Instead of higher unemployment, why not shorter work weeks?

[Markxxx]

This thing happened in Illinois with “Put Illinois Back To Work.”

The idea was to give companies incentives to hire people at least temp, to kick start.

The problem is Earnfare was also another program.

Earnfare workers would work a minimum of 55 hours per month. Then they’d pick up about 10 - 15 hours extra.

When “Put Illinois Back To Work” came abord, employers simply cut the Earnfare workers back to 55 hours a month and gave the “extra” hours to the new people in the new program.

Few jobs were actually created, they were shifted. Of course both programs are hailed as successes by the state as it used federal funds. So basically you used stimulus money to shift jobs.

This is the core issue, the money is not being used to create jobs but the money is being used to create statistics to justify the money in the first place.

[Broomstick]

Around here, I’ve seen companies that cut some percentage of the workforce, and other that cut some percentage of everyone’s hours. Which is better? Depends on who you ask. Both methods have trade-offs.

Given how little work is available in my area, most workers would seem to prefer shorter hours to being laid off. After all, some work is better than none for most of us. If it were easier to get a new job they might prefer a lay off to reduced hours.

No one is happy about this, of course.

[Sam_Stone]

Such a policy can only possibly work for workers who are truly interchangeable, who have no ‘local knowledge’, who are not members of projects, who do not carry work over from one day to the next, etc.

If any of you have read “The Mythical Man-Month”, it talks about the folly of believing that you can cut the time of a software project down by increasing the number of programmers. At a certain point, you run into diminishing returns because management becomes harder, communication between team members more difficult, overlap of responsibilities grow, etc. This applies just as much to an effort to double the size of a team but to work each person half as much. To do that, you’d have to give each person a smaller task load, which means you’re just distributing the work across more people. The net result is an explosion of management and a loss of efficiency.

If you’re a bookkeeper who leaves at the end of the day and picks up work again in the morning on the same set of books you left the day before, how you would like to share that with someone else? How much time would be lost trying to figure out what the other person did? How much extra effort would be required to coordinate your activities and make sure you had a smooth transition process?

There are very few jobs any more that are simply self-contained manual labor with no real information transmission requirements. Maybe a minimum wage worker picking lettuce in a field could be dealt with that way. Or an assembly line worker in a factory.

But for most jobs, this just isn’t the case. There’s even transition overhead for cashiers in a 7-11. When the new shift comes in, the old one has to cash out, balance the cash against the register total, fill out a deposit for the cash, etc. The new one has to set up his or her cash box, make sure the amounts are right, make sure the cash machine has been zeroed out, and all the rest. This can easily take 15 minutes per worker in total. Cut hours in half and double the number of workers, and you just added an extra sunk overhead.

More people also means more sick calls, more HR effort, more late arrivals, more legal paperwork.

Also, if businesses are going to be fined a flat amount for not providing health care, then each worker carries at least a $2000 overhead. Doubling the number of workers doubles the overhead.

The result would be an economic mess. You’d wind up with less overall worker productivity and higher fixed costs of labor. The result would be less competitiveness, and ultimately, lower employment overall.

If it made economic sense to do this, companies would already be doing it.

[Wesley_Clark]

France tried cutting their work week to 35 hours. My understanding is it resulted in higher hourly productivity, but not really new hires. So people did 40 hours of labor in 35 hours.

Lowering the retirement age is another thing to look at to lower unemployment, but I don’t know if we can afford it.

[constanze]

@Wesley_Clark

France tried cutting their work week to 35 hours. My understanding is it resulted in higher hourly productivity, but not really new hires. So people did 40 hours of labor in 35 hours.

If the employers don’t feel responsibility to creating jobs and simply use the crisis as excuse to cut the pay directly or indirectly, then this is the usual result.

Lowering the retirement age is another thing to look at to lower unemployment, but I don’t know if we can afford it.

The problem is that making people retire earlier usually does not create many new jobs, and leads to increased poverty among the retirees when their pensions are reduced because of the lesser years.

[constanze]

@Sam_Stone

If it made economic sense to do this, companies would already be doing it.

