More than 150 years ago, workers in New Zealand, closely followed by Australia, were the first in the world to secure an eight-hour working day. And 75 years ago, we achieved that great boon, the weekend.
Over subsequent years, until the 1980s, we saw a steady reduction in standard hours of work, including the achievement of four weeks of annual leave, widespread long-service leave and the reduction of the standard work week to 38 hours. Thanks to sustained technological progress, productivity and living standards improved steadily over this period.
The decades since have seen further technological advances, most obviously in information technology. The rise of Artificial Intelligence (AI) is just the latest example. Yet there has been no general reduction in standard working hours in more than 30 years.
This may finally be about to change, with New Zealand again taking the lead. After successfully implementing a four-day week in their own company, New Zealanders Andrew Barnes and Charlotte Lockhart established 4DW Global. As the name implies, the organisation has promoted the four-day week in a number of countries, primarily by helping to implement pilot programs.
The central idea of 4DW is summed up as 100-80-100. Workers receive 100 per cent of their previous wages while working 80 per cent of previous hours and attempting to maintain 100 per cent of previous productivity.
Initial results from trials in Australia and New Zealand have just been released with very positive outcomes. The trial was undertaken by 26 companies in sectors that included professional services, marketing, manufacturing and construction.
All but one indicated an intention to maintain the four-day week after the trial. Companies rated the impact of the four-day week to attract new employees at an 8.3/10, with productivity scoring a 7/10 and performance 6.8/10.
Employees were even more positive, and there was a big increase in self-reported productivity, with more than half (54 per cent) reporting an increase in their current work ability compared to their lifetime best.
Almost all participants (96 per cent) reduced their work time, with 88 per cent getting one full additional day off per week. When asked how much additional pay they’d require in their next job to go back to five days, 35 per cent of employees said 26-50 per cent more, 9 per cent would require more than 50 per cent, and over one in ten (11 per cent) say no amount of money would induce them to go back to five days.
Two factors have played a central role in the success so far of the four-day workweek trials.
First, progress towards reduced working hours and better conditions only takes place when the balance of supply and demand in the labour market favours workers. This was true for the Victorian stonemasons who first won the eight-hour day in Australia, and it is true for large groups of workers today.
By contrast, many managers, whose working conditions are usually comfortable, typically prefer to undertake longer working hours. Having made this choice, they are keen to see their subordinates working as well. As a result, most employers have pushed back against limits on working hours.
Second, the pandemic showed us that just because particular ways of working have been around for a long time, this does not imply they are the only possible way of doing things, let alone the best. We rapidly discovered that for most kinds of information work, it wasn’t necessary to turn up at an office five days a week. Against their will, in some cases, managers have been forced to adapt to a world in which a large proportion of their workforce is out of sight much of the time.
The rise of remote work, and the shift in the balance of power in the labour market, has granted workers more autonomy over how and when they do their work and allowed them to set and maintain boundaries between work time and home time. It is thus not surprising that many want to get their work done in four days, rather than five.
The shift to a four-day week has the potential to improve our lives in ways that go beyond an increase in leisure time. Gender balance should be improved, partly by making full-time work a more feasible option for many women. The increase in hourly pay rates implied by a four-day week should flow through to part-time workers, primarily women.
Shorter working hours can also encourage men to take a more active role at home. The 4DW survey found that 27 per cent of the men in heterosexual relationships increased their share of housework and 17 per cent of men in heterosexual relationships increased their share of childcare.
Environmental and health benefits will arise from reductions in time spent commuting (around 36 minutes per week on average) and increases in time spent on exercise (30 minutes per week).
The shift to a standard four-day week is long overdue, given the technological improvements of the last four decades. While still in its early stages, it seems likely to become a reality sooner rather than later.
A year after the Albanese government’s election win, Labor’s strategy for its first term in office is clear.
On the issues where the Coalition has historically had an advantage, most notably economics, defence and foreign policy, Labor has adopted those policies and sought (so far successfully) to more competently implement them. On everything else — climate, health, education, human rights — Labor has pitched just far enough to the left of the Coalition to provide a point of difference while minimising the risk of losing votes on the centre-right.
Examples of the first part of the strategy are the stage three tax cuts and AUKUS, but they’re only the most prominent. As well as promising to implement the stage three cuts, the government allowed numerous initiatives of the previous government — funded for a limited time — to expire on schedule. Most notable was the low- and middle-income earners’ tax offset, which ensures the tax system will be more regressive by the end of the government’s first term than it was at the start, even if the stage three tax cuts are trimmed.
In foreign policy, as well as AUKUS, the government has outdone its predecessor in supporting the Quad alliance to contain China. Prime Minister Anthony Albanese’s embrace of the ethno-nationalist Narendra Modi government, and (literally) of its prime minister, goes beyond anything seen under former prime minister Scott Morrison.
The government has interpreted its House of Representatives majority as a mandate to do precisely what was contained in its election platform (and nothing more), but one major promise has been watered down and, for practical purposes, repudiated.
In 2021, Albanese promised a renewed commitment to full employment. The plan included a jobs summit, leading to the issue of a white paper on full employment. Its title echoed that of the 1945 white paper on full employment in Australia, which was the founding document for Australian economic policy during the decades of postwar full employment.
But then the jobs summit became a jobs and skills summit, with most of the discussion centring on the difficulties faced by employers when full employment unexpectedly became something close to reality. Similarly, the word “full” disappeared from what is now promised as the employment white paper.
