Used Cheap Bikes: Dramatically reduce unemployment - with no cost to government

Tuesday, October 25, 2011 (UPDATED 15 SEPT 2013!; new petition currently active)

Dramatically reduce unemployment - with no cost to government - by instituting a 35 hour work week

Please sign my federal petition:
http://petitions.moveon.org/sign/a-35-hour-work-week-will

Whatever the response is, it will at least bring this issue to the attention of American politics which is the first step toward action.
It may never happen, but it will get people thinking about things they take for granted; like the purpose of the economy, production, employment, unemployment, distribution of wealth, etc.

It has become common practice when talking about the economy or the market to treat them as though they were an end in and of themselves, and inherent good regardless of their effects. We seem to have completely forgotten that the whole point of having an economy in the first place is to serve and better the lives of actual people. Over the past half century improvements to the economy have not translated to improvements in the lives of the majority of Americans. We all need to stop, step back a moment, and ask the question: in that case, what is the point?
When individual citizens are asked to make sacrifices for the sake of "the economy", that means citizens are here to serve the markets, instead of the markets being here to serve the citizens.

The petition website has a character limit; here the original text I wrote for it:

A 35 hour work week will create 22 MILLION jobs without costing the federal government or tax payers anything.

There are currently 14 million unemployed American's, so this will eliminate all unemployment, and then it will push wages up as employers are forced to compete for a limited labor force.

Literally ALL arguments against a 35 hour work week (that it would hurt business or make America less competitive, etc) can be countered by the simple fact that those same arguments were made against the 40 hour work week, and none of those things happened.

The 40 hour work week dates back to the early 1900s, with it becoming federal law in 1932.
Since that time productivity per worker has increased well over 1000%. This means each US Worker produces more than ten times as much in an hour of labor than when the current work week was created.
This has not manifested a corresponding 10 fold increase in average wages.

Productivity has increased over 400% since 1970 alone. In that same time, total GDP has increased even more dramatically, by 1400%.
And yet, since that time, wage income (adjusted for inflation) has been completely stagnant.

The reason for this disparity is that literally 100% of the additional profits made possible by new technology and globalization have gone to corporations and investors, while 0% have benefited the working and middle classes. The average worker produces approximately $100 thousand a year in output, yet receives less than $40 thousand in wages.

While many employers will object that they can not afford it, the enormous increases in productivity per worker and total GDP prove indisputably that they can. Income inequality is at an all-time high, and thanks to patent, tax, and labor laws there is no longer any correlation between income and how much an individual contributes to society or how hard they work. The unprecedented profits which have gone to corporations and investors between the time the 40 hour week was created and today are more than enough to cover the minor costs associated with taking the next step to a 35 hour work week.

The 35 hour work week must apply equally to hourly wage AND salaried workers, and even to commission based employees. In our current system millions of people are forced to work unpaid overtime hours because they are paid salary. These people should be entitled to overtime at a rate of 1.5 times their weekly pay (annual pay divided by 52) divided by 35 hours. This needs to be stated explicitly in the law to prevent abuse by employers. No industry should be exempt, the only exception being if an individual or union VOLUNTARILY chooses to waive their rights.

In order to protect the lowest paid workers, a 35 hour work week must be coupled with an increase in minimum wage so that full-time employment at minimum wage constitutes a living wage. A minimum wage of $11.50 would equal $20,000 a year (before taxes, assuming 10 days of holidays, vacation and/or sick days per year).

Finally, in order to protect American jobs from outsourcing (and reclaim jobs which have already been outsourced), the 35 hour work week could also be coupled with a tariff on any goods sold by a US based company, which was manufactured or assembled in another country, unless that other country has labor and environmental laws as strict or stricter than the US, or if the individual company voluntarily abide by US labor and environmental laws.

A 35 hour work week would give hard-working families a much needed and deserved break, while creating enough jobs to end unemployment completely.

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I have already received a number of very good questions and comments about this idea - but I have answers for them all:

Legitimate point:

"How could you prevent this from decreasing productivity?"

My response:

I don't claim it won't drop total productivity, although it is possible that as a side effect of more free time people will become more productive.

My point is productivity per person has ALREADY increased 1000% since the 40 hour week was enacted. And that 1000% increase has not resulted in a 1000% increase in wages, nor a 1000% decrease in working hours, nor a 1000% decrease in CPI, nor any combination of the three.
We don't need as much productivity as we have.
That's why unemployment is so high.

If, in order to just maintain, you have to be growing at all times, then the system is obviously inherently unsustainable, and yet growth is the only solution normally proposed to absorb all of our excess labor capacity. Yet we all consume too much as it is.