The thing is that business and companies have a responsibility to the community they work in, to their employees and the citizens generally. It also makes long-term sense - why did Ford pay his workers better than average wage and give free weekends? Because then they started buying his cars. Likewise, an unemployed person will consume only the bare necesseties and far less than an employee with an adequate salary.

Sadly, the short-term thinking where the only thing that counts are the quarterly profits for the stock exchange means that long-term problems are created.

[Ruminator]

It also makes long-term sense - why did Ford pay his workers better than average wage and give free weekends? Because then they started buying his cars.

Henry Ford paid his workers more to help solve the rampant turnover. (A side-effect of this is that the extra money also happened to help his workers afford cars. This after-effect is a coincidence and not a root economic reason for calculating a wage increase.) You can research this on google if you care to get the real story. Modern idiot journalists have incorrectly rewritten Henry Ford’s calculated motives as feel-good propaganda for paying workers a higher wage. Those journalists need to review basic math.

Let’s apply Ford’s approach to a family and see if the math works. A mother pays her son $10 per week as an allowance for helping out with house chores (washing dishes, feeding cat, etc.) The mother also makes ham sandwiches for his lunch. If we use Henry Ford’s brilliant pay scheme as you’ve put it, the mother could increase the pay of her son’s allowance to $10,000 per-week. This would be smart because her son could then turn right around and pay her mother $9,000 for the ham sandwiches. That $9,000 could then be used to make better ham sandwiches in higher quantities, or even buy a new TV, or help may off the mortgage. The whole is family is richer, right? This whole round-tripping of money is like building a superconductor loop of perpetual electricity, right? Frictionless wealth creation, yes?

The reality is that there’s no economic logic to help or not help your workers buy the particular products they happen to help manufacturer. You pay whatever amount it happens to take to attract new workers and retain old ones. The price of what they workers make is irrelevant. Should Boeing Company increase the pay of its workers so they can afford a 747 airplane? Each 747 jet costs $300 million. Even the CEO of Boeing can’t afford to buy one. Boeing has 150,000 employees. Multiply the numbers and you need $45 trillion dollars to enable the workers to buy 747 airplanes. Where will Boeing get the revenue to pay $45 trillion in wages since their annual revenue is only $60 billion? The entire GDP of the USA is only $14 trillion.

Would it make better “long-term sense” for Ferrari and Lamborghini to pay their workers higher wages so they can afford the $250k cars they make? Please show the math of how they would prosper if they altered their wage structures like Henry Ford.

[Obsidian]

My understanding is the real concern is about the top 10%.

Your star performers, who you can least afford to lose, are those who are most capable of finding employment elsewhere. You cut their salary and they’re likely to go elsewhere, because they can. Employers would rather control who leaves, because if they don’t, some will leave, and it’ll often be the ones they don’t want to.

[Wesley_Clark]

@constanze

If the employers don’t feel responsibility to creating jobs and simply use the crisis as excuse to cut the pay directly or indirectly, then this is the usual result.

The problem is that making people retire earlier usually does not create many new jobs, and leads to increased poverty among the retirees when their pensions are reduced because of the lesser years.

My limited impression is in France the costs of new hires are too high so they just increased productivity. Higher productivity isn’t necessarily a bad thing, but it didn’t lead to new hires. My impression is that offering incentive (tax breaks, subsidies to employers, etc) for hiring would do more to increase employment than cutting the work week.

I’m not talking about forcing retirement on people, but opening it up as a realistic option for those who want it. I have known several people who wanted to retire in their late 50s but couldn’t because they didn’t feel comfortable going w/o health insurance until medicare kicked in at 65.

[Wesley_Clark]

@Ruminator

It also makes long-term sense - why did Ford pay his workers better than average wage and give free weekends? Because then they started buying his cars.

Henry Ford paid his workers more to help solve the rampant turnover. (A side-effect of this is that the extra money also happened to help his workers afford cars. This after-effect is a coincidence and not a root economic reason for calculating a wage increase.) You can research this on google if you care to get the real story. Modern idiot journalists have incorrectly rewritten Henry Ford’s calculated motives as feel-good propaganda for paying workers a higher wage. Those journalists need to review basic math.

