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June 9, 1997
"Reducing the Work Week Seems Like a Simple Solution to Create Jobs; Not So"
San Jose Mercury News
By Timothy Taylor
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SAMUEL Gompers, who was the original president of the American Federation of Labor in 1885 and held that role almost every year until his death in 1924, had a solution for unemployment: ''So long as there is one who seeks work and cannot find it,'' he said, ''the hours of work are too long.''

The logic may seem airtight. In the recent French election, parties of both left and right suggested cutting the work week to create a need for hiring and to reduce the 12.8 percent unemployment rate, and two-thirds of the public expressed some support for the idea. Similar proposals are hot in Germany (unemployment rate 10.2 percent), Italy (12.2 percent), and Canada (9.6 percent). Similar bills are even introduced before the U.S. Congress every few years.

However, the notion of creating jobs with a shorter work week quickly encounters difficulties.

The most obvious practical problem is that the unemployed tend to be both younger and to have less education than those who have jobs, which means that it isn't clear how they could substitute for each other. For example, even if 40ish engineers work fewer hours, it won't create jobs for young high school dropouts.

In addition, reducing hours would cause adjustments throughout the labor market. Many workers want to work extra hours for more income; if they aren't permitted to do so in one job, they will find a second job. If businesses have to pay more for less work, they will adjust by hiring less labor or by becoming less competitive, either of which puts jobs at risk.

Advocates of shorter hours often argue that they need not mean pay cuts for workers or pain for business, because workers will raise productivity during their shorter hours. Although we all spend some unproductive time at work, it seems highly unlikely that shorter work weeks will reduce only that unproductive time.

In fact, restrictions on hours almost always mean that workers produce less, which in turn leads to cuts in pay or benefits. Often, government is expected to chip in to minimize the loss of income; for example, an experimental program in Canada allowed workers to claim some unemployment benefits in exchange for reducing their hours. But government subsidies in one area create unpleasant need for higher taxes, higher deficits or spending cutbacks elsewhere.

A glance around the world and at history doesn't suggest that shorter hours will reduce unemployment, either.

Thanks to longer vacations and shorter hours, average Europeans already work hundreds of hours per year less than their U.S. counterparts -- but those countries are still facing double-digit unemployment. During this century, the average U.S. work week has fallen dramatically, from nearly 60 hours a week in 1900 to more like 40 hours a week now -- but this decline has not wiped out U.S. unemployment.

The illusion that shorter hours will reduce unemployment is based on what economists sometimes call the ''lump of labor'' fallacy. This is the belief that an economy needs only a certain fixed number of hours of labor, and the only way for new workers to get jobs is to take time from existing workers.

The lump of labor argument is clearly wrong. As one obvious example, the U.S. economy has added 36 million new jobs in the last 20 years -- 10 million of those in the last five years -- without any offsetting reductions in hours worked.

Plausible policies for reducing unemployment over time will affect the incentives of employers or workers. Regulations that hinder small businesses from starting should be reduced. Government should also avoid loading employers with social responsibilities, whose costs can discourage hiring. Employers must be allowed to fire when they feel it is necessary, or they may become reluctant to hire. Social welfare programs must be structured to provide a safety net, without rendering work unattractive.

A serious attack on unemployment in France, Germany, Italy and across Europe would necessitate some hard rethinking about why and how government should intervene in the economy. But the cause of unemployment is not that current workers have greedily seized more than their fair share of a fixed number of working hours.

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