Dean Baker and Alan Pike raising important issues about the relationships between working time, productivity and wages. It would be fantastic if the conversation broadens and deepens to embrace the historical theory and analysis of working time. Back in December, I posted the abstract of a [still] forthcoming Economic Journal article by John Pencavel, "The Productivity of Working Hours." Here it is again:
ABSTRACT: Observations on munition workers, most of them women, are organised to examine the relationship between their output and their working hours. The relationship is non-linear: below an hour’s threshold, output is proportional to hours; above a threshold, output rises at a decreasing rate as hours increase. Implications of this finding for the estimation of labour supply functions are considered. The findings also link up with the current research on the effects of long working hours on accidents and injuries.
In the conclusion to his article, Pencavel cited the "neglect in contemporary models of labor markets" of the question of the variability of "the link between working hours and work effort or fatigue..." Addressing this theme, I sent the following email to Professor Pencavel, which I think well sums up my puzzlement and consternation at the paradigmatic incongruity of that neglect:
Dear Professor Pencavel, 
I was delighted to hear about and read your working paper and forthcoming article on the productivity of working hours. May I suggest a few further historical connections you may find of interest? 
In 1913, the British Association for the Advancement of Science established a committee to investigate "the question of fatigue from the economic standpoint." This committee presented its first interim report at the annual meeting of the Association in Manchester in September, 1915, the same month that the Health of Munitions Workers Committee was established. Philip Sargant Florence was investigator for the British Association committee. Florence later wrote Economics of Fatigue and Unrest (1924). Also on the committee was Sydney Chapman, whose 1909 presidential address to the economics section of the British Association, "Hours of Labour" was subsequently published in the Economic Journal and was deemed authoritative by Marshall, Pigou, Robbins and  Hicks. 
In The Theory of Wages, Hicks devoted six pages to a summary of Chapman's theory of hours, which he described as the “classical statement of the theory of 'hours' in a free market.” Hicks was paraphrasing Chapman's analysis when he explained "why competition among firms might not induce a cut in hours and why, in the absence of statutory regulation or the activities of trade unions, employers have been 'slow' to initiate a reduction in hours." Pigou also presented an extensive summary of Chapman's theory in his Economics of Welfare, although his attribution of the theory to Chapman was somewhat less than explicit. 
Chris Nyland emphasized the importance of Chapman's theory and  its curious omission from contemporary neoclassical discourse in his chapter on the history of worktime thought in Reduced Worktime and the Management of Production (1989). Peter Groenewegen has a chapter on Chapman in The Minor Marshallians and Alfred Marshall: An Evaluation (2012). 
Chapman also collaborated with Thomas Brassey on a three-volume "continuation" of Brassey's Work and Wages. The evidence in Brassey's original Work and Wages, published in 1872, played a strategic role in the demise of classical political economy and its eventual displacement by marginalist analysis. Brassey's father was a railroad builder who employed tens of thousands of laborers throughout Europe and the British Empire. The younger Brassey relied on his father's extensive labor accounting records to show that higher wages didn't translate into higher labor costs and that long hours didn't necessarily result in more output. The prominent American economist, Francis Amasa Walker, extolled the influence of Brassey's evidence:
[B]y far the most important body of evidence on the varying efficiency of labor is contained in the treatise of Mr. Thomas Brassey, M.P., entitled Work and Wages, published in 1872. Mr. Brassey's father was perhaps the greatest "captain of industry" the world has ever seen… The chief value of Mr. Brassey, Jr.'s work is derived from his possession of the full and authentic labor-accounts of his father's transactions.... 
Subsequently, in what came to be "regarded to be the first modern economic textbook," Alfred Marshall credited Walker for "forcing constantly more and more attention to the fact that highly paid labour is generally efficient and therefore not dear labour…" Marshall judged that fact to be "more full of hope for the future of the human race than any other… [although it] will be found to exercise a very complicating influence on the theory of Distribution."  In addition to his argument that wages rates didn't predict labor costs, Brassey also affirmed that it was "equally true that the hours of work are no criterion of the amount of work performed." 
Chapman was a highly regarded Marshall protege. Thus  Work and Wages, in Continuation... completed an arc from Brassey to Walker to Marshall to Chapman and, finally, back to Brassey. In volume 3 of Chapman's "Continuation" (1914), he reprised his own theoretical analysis of the hours of labor that had been published five years earlier and which was consistent with the evidence and conclusion that Brassey had offered in his 1872 book. 
In the conclusion to your article, you mention the apparent "neglect in contemporary models of labor markets" of the variability of "the link between working hours and work effort or fatigue..." This neglect becomes more perplexing in light of the role that Brassey's contribution played in the emergence of neoclassical analysis and of the former prominent regard for Chapman's theory of the hours of labor, at least among leading British economists. I've written about Chapman's theory and its undeserved eclipse in several articles and have appended links to two of them below. 
A third piece listed below, my chapter in Toward a Good Society in the Twenty-First Century, "Time on the Ledger: Social Accounting for the Good Society," projects from Chapman's theory and from historical trends in working time what might today be an "optimal" average working year in the U.S. My projection is, necessarily, highly speculative but is intended to provoke more systematic attention to the issue addressed by Denison in the quote with which you concluded your article.
Tom Walker
Missing: the strange disappearance of S. J. Chapman’s theory ofthe hours of labour 