Let’s apply Ford’s approach to a family and see if the math works. A mother pays her son $10 per week as an allowance for helping out with house chores (washing dishes, feeding cat, etc.) The mother also makes ham sandwiches for his lunch. If we use Henry Ford’s brilliant pay scheme as you’ve put it, the mother could increase the pay of her son’s allowance to $10,000 per-week. This would be smart because her son could then turn right around and pay her mother $9,000 for the ham sandwiches. That $9,000 could then be used to make better ham sandwiches in higher quantities, or even buy a new TV, or help may off the mortgage. The whole is family is richer, right? This whole round-tripping of money is like building a superconductor loop of perpetual electricity, right? Frictionless wealth creation, yes?

The reality is that there’s no economic logic to help or not help your workers buy the particular products they happen to help manufacturer. You pay whatever amount it happens to take to attract new workers and retain old ones. The price of what they workers make is irrelevant. Should Boeing Company increase the pay of its workers so they can afford a 747 airplane? Each 747 jet costs $300 million. Even the CEO of Boeing can’t afford to buy one. Boeing has 150,000 employees. Multiply the numbers and you need $45 trillion dollars to enable the workers to buy 747 airplanes. Where will Boeing get the revenue to pay $45 trillion in wages since their annual revenue is only $60 billion? The entire GDP of the USA is only $14 trillion.

Would it make better “long-term sense” for Ferrari and Lamborghini to pay their workers higher wages so they can afford the $250k cars they make? Please show the math of how they would prosper if they altered their wage structures like Henry Ford.

That is a huge stretch and strawman argument. The central concept that if people have living wages and job security it is better for the economy (esp one like ours that is so reliant on consumer spending) isn’t really a controversial one.

In fact if the consumer/labor/working class hadn’t been squeezed so badly over the last few decades this last recession likely wouldn’t have been nearly as bad. People would still be able to retire, unemployment wouldn’t lead to as many foreclosures, consumption would be up, etc.

[Ruminator]

@Wesley_Clark

That is a huge stretch and strawman argument.

No it isn’t. People are saying Henry Ford’s primary motivation was for the workers to afford his cars. That’s not true. That’s just repeating idiot journalism and people eat it up without applying any thinking.

The central concept that if people have living wages and job security it is better for the economy (esp one like ours that is so reliant on consumer spending) isn’t really a controversial one.

I can agree with that concept but that philosophy has nothing to do with Henry Ford’s calculated wage increases. People are retrofitting an after-the-fact-feel-good reason for Ford’s wage increase. Understandably, the confusion was helped by Henry Ford himself because it’s a great publicity stunt but let’s not let idiot journalism make us blind to what Henry was actually trying to accomplish.

Gee whiz, if Wal-Mart announces they will eliminate plastic bags at checkout and switch exclusively to customer supplied cloth bags so they can be “environmentally green”, we’d all just roll our eyes. We’d see that it’s actually just Wal-Mart saving money on plastic bag supplies instead of an honest concern for the planet. However, if journalists say Henry Ford increased wages so “workers could afford his cars”, we eat it up like naive consumers. How the average person’s skepticism radar can function correctly for the Wal-Mart example but not the Ford example is mind boggling.

[gonzomax]

Ford was attacking worker turnover that was running well over 300 percent per year. But he did recognize that the employees could afford to buy cars.
Turnover dropped under 50 percent and absenteeism dropped dramatically.

[Wesley_Clark]

I wasn’t talking about Ford’s motivation (my impression is it was to lower turnover). You were talking about a mom offering her kid a $10,000 a week allowance, which is a total stretch of what was being discussed.

[smiling_bandit]

@Wesley_Clark

I wasn’t talking about Ford’s motivation (my impression is it was to lower turnover). You were talking about a mom offering her kid a $10,000 a week allowance, which is a total stretch of what was being discussed.

The fact that you said this shows that you simply do not understand what we are talking about, because the two cases are functionally identical. You took a badly-thought argument, slapped it on a separate idea*, and are now not understanding why you were slapped down for it. Frankly, I don’t think you even realized the two were seperate, which implies you haven’t studied this much. Even the most Marxist of scholars argee on this one, though some support wage increases for other (equally stupid) reasons.

