Thought for Thursday

My column in today’s Fin (subscription required) is about work and work intensity. The takeaway

According to the Australian Bureau of Statistics. Average working hours for full-time employees increased from 42 to 45 hours a week between 1982 and the mid-1990s, levelled out, and have declined slightly over the past two years. It is reasonable to assume that work intensity has followed a broadly similar pattern.

The productivity statistics reflect the easing-off in effort. The best single measure is multifactor productivity, which takes account of capital inputs and working hours, but not of changes in work intensity. After two decades of fairly poor performance, ABS estimates of showed a strong increase in multifactor productivity from the end of the recession in 1992 to the late 1990s, when work hours and work intensity reached their peak.

In the last few years, however, as work intensity has eased off, so has (measured) productivity growth. The figures have bounced about, but the average rate of multifactor productivity growth since 1998-99 has been below 1 per cent.

Can the Howard government claim, then, to have delivered a relaxed and comfortable Australia? Certainly it could not do so on the basis of its first term in office. The government ditched its pre-election commitments as Înon-coreâ and used the Black Hole and the Commission of Audit to justify a new round of reforms and Budget cuts. But the pace of reform has eased significantly since then.

Many commentators have criticised the slowing pace of reform, arguing that it has contributed to slower productivity growth. They may be right, but a slowing pace of reform, along with worker resistance to the erosion of leisure time, has also contributed to more Îrelaxation and comfortâ.

10 thoughts on “Thought for Thursday

  1. True, but so what? You can work like Americans and have lots of money, like Americans, or you can work less hard, like the French, and have less money, like the French.

    We can choose, individually or as a nation, what we prefer. But whatever we choose, it’s just a matter of preference. Neither choice is inherently superior.

  2. “We can choose, individually …, what we prefer.”

    Er, no. As individuals we do not have any option about where to place our efforts on a continuum between unemployment and overwork, by and large (JQ himself may be an exception!). We are only offered options towards one or other of the ends, with no happy medium; the result is Procrustean, since most of us don’t fit what’s on offer. That seems to me to be the thrust of JQ’s discussions in the area.

  3. Competitive capitalism goes against the grain of human nature, which is right and good, because human nature is content to stagnate, whereas humman culture is an artificial game designed to promote uneasy progress.

    Economics is the science of happiness.
    In the short term, people are happiest when taking time out to smell the roses ie bludging.
    This is what humans did for 50,000 years plus,
    until the last interglacial shook us out of our somnabulistic ambulations.
    Leisure = pleasure but not progress.
    It was not until North European Christian fundamentalists made work a religion that real self-generating progress took off.
    Technical and economic progress do not make for “relaxed and comfortable” people, as any therapist of Type A achievers will tell you.
    Yet Darwinian social competition is a necessary condition for such tech-ec progress – as social theorists from Marx to Weber have recognised.
    Hence the US is the leader in tech-ec progress.
    And tech-ec progress is necessary to defeat the auldest enemies of human happiness, back breaking work, disease and poverty.
    So to achieve long term happiness we must sacrifice short term ease, to maximise the quantity and quality of neurological and technological capital accumulated.
    Note: the longest hours are ususally put in by the highest achievers.
    Such are the Ironies of History.

  4. Pr Q’s aggregational average approach suffers from twin defects:
    latitudinal: class disaggregation – yuppies work longest hours
    longtitudinal: cohort re-allocation – boomers are retiring earlier

    Some Australians are working shorter hours, think battered boomer males who have gone onto the disability pension.
    Some Australians may be working longer hours, but they are retiring earlier and living it up by the coast – think “sea change”.

  5. Can the Howard government claim, then, to have delivered a relaxed and comfortable Australia? Certainly it could not do so on the basis of its first term in office. Yep – which is exactly why it came so close in 1998 to being a one-term government.

    “Worker resistance to the erosion of leisure time” is best translated as “people choose more leisure as they get richer and more secure”. The reduced hours are thus more a consequence than a cause of the relaxation and comfort. Just as the ‘overwork’ of the earlier years was more a consequence than a cause of other angst.

  6. Oh, and what PM Lawrence says is true as far as it goes, but remember that the whole thrust of labour market deregulation is to reduce the rigidity of that Procrustean bed.

    The widening in the distribution of hours of work associated with it could easily represent a large welfare gain – it weakens the binary nature of that choice between “too long” (for some) hours and unemployment. Whether it is in fact a Good Thing ought therefore to be a matter of empirics – subject neither to the knee-jerk reactions of aging leftists idealising the old Australian settlement, nor to the short-sightedness of employers who think they can get extra effort from people without paying for it.

    What enforces that binary choice is the really sharp insider/outsider dichotomy (something which it is, of course, in the unions’ interest to maintain and extend). It is this dichotomy which makes it worthwile for employers to pay efficiency wages (and conditions) and try and recover the extra costs through extra hours, rather than to employ more people (and hence reduce unemployment).

    So if you want more control over your hours you should go easy on the pay rises.

  7. “…remember that the whole thrust of labour market deregulation is to reduce the rigidity of that Procrustean bed…”

    No, though it may be behind the intentions of some of those involved. Even so, it is certainly not a unanimous aim of theirs, and it is neither a necessary end result nor is it observably an achieved thing so far.

    As I see it (and have said before), there is an externality in the labour markets that favours downsizing, which to some extent flows through to encourage overwork by those remaining. In this context – let’s stipulate the externality for the moment – deregulation is not necessarily reducing market imperfections but giving free rein to the concealed one. It depends on whether any given overt regulation was offsetting the concealed imperfection.

    That leaves us to answer the question of whether there really is an externality, but it certainly shows us that until we check that out we do not yet know – have not yet established – that deregulation is actually leading to a less imperfect labour market after all. An externality certainly squares with the idea of a split (“bifurcated”) labour market response, and in fact it was observing the bifurcation behaviour that first made me go looking for a mechanism that might produce it; that was how I spotted the possibility of an externality.

  8. Not quite sure what you’re getting at, PM. If you mean that employees, not employers, bear the cost of retrenchment then surely this is just another way of saying that employees are capturing rents while they are employed (ie the loss is due in part to loss of a rent). But this just strengthens my argument about the nature of the insider/outsider dichotomy. If you want the wages and conditions consequent on such a structure then you have to accept the price – higher unemployment and more mismatch between hours desired and hours work (in both under- and over- work directions).

  9. Well, DD, you’ll get more of the detail of the externality I suspect at my publications page, but here’s the gist.

    Each hire/fire decision affects the Social Security budget (with on costs of various sorts as well as the actual transfers to the unemployed). So, each retrenchment adds to the general tax burden (and the much rarer reverse reduces it when someone is hired). As that burden is carefully not hypothecated it spreads widely, so we get a sort of Tragedy of the Commons/Prisoner’s Dilemma effect, in that employers don’t face the full financial implications of the hire/fire decision but get to spread a material part of the cost. That would even happen in an economy in which the whole tax burden fell on employers, since it would still be spread among employers in general.

    This is simply describing the cost structure we now face. It doesn’t address who is capturing what rents at all – that doesn’t affect this mechanism. For what it’s worth, when countries don’t have Social Security they still get spread costs from unemployment – Vagrancy Costs, the costs of adapting to and dealing with their presence. Social Security in whatever shape or form first came in for the public purpose of heading off Vagrancy Costs, quite regardless of any personal charitable impulses among statesmen or influential people (it was usually before democracy).

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