If everyone were to, say, discover Mr Money Mustache and join in, there would be a lot less consumption, and a lot less needs to get done. But there will always be people in the accumulation phase who need work.
Even without that scenario, if consumption doesn't grow fast enough, there are more people who need work than there is work that needs to be done.

Our current "solution" is to have some people work full time, and pay others to look for a job.
We could just as easily have everyone work just a little less, and spread the effects out across the entire labor force - and not have to pay any unemployment.

The reason it creates job is because right now you have 130 million employed people doing 5.2 billion hours of work per week.
That means the current economy needs 5.2 billion hours worth of work done per week. If there was more or less than 5.2 billion hours worth of work to do, companies would be hiring or firing people accordingly.

But now say each person can only work 35 hours, or else the employer has to pay them time and a half. That's a pretty steep premium.
Now, in order to get 5.2 billion hours of work done, you need 148 million people to do it. Boom, instant 18 million jobs.

18 million is more than the total number of unemployed people. In other words, it becomes a employees market - which raises wages due to supply and demand.

If, as many suggest, it had the effect of creating more overtime hours instead of more jobs, I'd consider that a success too, it is still allowing employees to reclaim some portion of their own productivity that has been lost over time.

Legitimate point:

"I am payed for 40 hours, I actually work around 45 to 50 per week for the same pay. Sometimes I work even more, nights and weekends for the same pay... If we have a 35 hour work week, I loose 20 hours of pay/mo and still work 45-50 hours, nights and weekends. I am on a salary... Won't work for me"

My Response:

In California at least (except for a few specifically exempted professions) people on salary are still entitled to time and a half pay for hours over 40 in a week. If you are not being paid for working overtime, you should be looking for a good labor lawyer. See: http://www.dir.ca.gov/dlse/faq_overtime.htm
The fact that this law is almost never followed has more to do with the decline of unions than probably anything else.
Regardless of the length of the work week, there should be a similar law on the federal level that explicitly states that overtime laws apply to workers on salary and commission. Not only does it demean human dignity that money is put above everything else in life, but an overworked workforce is less productive per hour anyway. Forced overtime should also be illegal.

So, I also propose to explicitly include salaried and commissioned workers in the 35 hour week. Even on salary, anyone who went beyond 35 hours would be required to be paid time and a half based on what their weekly salary divided by 35 hours works out to, as it is in California. So a person in your situation would actually benefit even more than wage earners, as you would either get much more free time and/or a substantial boost in pay.

Legitimate point:

"The French tried that already, and it didn't accomplish what it was supposed to. They eventually gave it up"

My response:

First of all, it has not been given up yet.
Further, there were always some differences between France in 2000 and us today. One of the more significant ones is that French employers are not allowed to lay off workers when business is slow, which makes them even more reluctant to hire new ones than our fixed per worker costs.
Another difference is the size of our economy, and how much tangible goods we manufacture and export.

Overtime after 35 hours is as little as 1.1 times (+10%) regular pay in France (as opposed to our 1.5, +50%), so employers had less incentive to hire new workers rather than just pay existing ones slightly more for 4 hours a week.
Plus, apparently the way they set it up left a lot of big loopholes from the start, (for example, a 5 minute break could be considered off the clock even if it wasn't considered off the clock before the rule, so instead of actually reducing hours, employers could just redefine them). Apparently no one kept any records of how many hours workers actually worked before and after the law, but it is likely to have been a much smaller change in reality than on paper.

In 2003 (2 years after it went into affect) the law was changed so that overtime could be paid at regular wages (making the 35 hour standard meaningless in practice - yet still retaining the 35 hour as a standard)
Despite all these caveats, 300,000 new jobs were in fact created during the 3 years the law was fully active.

Unemployment dropped from 11.5% in 1997 (a year before the first, voluntary, phase of the law went into affect) to 8.5% in 2001 (a year after the mandatory provisions went into affect). After it was weakened in 2003 unemployment went up to about 9.3% for 3 years, dropped briefly, and then was essentially repealed completely in 2008, after which unemployment immediately climbed from its 7.6% low back up to 10% within one year.

http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group&idim=country:fr&ifdim=country_group&tstart=859186800000&tend=1314169200000&hl=en&dl=en&uniSize=0.035&iconSize=0.5&icfg

How much these changes were due to the 35-hour work week and how much to other economic factors is debatable, but the data definitely doesn't support the idea that the 35 hour week hurt employment.