• That the economy needs to somehow function, being the idea. That is a completely different issue. Worker wages really have nothing to do with it: the clearing-price of a market as a whole have absolutely nothing (period, end of story) to do with the wage/unit price of a single firm (Ford), or even a single sub-market (like automobiles). Some firms produce items so cheap anyone could casually afford a hundred. Others produce items exclusively for the super-rich. A given firm or submarket’s specific place in that spectrum comes down to technology, demand and market positioning, and productivity per wage value (i.e., how productive a “generic” worker is at a given payscale). Price controls and supports always distort the market. It may on occaision be good anyway for other reasons - but not bloody often.

@constanze

If the employers don’t feel responsibility to creating jobs and simply use the crisis as excuse to cut the pay directly or indirectly, then this is the usual result.

I’m going to take a look at this one now. constanze, I don’t want you to think I hate you, but this was, well, all kinds of stupid.

Employers do not go out of business for some abstract social good, particularly when it is the result of government’s trying incredibly dim-witted stuff and then expecting others to take the fall for it. This only makes sense if you’re the kind of person who gets up to let other people sit in your bus seat - and then you shoot yourself in head before flinging yourself out a window.

Employers are not responsible for the nation. They are not responsble to you. They owe you precisely jack and squat, in that order. If some fool in government thinks that acting like a dumbass in public will fix all our problems, I still don’t have any responsibility to act like adumbass in public. The fool in government is just wrong. And that’s exactly what happened. The people who came up with this idea had no clue what they were talking about, because anyone with half a brain could have told you well in advance.

[villa]

@constanze

Under the german model, the government makes up the 10% for those who fall under the poverty level. It’s cheaper to pay 10% than 60% unemployment.

Indeed - I was looking at reasons why this isn’t in place elsewhere in the world.

@constanze

This, however, is just a bad, bad management technique. If you have unproductive employees, you let them go as soon as possible, while hiring new, better ones. The assumption that the bottom 10% are always the worst and can safely be let go is idoitic - there will always be a bottom 10%, no matter how often you cut. And, the people who work already in your company at least now the ropes, new people have to be taught again (esp. under the American level with no proper qualification through apprenticeships, just learning on the job).

Don’t assume I am supporting it - management the world over makes idiotic decisions, and certainly in the US. They very often are short term driven, which magnifies the mistakes. Part of this is due to the prevalence of stock market capital funding rather than long term loans, and is therefore more apparent in the US and UK.

@constanze

If employers are not to be trusted, that’s bad, because it means any contract with them is useless.

Indeed. Hence the need for strong unions.

[Really_Not_All_That_Bright]

@Tahssa

Also if the work hours were cut under “full-time” employment many employers can cut off workers benefits like medical coverage.

I as a full-time employee with medical and dental coverage would not be happy if my employer cut my hours to 36 a week and then claim because I am not full-time anymore I do not qualify for the medical and dental coverage. I would quit and go find employment at a place where I could work full-time and get those benefits.

Your employer can do that anyway. It has no obligation to provide you with medical and dental coverage, unless you live in Massachusetts; it just does.

[Sam_Stone]

@constanze

This, however, is just a bad, bad management technique. If you have unproductive employees, you let them go as soon as possible, while hiring new, better ones. The assumption that the bottom 10% are always the worst and can safely be let go is idoitic - there will always be a bottom 10%, no matter how often you cut. And, the people who work already in your company at least now the ropes, new people have to be taught again (esp. under the American level with no proper qualification through apprenticeships, just learning on the job).

Have you actually managed employees? It’s not as simple as just ‘letting go of the unproductive ones’. Firing people is hard. It’s not only legally difficult, but it plays havoc with team morale. It’s also expensive to train replacements.

And sometimes, employees go from being productive to non-productive and back again. Some times they lose motivation. Other times their skill set doesn’t align with current activities, but when it does they are great.

Employees who are fired can be counted on to bad-mouth the company, and if they are friends with current employees they can be a source of discord.

In the real world, bosses are people too, and in general don’t like firing. So they become avoidant or may procrastinate on the decision. They may give the bad employee their fifth ‘last chance’, or decide to send them for retraining or put them on an improvement plan hoping to make the employee productive again.

