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Home Publications Blogs Beat the Press Casey Mulligan on Work Sharing

Casey Mulligan on Work Sharing

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Friday, 10 May 2013 04:11

Casey Mulligan used his Economix blog post to discuss the topic of work sharing. It's always good to see work sharing get some attention and Mulligan raises many of the right issues.

I will correct a couple of points. Mulligan tells readers:

"It is also possible that work-sharing would reduce employment by making jobs less attractive to people who desire full-time work. One reason that people sometimes justify commuting long distances to work or enrolling in demanding training programs – trucking and nursing are two such occupations — is that they expect to recoup those cost by taking advantages of opportunities to earn extra by working long hours."

Neither of these claims is quite right. Long commutes are a disincentive to short workdays, but one could easily imagine shorter working hours being associated with fewer working days rather than shorter work days. (Anyone hear of a 4-day week, say 4 days at 8-9 hours per day?) Of course, if most workers had fewer week days then we would all enjoy shorter commutes.

The other point about fewer hours providing less incentive to train for jobs needs two important qualifications. First, if work sharing is a short-term alternative to layoffs, then it does not imply a reduction in average hours. It would simply reduce the risk of being unemployed and replace it with an increased risk of being forced to work fewer than desired hours. If we assume that most workers are risk averse, this should increase the desirability of training for jobs since there will be a lower probability of being out of work altogether.

If we follow the route of Western Europe and have shorter work years (they work on average about 20 percent less than us), then it is important to keep in mind that no one is literally being prevented from working. In other words, in countries where the average work year is 1500 hours, no one arrests truck drivers or nurses who want to work extra hours. If they want to find a second part-time job in addition to their normal full-time job they are free to do so, just as many people in the United States work at more than one job.

Arranging a second job is of course more difficult than simply working more hours on a first job, but the point is that we are not talking about rigid constraints. The issue is instead one of relative costs.

In Europe policy has pushed in the direction of shorter work years. This includes items like mandates requiring employers give paid vacation, sick leave, and family leave. Some countries have shorter workweeks requiring overtime payments for as little as 36 hours of work.

In the United States the push is in the other direction. The fact that hugely expensive health care insurance is typically provided by employers, and usually treated as an overhead expense (all workers get the same insurance whether they work 35 hours a week or 60 hours a week), means that employers have a strong incentive to have workers put in more hours.

The Affordable Care Act, by making it easier for workers to get insurance on the individual market, will reduce the incentives for long work years. It will be interesting to see if it has an impact in shortening work years.

Comments (11)Add Comment
4 day work week
written by JDM, May 10, 2013 6:33
The 4 day work week is great. Even with a 40 hour 4 day week, which I did in the 1970s for a while, it was terrific. We were there 10 hours a day, and after spending 8 hours there, another couple was no big deal. Then you have a day to do your shopping, and 2 full days of weekend.

With fewer hours it'd be fantastic.
Work Leisure Trade Off and Job Sharing: Lessons Learned on the Golf Course
written by Last Mover, May 10, 2013 7:18
Neither of these claims is quite right. Long commutes are a disincentive to short workdays, but one could easily imagine shorter working hours being associated with fewer working days rather than shorter work days. (Anyone hear of a 4-day week, say 4 days at 8-9 hours per day?) Of course, if most workers had fewer week days then we would all enjoy shorter commutes.


Exactly. Also known as the Tiger Woods Effect, time spent on the golf course actually playing golf as a job is far more enjoyable than commuting around the course on foot as inefficient work time which reduces the leisure time available to actually play golf.

The solution of course is to speed up the commuting time with shared golf carts combined with playing each hole intensely several times in one day, rather than playing the same course repeatedly over different days and weeks.

Since more golfers would have fewer yet longer golf days with less commuting time, everyone who wants to golf at the going real golf wage rate could always find a golf job.
Lump of Mulligan
written by Sandwichman, May 10, 2013 11:11
Mulligan starts off his post with a paraphrase of the old lump-of-labor fallacy canard.

"The idea behind work-sharing is that employers have a certain amount of work that needs to be done, and that the work can be divided by many employees working a few hours each or a few employees working many hours each. If hours per employee could be limited, by this logic employers would have to hire more employees to get the same amount of work done."

There are so many things wrong with this its hard to know where to start. But I'll start at the beginning. The early version of the claim originated in 1780 in response to machine breaking riots in Lancashire, England. It was basically a red herring that evaded the real reason workers were rioting.