Legitimate point:

"It seems like the current unemployment is the result of an unusually large recession, and the fact that much of our previous boom was built on fake housing prices and borrowing, so the jobs related to that disappeared when the bubble popped. To fix it in a free-market sense, you need existing industries to keep growing ...and new industries to grow. "
and
"I too would like to see a more bell-shaped distribution with a smaller standard deviation. But if the "area under the curve" starts to decrease (GDP decrease), then everyone looses."

My Response:

One of the main reasons I hope to get this idea talked about is to get away from the traditional view of the economy.
Most specifically, I want to challenge the mind-set that "growing the economy" (mainly by increased consumerism) is inherently good and the primary goal of policy, as well as the only way to improve living standards.
The problem with expanding the economy in order to create jobs is that, as a society, we really have everything we need (and then some) already.
The flip side of consumption is production. The whole idea behind encouraging American's to buy more stuff is to "grow the economy". All the stuff that gets produced has to be bought by someone. The environmental impact of 300 million people working 40 hours a week at our current productivity levels is simply unsustainable, because it would necessarily mean an enormous amount of natural resource extraction for the purposes of production, and a corresponding increase in consumption. Therefor I believe it makes more sense to share the work we already have, rather than try to force there to be more work to do - especially since the marginal effect of additional wealth on the happiness of middle class Americans has consistently been shown to be zero
It is basically Jacob's (of Early Retirement Extreme) "Broken Window" theory of jobs. If someone throws a rock through your window, you have to hire a glassmaker to come and put in a new one. Now that glassmaker has a job and money just traded hands. So, technically, GDP has increased, and supposedly this is good for "the economy" and therefor society. However, nothing new of value has been created. In fact, resources were used up and wasted. This means that, while on paper, society is richer for the broken window, in reality we are poorer for it. The paper accounting and the reality are in direct opposition to each other.
The "service economy" is more or less just economic masturbation.
It reminds me of the story by Kurt Vonnegut where in the future automation had made work obsolete, so the government has people building multiple bridges over the same river, just in order to give people something to do since society is convinced it is morally irresponsible to just give everyone welfare checks even if society can afford to.
Growing the economy for its own sake, once a comfortable standard of living has been established, is actually counter-productive.

Legitimate point:

"1) Why not go further? Research shows part-time workers are more productive than full-time workers per hour, AND, they have better involvement in family and community...

2) Part-time workers need protection for basics like healthcare benefits"

My Response:

1) I didn't go further because I know there would be enormous resistance as is, and it would be stronger the more extreme the change; both from employees (who would be losing 12% of their salary upfront) and employers (who have some fixed per/worker costs and therefor prefer the smallest possible workforce)

2) Healthcare should be provided by the government.

Legitimate point:
"How does the tariff relate to WTO and such? Is it even legally possible at this point?"

My response:

I don't know the details, but my idea is that you would bypass trade treaties by only applying tariffs to goods made by US companies. If it is a US based company already, then the "imports" aren't affecting the trade balance. The idea is just to de-incentivise employers building factories in 3rd world countries for cheap labor and then shipping products around the world back to US marketplaces.

- Incidentally, I have dropped this part of the proposal from my more recent petition -

Legitimate point:

"The downside of this is fat countries like the US will see a flattening of the wealth curve and regression to the mean which means a lowered standard of living for us while the rest of the world enjoys the benefits of world capitalism. I probably won't live to see the day when human capital will flow across borders as monetary capital has done for centuries. But you might and you won't like it when a desperate kid from the Mekong delta can do your job for $1/hour and be happy to get it. So much for a 35 hour workweek..."

My response:

Even though I personally stand to lose from a lowered standard of living overall in the US, I actually find that to be a perfectly reasonable outcome. We have way more than we need. We have so much that more has no affect on happiness. We are living way over the sustainable rate of natural resources regeneration. And we didn't earn that privileged, we got lucky by being born in the US. On top of all that, nearly all American's could easily maintain their current standard of living with 1/4 to 1/2 their current income, if they just stopped wasting so much of their money. If we didn't have so much excess, we would learn to stop throwing it away.

(I have become a big fan of Mr Money Mustache and Early Retirement Extreme of late)

If I were king of the world, the extreme wealth of the top 0.01% of the US would not be distributed to the American middle class. It would be distributed to the Third World.

However, all that said, this proposal has provisions to decrease outsourcing. There is nothing about it which would make "human capital" any more able to cross our boarders. The situation being described is the situation we have been facing for decades, which this proposal aims to amend. Outsourcing is one of the reasons for increased profits for wall street at the expense of employment and wages. Protecting those profits will not do anything to help the situation.

Legitimate point:

"for someone who's used to spending $X and desiring more money rather than more time, they wouldn't be happy to have to "sacrifice" their annual flat screen upgrade for an extra 5 hours per week.