Another reason it’s expensive to fire someone is that if you fire them for cause you can open yourself up to lawsuits unless you have extensive documentation supporting the firing, and maybe not even then. So bad employees often get layed off instead, but that usually costs the company a significant amount of money. A ten year employee may get 10-20 weeks of pay, in addition to regular notice. Significant legal costs can also be incurred because the company has to extensively document the firing/layoff to protect themselves.

For all these reasons, companies tend to accrue a certain amount of dead weight. Recessions put pressure on companies and force them to face reality and lay off their non-productive people (and liquidate non-productive assets and divest themselves of non-productive divisions). It also gives them a rationale for layoffs that tends to protect them from employee retribution.

In addition, if your work force is unionized, you often can’t fire people until there is a crisis of some sort. Many union rules put so many reviews, meetings, arbitrators, appeals, and other processes in place that it makes it so painful to fire someone that it’s cheaper to just shunt them aside and accept the dead weight. It’s only when the company is at risk of completely failing that the unions will back off and allow a certain number of layoffs.

[Really_Not_All_That_Bright]

Not only that, but getting rid of unproductive employees is generally more expensive in the short term than keeping them on. Unproductive or not, they’re still trained, and therefore infinitely more productive than people who aren’t.

[Wesley_Clark]

@smiling_bandit

The fact that you said this shows that you simply do not understand what we are talking about, because the two cases are functionally identical. You took a badly-thought argument, slapped it on a separate idea*, and are now not understanding why you were slapped down for it. Frankly, I don’t think you even realized the two were seperate, which implies you haven’t studied this much. Even the most Marxist of scholars argee on this one, though some support wage increases for other (equally stupid) reasons.

• That the economy needs to somehow function, being the idea. That is a completely different issue. Worker wages really have nothing to do with it: the clearing-price of a market as a whole have absolutely nothing (period, end of story) to do with the wage/unit price of a single firm (Ford), or even a single sub-market (like automobiles). Some firms produce items so cheap anyone could casually afford a hundred. Others produce items exclusively for the super-rich. A given firm or submarket’s specific place in that spectrum comes down to technology, demand and market positioning, and productivity per wage value (i.e., how productive a “generic” worker is at a given payscale). Price controls and supports always distort the market. It may on occaision be good anyway for other reasons - but not bloody often.

Yes, I need to bow in fear of every strawman argument and piece of condescending claptrap thrown at me.

I’ve heard arguments like that one before whent he minimum wage is raised $0.70 an hour, people make arguments saying ‘lets raise the minimum wage to $500/hr, then everyone will be rich’ which is a far cry from $0.70 an hour. If you can’t tell the difference between $0.70 and $500 then I’m probably wasting my time.

[Ruminator]

@Wesley_Clark

I’ve heard arguments like that one before whent he minimum wage is raised $0.70 an hour, people make arguments saying ‘lets raise the minimum wage to $500/hr, then everyone will be rich’ which is a far cry from $0.70 an hour. If you can’t tell the difference between $0.70 and $500 then I’m probably wasting my time.

You still don’t get it. It’s not the particular amount (regardless if it’s stretched to $500 or $10,000 for literary emphasis) that’s essential to demonstrate the idiocy – it’s the misguided concept of a “boomerang” money transfer being supposedly “good for business.”

Do you have a brother or good friend? Do you also know how to boil water? Ok, why don’t you pay him $10 to turn on the faucet so he can turn right back around and pay you $10 for Wesley’s homemade version of boiled water. Whether it’s $10 or $500 or $10,000 used as the roundabout money transfer, did it make good “business sense” to do it? That’s what the people who keep bringing up the Henry Ford story keep claiming.

Read constanze’s quote again: “It also makes long-term sense - why did Ford pay his workers better than average wage and give free weekends? Because then they started buying his cars.”

He claims Ford increased the workers wage so they could buy his cars. You agree with that statement? If so, show the math of how Ford’s particular version of the money boomerang makes the company more prosperous for the long term. You may have stumbled on to a goldmine of a business expansion technique that I’d love to put into practice! McDonalds and Burger King would also be very interested in this financial wizardry – it means they can reduce the wages of their burger flippers all the way down to $5 a day because that amount is more than enough to let the workers buy a hamburger meal.