The Hours of Labour and the Problem of Social Cost 

Time on the Ledger: Social Accounting for the Good Society

Links: Pencavel, Hours of Work and Productivity

The Economist, December 9, 2014: Proof that you should get a life
But a new paper, by John Pencavel of Stanford University, also shows that reducing working hours can be good for productivity.  
TIME, June 19, 2015: How to Unplug From Work
Productivity falls sharply after a 50-hour workweek, found Stanford economics professor John Pencavel. So connecting less is good for you and your company—though your boss may need convincing. 
Research shows working longer hours doesn’t increase productivity. Economists have argued for some time working longer hours would negatively affect productivity. John Hicks, a British economist who looked at this issue in the 1930s, concluded that productivity declined as working hours increased. And John Pencavel of Stanford University showed in his research that reduced working hours can be good for productivity. The study found that productivity declined markedly after more than 50 hours a week and that the absence of a rest day (such as Sunday) damaged productivity.
New Zealand Herald, July 11. 2015: No winners in culture of overwork
Employee output falls sharply after a 50-hour working week and falls off the cliff after 55 hours, with those putting in 70 hours producing nothing more in those extra 15 hours, according to a recent study by John Pencavel of Stanford University. He says long hours are also connected to absenteeism and high employee turnover, and there are ancillary costs to employers such as providing light, heat, ventilation, and supervisory labour during those extra hours.
Human Resources Executive Online, February 5, 2015: Long Hours Lead to Lower Productivity
Research by Stanford University economics professor John Pencavel indicates there’s a point of no return, if you will, when long hours and overwork become unproductive and unhealthy, and even have negative effects on your bottom line. So, counter to common thinking, your hardest workers may not be your best workers, not by a long shot.
The study—The Productivity of Working Hours, based on a review of much earlier research undertaken by investigators of the British Health of Munition Workers Committee during the First World War—finds employee output falls sharply after 50 hours of work in a week. After 55 hours, that output is fast becoming nonexistent, to the point that an employee working 70 hours in a week produces absolutely nothing between 55 and 70 hours, according to the research. 
“Long weekly hours and long daily hours do not necessarily yield high output,” Pencavel writes in his report, “and this implies that, for some employees engaged in certain types of work, their profit-maximizing employer [should] not be indifferent to the length of their working hours over a day or week.” 
This point has already been made in reports of fixed employment costs, where costs linked to the number of workers employed inclines a firm to extend workers’ hours, he notes. 
“[But] this paper,” Pencavel writes, “has suggested a different reason for an optimizing employer to care about the length of working hours: employees at work for a long time may experience fatigue or stress that not only reduces [their] productivity, but also increases the probability of errors, accidents and sickness that impose costs on the employer. 
“Unlike the case of fixed employment costs,” he writes, “these concerns over work stress incline the firm not to extend the work hours of employees, but to curtail them. … This is certainly not a new argument, but it seems to have been neglected in contemporary models of labor markets. It implies that restrictions on working hours—those imposed by statute or those induced by setting penalty rates of pay for hours worked beyond a threshold, or those embodied in collective-bargaining agreements—may be viewed, not as damaging restraints on management, but as an enlightened form of improving workplace efficiency and welfare.”