A further problem in the US is that hiring extra workers comes with more fixed costs (benefits). It's in the interest of the way the system has been set up to have as few workers working as much as possible. Not a very smart way to do it, but that's the starting point."

My response:

I know that many many people will object - both the workers who lose hours and therefor pay, and employers who have fixed costs per employee. I don't expect it to happen (at least not anytime soon). But I do think it should be something people are talking about, if only to set the stage for the future, or even if only to challenge peoples assumptions about things they take for granted; like the purpose of the economy, production, employment, unemployment, distribution of wealth, etc.

Then again, the 40 hour week must have seemed just as impossible to the people who fought for it in the early 1900s - at a time when 80hour weeks were considered normal - and it eventually became an almost worldwide standard.

Legitimate point:

"I am more interested in changing the way business reward workers. It'll be nice to be rewarded as a function of economic output instead of the amount of time a person show up at a business.
It drives me nut to sit for 8 hours while doing 2 hours of real work for most of the year."

My response:

I'm with you in principal, but I can't think of any practical way to put that into practice universally. Can you?

Even if it were to be done, my original point - that wages have not kept up with productivity gains - would still be true. You generate more towards GDP in your 2 hours than a 1850 worker did in 12 hours.

Besides, there is good reason to believe that a shorter workweek would actually increase productivity. Note that in Europe, where the average work week is several hours lower than our own, productivity per worker per hour is actually higher.

For a likely explanation of that, see: http://www.mrmoneymustache.com/2011/10/25/the-joy-of-part-time-work/

Legitimate point:

"I am afraid this will be an automatic no-go. Wally*World will never let it fly. Wally hires people "under" a 40 hour week in order to consider them part time. This is why most of the WW people have no benefits."

My response:

Wally already hires people for 34 hours a week, which is still less than 35. They currently offer healthcare plans to anyone over 24 hours per week, so this change would not affect that threshold at all.

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The following questions were asked to me by someone who not only supports the principal, they are actually actively advocating an even shorter work week (20 hours, which I fully support in principle, but I am not sure it is as politically feasible at this time.)

1.- Why only 50 signatures? I was thinking maybe 100000 to really be take seriously. 50 is too low.

Because 50 is the threshold I have to generate before moveon makes the petition live on their site for the general public to see and sign. Then it can build it's own momentum.

2.- I really don't believe in writing politicians because they could care less if we have 100, 1000, or 1000000 signatures. All they see in those papers is something that can be used when they run out of toilette paper. If they see 1 million signatures on one side, from citizens requesting to do one thing or to vote one way, and on the other side they also see 1 million dollars in campaign contributions from corporations to do the opposite, the politicians are more likely to do what corporations ask, no question about it. However, I will still sign your petition because your goal is mostly to create momentum and awareness. I do have a similar petition, but for Sharan Burrows, head of the largest union in the world, ITUC, to call for a global strike to implement the 4 hour work-day. You can check it out by clicking on this link http://www.change.org/petitions/sharan-burrow-general-secretary-of-the-ituc-please-call-for-a-global-strike-to-implement-the-4-hour-work-day-worldwide

You answered your own question. My "goal is mostly to create momentum and awareness."

3.- 35 hours is not enough. If we do the math, 4 hours a day is not enough either. It should be 3, like Keynes predicted it (and I am not a Keynesian, but he was right about this). 35 is too short of a reduction. It could be easily reversed, like the French did. It would not be the same to tell people to work one more hour (from 7 to 8 hours) than to tell them to go from 4 back to 8 hours. It is harder to reverse a 4 hour work-day. The jump is higher and people will fight it. Also, a 4 hour workday request leaves room for negotiation, because corporations will fight against it for sure. We might not achieve the 4 hour work day but maybe the 5 or 6 hour work day. It's like selling a car. If you want to get $10000 for the car, list it for $12000 so you can have some room for negotiation and still get what you wanted. With 35 hours, you have nowhere else to go but back to the status quo of "40 hours" (And I put it on quotation marks because we work more than 40 hours a week) These are not the strongest reasons why we propose 4 hours (the strongest reasons are the economic reasons explained in my website) but I mention it just so you can have a different perspective.

I agree 100%. But, again, my goal is creating awareness. What 1 million signatures would do is potentially grab media attention. From conversations with people, I suspect 35 will be more palatable for larger numbers of people. The math works out that we should have 4 hour work WEEKS, given the rise in productivity since the 40 hour week began. But almost no one considers math or history when they form opinions. My primary intention is to just crack people's assumption that "40" is somehow a magical default number, the given standard. I want people to realize that WE (society) choose the number, it is not arbitrary, or handed down from the Gods, and that it can - and should - change proportionately with productivity. I want people to realize that the gains of productivity have gone disproportionately to the top 0.1%, and this is the primary reason for growing wealth inequality.