Finally, the 2023-24 budget projected an increase in unemployment during Labor’s first term. The projected rate of 4.5% exceeds even the Reserve Bank’s estimate of the “non-accelerating inflation rate of unemployment”. In contrast with Albanese’s statement that a return to 2019 conditions would be unacceptable for a Labor government, the projected rate is within half a percentage point of that prevailing before the pandemic.
Left, right and centre
In summary, Labor has taken a position in the centre-right of the Australian political spectrum, occupying a space vacated by the disappearance of the moderate Liberals epitomised by former Liberal prime minister Malcolm Turnbull. On the right, the Liberals and Nationals are in dire straits nearly everywhere. To the left, Labor is fending off the Greens and independents, whose economic views are broadly in line with Labor’s but who want more action on issues such as climate policy and human rights.
While most of the political commentariat is still focused on the long-standing two-party system, urban Australia has already moved to a three-party system, in which Labor confronts a divided opposition.
The Liberals now hold only 19 seats in the metropolitan areas of Australia’s capitals, barely more than the combined total of Greens and independents. The trend is even clearer among young voters. According to the Australian Electoral Survey, about 38% of those under 40 voted Labor, compared with about 25% each for the Liberals-Nationals and the Greens, leaving about 12% for independents and minor parties.
The closest international analogue is France, where the centrist party of Emmanuel Macron in France secured 39% of the votes in the 2022 legislative election, compared with 32% for the left-wing coalition NUPES (Nouvelle Union populaire écologique et sociale) and 25% for the right and far-right. Unlike in Australia, this was not enough to secure an absolute majority.
Neoliberalism on the wane
The best way to understand these developments is that they follow from the decline of neoliberalism as a dominant ideology. For most of the time since the 1980s, politics in developed countries has involved an alternation of power between versions of neoliberalism: hard, represented by LNP, US Republicans, UK Conservatives and European conservative parties; and soft, represented by Labor in Australia, New Labour in the UK, US Democrats and European social democrats).
Since the global financial crisis in 2007-08, the failure of neoliberalism to deliver on its promises has led to the erosion of support for this comfortable duopoly. On the right, this has been manifested by the rise of demagogic leaders such as Donald Trump, Boris Johnson and Marine Le Pen. On the left, traditional social democrats have lost support to the Greens and others, so there is no longer enough support to sustain two neoliberal parties.
The consequences are still playing out globally. But in Australia, it appears Albanese’s Labor Party has taken hold of the mantle of neoliberalism, with the Coalition reduced to a rural and peri-urban rump. In metropolitan Australia, Labor is facing a challenge from Greens and independents, whose positions are probably closer to the actual views of most urban voters. But enough voters still think in two-party terms to keep Labor in front for the moment.
On this analysis, Albanese’s ambition to hold office for three terms, or even more, looks quite feasible. But it will be achieved by abandoning most of the policy goals Labor previously aspired to. And as urban voters shift left, it will be harder and harder for Labor to hold on to its narrow majority in Parliament.
A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.
To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.
One practical approach to implementing weights that account for diminishing marginal utility uses a constant-elasticity specification to determine the weights for subgroups defined by annual income. To compute an estimate of the net benefits of a regulation using this approach, you first compute the traditional net benefits for each subgroup. You can then compute a weighted sum of the subgroup-specific net benefits: the weight for each subgroup is the median income for that subgroup divided by the U.S. median income, raised to the power of the elasticity of marginal utility times negative one. OMB has determined that 1.4 is a reasonable estimate of the income elasticity of marginal utility for use in regulatory analyses.
This is pretty obscure, but what it means is that, a project that delivers a dollar of benefits to each of a group of poor people is worth more than a project that delivers a dollar of benefits to each of a group of poor rich people.
A lot more !
Kevin uses a graph to illustrate, showing that an extra dollar for the median household is worth 50 times as much as an extra dollar for a household with an income of $1 million a year. Conversely, an extra dollar for households at the bottom of the income distribution is worth 12 times as much as an extra dollar at the median.
It’s actually simpler to get the intuition of you use an elasticity of 1, which corresponds to logarithmic utility. Then you can sum up the implications by saying that a given percentage increase (or reduction) in income yields the same additional (or reduced) utility no matter who gets it. So, for example, if a policy halved Elon Musk’s income, while doubling the income of a single randomly chosen US household, it would be evaluated as neutral. If the policy doubled the income of two households, it would be beneficial. More generally, you can just add up all the percentage changes in income from the project (included the taxes needed to finance* it). If that sum is positive, the project should be approved.
This proposal would imply such radical changes that it is almost certain to be killed off. But it’s a straightforward implication of mainstream neoclassical welfare economics, based on utilitarianism. And the estimated elasticity is very close to that we usually get when we look at individual choices under risk (you can translate to social welfare using a device like Rawls veil of ignorance).
Even if the proposal is never implemented, it has some striking implications for the way we think about utilitarianism. For instance, it means that the limitarian position for which Ingrid Robeyns has argued follows from utilitarianism, if we accept the additional claim that the existence of very rich people has a net negative impact (not necessarily large) for society as a whole.
More generally, this kind of calculation ought to give some pause to critics of utilitarianism who worry about trolley problems, forced organ donation, and the like. Unless they go with a similarly sharp case for radical income distribution, arguments like this are, in practice, politically aligned with the kind of logic-chopping practised by US-style libertarianism/propertarianism.
(H/T James Wimberley)
Please no MMT quibbles. Substitute “release resources for” if you must.
The Albanese government has quietly abandoned full employment. Looking back over the past four weeks, I’ve turned out ten opinion pieces criticising the Albanese government. This piece, from Inside Story, should be the last for a while. I haven’t covered everything they’ve done wrong, but I think I’ve written enough on the topic for now.