When employer costs are taken into account, it is unclear whether jobs are something that can be efficiently shared.
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.
American labor law has traditionally placed some limits on employee hours, such as overtime regulations. While the recent Affordable Care Act does not strictly limit hours per employee, beginning next year it gives employers a strong push toward part-time employment by levying a significant fee per full-time employee and exempting part-time employees from the fee.
A number of employers have said they would change some work schedules to part time from full time to avoid some Affordable Care Act fees. Because part-time workers generally have fewer benefits than full-time employees, this could save employers a considerable sum. From the work-sharing perspective, the part-time employee exemption by itself would be expected to increase employment, because employers would have to hire more people (probably on a part-time basis) to complete work their employees used to accomplish when full time.
But it is possible that work-sharing would reduce employment rather than increase it, because it prevents employers from accomplishing their tasks at minimum cost, adding administrative and coordination expenses. Higher costs for employers may put them out of business, or at least reduce the scale of their business. When companies reduce the scale of their activities, that means fewer employees.
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.
Work-sharing proponents have credited Germany’s comparatively low unemployment rate to its adoption of a work-sharing program, because the program encourages German employers to reduce employee hours rather than lay workers off. Work-sharing proponents may be right, although Germany carried out a number of labor-market reforms at the same time, such as allowing businesses to use temporary workers more easily.
As the Affordable Care Act suddenly pushes business toward part-time employment, we economists will have an unusual opportunity to learn whether cutting employee hours creates jobs, or destroys them.
Casey, you start off your post with a paraphrase of the old lump-of-labor fallacy canard.
ReplyDelete"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. 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 given of who it is that has that "idea behind" their thinking. 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. In the early years, when second-string classical political economists like James Mill subscribed to the wage-fund doctrine that there was a accumulated fund of wage goods, the reason given for work sharing being a fallacy was that there were only so many wage goods and dividing up the work just meant that everyone got a smaller portion of the fixed wage goods. But then after the wage fund doctrine was disavowed by James's son, John Stuart Mill, in the late 1860s, the reason given for the fallacy was that the workers had somehow in the meanwhile adopted the discredited wage-fund doctrine. 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 you have 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 assuming the bogus "idea behind" it that there is a certain fixed amount of work to be done. Presumably you have never heard of Rasbotham, the inventor of the fallacy claim, either.