The standard argument against redistributing the hours of work to reduce unemployment involves reference to a "lump-of-labour fallacy" (of which much more later) and a brief demonstration of how the presence of hiring and training costs, which vary with the number of workers, would make such a proposal unviable. It would increase total labour costs and thereby reduce the demand for labour. Although Oi stated that the theme of his paper came from J.M. Clark's analysis of the overhead costs of labour, he ignored Clark's central argument that any accounting for labour costs had to include the social costs. If those social costs are accounted for, the results of a redistribution of work time to create employment are the opposite of the usual treatment: the cost of labour falls at the same time as the hourly wage increases (for the simple reason that transfers to unemployed workers are eliminated). Walter Oi in "Labor as a Quasi-fixed Factor" (JPE 1962) p.554: "The central theme of this paper has been the treatment of labor as a quasi-fixed factor. This concept of labor was suggested by J.M. Clark, who dealt primarily with the social costs of unemployment." J.M. Clark in "Studies in the Economics of Overhead Costs" p. 402: "If all industry were integrated and owned by workers, what would be the relation of constant to variable expense? Labor would then be in the position which capital now holds, and while the need of incentives to call forth extra effort or to compensate for long hours might make some wage system necessary, it would be clear to the worker-owners that the real cost of labor could not be materially reduced by unemployment. . . "This imaginary integration of all industry has something more than a mere ficticious existence. It represents the underlying facts about the actual industrial organism, which is an integrated whole, whether its formal organization is cast in that mold or not." Here's a simple demonstration of what happens when the accounting for social overhead costs is restored to the quasi-fixed factor analysis: Assume that the per worker costs of hiring and training are $125 per week and the hourly wage is $10 per hour for a 40 hour week. Assume that the cost of maintaining an unemployed worker and dependents "in good stead" (that is healthy, happy and job ready) is one-half the weekly wage, or $200 per week. Then the total labour cost with 90 employed workers and 1% unemployed is $49,250. However, by reducing the hours of work to 36 and redistributing those hours one-for-one to create 10 new jobs, the total labour cost is REDUCED to $48,500 The lower cost result is true for all cases in which the cost of hiring and training is less than the cost of maintaining an unemployed worker. The above "pure case" assumes perfect substitutability of workers for hours, in other words, neither an increase nor a decrease in productivity. Removing those assumptions doesn't change the outcome. If we assume instead that the unemployed possess a lower level of skill and hence will lower productivity, that can be adjusted for by a differential entry level wage. If we assume that the shortening of work hours will take up some slack in production, then that will reduce the labour cost even further and hence increase the demand for labour or it will increase wages with the same effect. The only remaining objection is that the redistribution of work time to eliminate unemployment would give workers greater power in labour relations. Of course, that has been the only REAL objection all along. Regards, Tom Walker ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ #408 1035 Pacific St. Vancouver, B.C. V6E 4G7 [EMAIL PROTECTED] (604) 669-3286 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
