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.