Instead of analysis, the fallacy claim reads minds, "the idea behind..." But it doesn't read anybody in particular's mind. There is NEVER evidence of who it is that has that "idea behind." This at least is consistent with Dorning Rasbotham's original 1780 formulation in which an unspecified "they" was credited with the fallacious idea that there was "a certain quantity of labour to be performed."

That may be about the only consistency in the fallacy claim. Down through the centuries, the bogus fallacy claim has done a 180 turn around on why the alleged fallacy is a fallacy. Harvard's Lawrence F. Katz has the distinction of taking both sides of the argument at various times.

Actually, when you're making up things about what other people think, it doesn't much matter what reasons you give for showing that they are wrong. Here[s the bottom line: "the idea behind work sharing" is NOT the simplistic notion "that employers have a certain amount of work that needs to be done."

On the contrary, there is a sophisticated analysis going back over two centuries that examines the many factors of employment before suggesting that work-sharing can be a suitable method of job creation. No doubt Mulligan has never heard of Ira Steward, John R. Commons, Dorothy W. Douglas, John Maurice Clark, Sir Sydney J. Chapman, A. C. Pigou, or Maurice Dobbs. All of those except Steward who was a pioneering labor leader were highly regarded economists who analyzed shorter work time without the bogus "idea behind" it. Presumably Mulligan has never heard of Rasbotham, his putative mentor on the fallacy claim, either.
http://ralphanomics.blogspot.co.uk/
written by Ralph Musgrave, May 10, 2013 12:38

Compulsorily shortening working hours is daft, and Mullilgan completely fails to get the basic flaw in the idea, which is thus.

The constraint on raising demand and cutting unemployment is inflation. And inflation looms when unemployment is sufficiently low that employers cannot find the types of labour they want, thus the price of suitable or skilled labour gets bid upwards.

Now suppose employers run into that problem when the number of unemployed is X, they’ll run into the self same problem when the number of unemployed is X, even after average hours are artificially reduced. E.g. the ease of locating a fully qualified plumber will not magically rise just because hours are artificially reduced.

Ergo NAIRU is totally unaffected by artificial reductions in the working week. Ergo, artificial reductions in working hours does not create extra jobs.

ralphanomics
written by Sandwichman, May 10, 2013 1:01
What Ralph is talking about is Richard Layard's "lump-of-output fallacy" -- another crock of even more convoluted dimensions than the original lump-of-labor B.S. Layard starts from the same bogus premise that Mulligan, Rasbotham, Krugman, Samuelson and all the other lump-puppets regurgitate: that the "idea behind" work sharing is that there is a fixed amount of work to be done. Can you read my mind, Ralph? I didn't think so.

But Layard goes the prosaic lump fallacy argument one better. He allows that reducing work time may indeed reduce unemployment but then brings in the NAIRU myth to claim that lower unemployment will cause more inflation leading central banks to choke off credit and thus countering the initial employment creation effects of the reduced working time. This is like saying that if I feed a starving person it will only make them hungry again in the long run. Hey, let's not wash those dishes -- every time we do somebody uses them and they get dirty again! No one goes there any more, it's too crowded.

But, Ralph, I have to give you marks for stubbornly holding on to a prejudice no matter what.
Lumps of Mulligan and the Specter of the Disembodied "Idea Behind"
written by Sandwichman, May 10, 2013 2:42
Lumps of Mulligan and the Specter of the Disembodied "Idea Behind"

http://econospeak.blogspot.com/2013/05/lumps-of-mulligan-and-specter-of.html
A Nobel Prize awaits Sandwichman.
written by Ralph Musgrave, May 11, 2013 3:02

Sandwichman:

I do like your rejection of the “NAIRU myth. . . that lower unemployment will cause more inflation”. If in fact lower unemployment does not at some point exacerbate inflation you really ought to set out your reasons in a full length paper. If you’re right, your ideas will enable tens of millions who are currently unemployed to find work, plus you’ll get a Nobel Prize. What’s holding you back? Fame awaits you (or perhaps ridicule).
ah ... these key phrases
written by Banelion, May 11, 2013 7:47
Yes ...at some point... it would affect inflation. The point is that economy is nowhere near any such point. The "NAIRU myth" isnt that in principle inflation doesnt happen, its that it pretends that the "at some point" is one milimeter away and havoc will follow if we change policy one milimeter. Which is patent nonsense.
...
written by watermelonpunch, May 11, 2013 9:03
Trucking & nursing are 2 very strange professions to use as examples for his points.

They are actually 2 jobs that most people would not have to relocate or endure long commutes, because they're the sort of jobs that are located dispersed throughout many regions, I think.