4.- There is nothing impossible in this world. Women did not think that fighting for her right to vote at the beginning of the 1900's was impossible. Martin Luther King did not think that his dream was impossible either. Relying on politicians to implement a 4 hour work day worldwide (yes, not just the US but worldwide. More on that later) is however highly unlikely. That's why we need to do it via a strike, a global strike, the same way we reduced the work day from 16 to 12 and then from 12 to 8.......with strikes. When you shut down the flow of money to the corporation's pockets, they will begin to listen.

That's not really a question! :P

As before, I agree with you 100%. The trick is getting a large enough portion of the general public involved. OWS is what started to make me think there was a chance in today's environment of making real progress on economic issues.

5.- why a reduction in income? That will not only gain opposition from the politicians and corporations but also opposition from the citizens, public in general. They would not support an idea that reduces their income, specially during a recession. With work-time reductions, income can remain the same. Business will have higher labor costs, yes, but also will have higher revenues due to the increase in aggregate demand, caused by full employment and a switch of bargaining power from the employer to the employee. That will allow them to cover the higher labor costs and still report profits. I explain that in more detail in my website.

Mainly because it would be very complicated to try to have everyone keep a fixed income with a change in hours when some are paid hourly, others on commission, still others on salary, and current work hours vary wildly. Could government effectively enforce a mandatory across the board 15% raise? I doubt it. Plus, there would already be many loud cries, on all sides of the political spectrum, that small and medium business could not afford to hire more workers to replace the lost hours.

Also, I believe the American middle class makes more money than anyone really needs. We, as a society, need to eventually start valuing life as much as we value consumption. We are extremely wasteful, and there are ecological consequences to that. Anyone who (for example) buys a new car is not hurting for money - though they may be making poor choices as a result of being used to excess wealth.

6.- I have issues with tariffs because it creates a distortion on the market. I am not a big fan of the market system either but that is what we have unfortunately. If I was the CEO of a US company and I am faced with tariffs on US products made overseas, I will bring the production plant back to the US but I will make it fully automated, which will be even cheaper that producing the goods in China. That will not generate the many jobs we want, unless of course we reduce the workday dramatically, like 3 or 4 hours a day. Another reason why I think 35 is not enough.

I think free trade causes distortions in the market. It is facilitated by a finite supply of artificiality cheap petroleum. It is used to circumvent labor, tax, and environmental laws. Any place we import from should be held to US labor and environmental laws, and if not, I see no distortion in evening things out with tariffs.

That said, I have dropped that portion of the idea from the current petition, to keep it simple and to the point.

7.- why just the US? If we reduce the work-day only here and the Canadians don't, then the Canadians will have more competitive advantage than the US. The reduction needs to be everywhere. You might be thinking that France implemented the 35 hour work-week alone and therefore it would be ok for the US to do it alone (and you might be right) but that brings me back to the point that 35 is not enough of a reduction.

Because no one people can force change on everyone else. I happen to be a US citizen, so this is where my focus is. At the same time, the US is the economic and cultural center of the world (for now), and places that are more politically liberal that might be more inclined to do something like this on their own are more likely to follow America's lead than the other way around. The US was the first country to adopt the 40 hour week (prior to which there was no maximum at all), and the majority of the developed world has followed suite since then.

8.- You seem to understand very well the concept of work-time reductions (you even seem to know more things that I do). You also seem very passionate about it too. Is there any reason? I am just curious. I hope we can work together on this endeavor.

I'm just an average ordinary guy. I have an associates degree in economics. I try to pay attention to how the world works. In this case, I saw a problem which (unlike most) actually has a clear solution, but very little of the general public, politicians, activists, or anyone else (present company excluded, of course), seems to have any awareness of it. If I could change that - from home, just using the internet(!) - I have to at least try.

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If you have actually read through all this, and haven't gotten bored of the topic yet, here are a few more articles I have written questioning the conventional wisdom - shared by both sides of the political spectrum, but completely wrong - regarding the economy:

Used Cheap Bikes

Tuesday, 25 October 2011

Dramatically reduce unemployment - with no cost to government - by instituting a 35 hour work week

Tuesday, October 25, 2011 (UPDATED 15 SEPT 2013!; new petition currently active)

Dramatically reduce unemployment - with no cost to government - by instituting a 35 hour work week

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