Nursing is also a profession that I happen to know MANY hospitals have nurses work on a 12-hour shift, 3 or 4 days a week. (I know this because I have a family member who is an RN, and has worked this type of shift/workweek in at least 3 different states at several different hospitals, over the past 20+ years.)

Also, I live in Pennsylvania and our governor believes, if I understand his gibberish correctly, that Obamacare is a conspiracy to have the system of employer provided health insurance fall apart.
When I saw that he had said this, I thought - I WISH that was the case. And I wondered what would be so bad about that! I think it would be better for everyone, citizens, and businesses, if we moved away from the employer provided system.
But I actually don't see that necessarily happening, in anything like en mass. Certainly not as a result of Obamacare.

But do I think over time, better access to health care insurance independent of an employer, will lead to more people being more open to taking a plethora of "non standard schedule" jobs, like seasonal jobs.
Those jobs are out there anyway already though.

That's why less than half the population has employer provided health care insurance. Those jobs are out there anyway - and a lot of them.

Which brings me to another issue...
People keep fear mongering about employers cutting workers to part-time to avoid having to provide health insurance.
But then they'd have to hire more workers, wouldn't they?
So then you'd have less unemployment and more competition with actual wages and more competition for job openings.
So again, not sure what there is to be scared about with that either.

The only reason changes would scare someone, I think, is if they're sitting pretty right now. And people who are sitting pretty right now, should know they are in the minority.
It wouldn't be very democratic to listen to them, IMHO.

Ironically I think there are people who have employer provided health insurance who SAY they "like it". I think they like it better than nothing. They have no idea really if it's actually good insurance... How could you compare when all you have to compare to is NOTHING?
Same with people who work 40 hours per week, and only get maybe 1 week of paid vacation per year. They SAY they like it. But compared to what? Compared to being unemployed with no health insurance?

People are so stuck on one scenario, that I think they have trouble understanding that if one thing changes, many other things would also change.
It's like on some of these issues, a great many people are in this irrelevant thesis tunnel with blinders on.
What’s holding me back?
written by Sandwichman, May 11, 2013 1:26
Oh Ralphie, you're so glib. Ever considered a career composing new taunts for schoolyard bullies? Jamie Galbraith beat me to the full-length paper on the NAIRU myth so if there are Nobel Prizes to be won there I'm afraid that seat is taken.

"Time to Ditch the NAIRU," James K. Galbraith
The Journal of Economic Perspectives, Vol. 11, No. 1. (Winter, 1997), pp. 93-108.

http://www.tek.bke.hu/files/szovegek/galbraith_time_to_ditch_the_nairu.pdf
"One of the worst ideas in the modern history of economics"
written by Sandwichman, May 11, 2013 1:36
Jamie Galbraith:

"Meyer's terrible idea is known as the Non-Accelerating Inflation Rate of Unemployment (NAIRU): the notion that there exists a threshold unemployment rate below which inflation increases without limit. The NAIRU was invented, mainly by Milton Friedman in 1968, in dissent from the prior doctrine of the Phillips Curve, the idea that full employment would entail only a modest rise in the permanent rate of inflation. Then, in the early 1970s, high inflation combined with unemployment to shatter the Phillips Curve. The NAIRU doctrine taught that even trying to push the unemployment rate down with monetary policy was futile; and, worse, that if unemployment were to fall for a substantial time below the NAIRU threshold, inflation would not only rise but also accelerate. This would lead over time to hyperinflation--to financial and social disaster.

"Economists, therefore, came to see full employment as a poisoned chalice, something to be avoided by the most aggressive and, if necessary, painful measures. This assumption dominated macroeconomics for about 30 years, causing enormous damage. In particular, it prompted the Federal Reserve to raise interest rates and provoke repeated recessions. Millions were left unemployed, their families in stress, and their human potential wasted. It was all entirely unnecessary as we eventually learned."

...

"So, what is the true theory of the economy of our time?

"There is another viewpoint. One might call it the Old Keynesian view, held by just a handful of economists in the late 20th century, including Nicholas Kaldor of Cambridge, Robert Eisner of Northwestern, and the present reviewer. We never accepted either the Phillips Curve or the NAIRU. Instead, we believed that full employment was not inherently inflationary; in fact, we saw the greater inflation risk in stagnation itself. In a slowdown, we believe, monopolistic enterprises raise prices in order to try to recover their fixed costs. While on the other hand, full employment production foments ample competition in product markets, high rates of technical change, and declining costs, as businesses seek ways to save on scarce and expensive labor. In other words, productivity growth accelerates because of full employment itself."

http://www.washingtonmonthly.com/features/2004/0407.galbraith.html

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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