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Reduced Working Hours as a Socio-Economic Investment

by Michael Schwindinger and Martin Risak Tuesday, Jul. 14, 2015 at 3:44 AM

In these Austrian articles, reduced working hours is seen as a socio-economic investment, not as a cost-trap. In a 1909 study by Sidney Chapman, shorter working hours leads to higher productivity and greater output. More time sovereignty and better health of workers would be long-term gains


By Michael Schwendinger

[This blog article published on December 5, 2014 is translated from the German on the Internet, http://blog.arbeit-wirtschaft.at.]

Statistics Austria recently published a special study on the theme “Employment as a Health Risk.” 80% of all gainfully employed persons were exposed to physical or mental health risks through their work. Working overtime hours aggravated problems. Therefore the strained occupational group of doctors is now negotiating over something that is often demanded: shorter working hours. The killing-argument that is mostly encountered is cost explosion, cannot be financed, end of discussion. To bend this narrowed perspective, I’d like to dredge up an old article that may help us think of the supposed cost-trap as a future investment.


In 1909, Sidney Chapman, chief economic advisor of the British government from 1927 to 1932, published a study titled “Hours of Labor” in the Economics Journal. Decades later neoclassicists like Alfred Marshall and John Hicks described this paper as incontestable state of the art.

Chapman concentrates on the economic effects of changes in working hours. He begins his analysis with evidence that past reductions of working hours even led to increases and not output reductions in British industry. From this finding, he asked whether the effective channel of the “free market” automatically produces “optimal working hours” or whether improvements could be realized through extreme interventions (of the legislature or unions).


To this end, Chapman examined both sides of the labor market. For workers, the travail of the work to be performed and the value of free time are factors that play a role for desirable working hours. These factors exist alongside earned income. Chapman assumed people underestimate the long-term effects of overly long work on their health and therefore prefer higher wages in the short-term to shorter working hours. The freedom of decision strongly depends on the amount of the wage. That this short-term money preference hides long-term health risks goes without saying.

For businesspersons, costs, output and productivity are crucial. The higher the number of daily working hours, the lower the productivity per hour. This is explained by exhaustion, lack of concentration and excesses causing sickness. Obviously the full extent of health risks does not immediately make a difference. In the short-term, output can be increased through longer working hours but only at the expense of long-term productivity losses. Conversely, an improvement of productivity does not appear at once with shorter working hours. Rearrangement of the daily work routine permanently improves efficiency.

Reduced working hours (with the same monthly earnings) is like an investment in the productivity of the workforce that is first gradually paid off or amortized. There will be a need for reduced working hours as long as the specialization and intensification of work increase, Chapman says. Why are potentially lucrative investments usually not made? Businesspersons cannot be certain whether the competition will later woo away the very productive and well-rested workers for minimal financial incentives, Chapman argues.


Before I come to the political conclusions from Chapman’s analysis, let me say a word about the remarkable career of this article. For decades, this study was treated as a standard argument on the working hours theme among neoclassical economists and hardly ever seriously questioned. Then the statement that a division of optimal working hours leads to productivity losses moved into the center. This agrees with Chapman’s analysis. The crucial adaptation occurred when the theoretical “optimal working hours” was simply equated with actual working hours. Consequently any change had to appear as inefficient. The economic mainstream obviously persists up to today in this confusion of abstraction and real value. In any case, Chapman’s incontestable study disappeared.


For working hours, Chapman identified market failure as that (singular) situation that legitimates political interventions according to the current mainstream economic theory.

The “free market” systematically produces sub-optimal or overly long working hours that damage individuals, the economy and society generally in the long-term. “These reasons are short-sightedness or fear of incurring an expense the fruits of which other employers might reap” (p. 367). Chapman urged support of the union movement for shorter working hours – based on a neoclassical economic argumentation. The cost-question can now be turned around on the background of this short-sightedness of the “free market” and the health impairments on the job. From a longer-term perspective, overly long working hours represent a cost-trap while reduced working hours becomes a socio-economic future investment.


By Martin Risak

[This blog article published on October 31, 2014 is translated abridged from the German on the Internet, http://blog.arbeit-wirtschaft.at July 30 and August 14 are special days for US labor commemorating in 2015 the 50th anniversary for Medicare and the 80th anniversary for Social Security.]

Flexibility of working hours is talked about everywhere and is addressed in the Austrian government’s current program. This article pleads for a differentiated perspective on flexible working hours in which the risks are included and a one-sided success story of gained personal freedom is not told. What sounds like more self-determination can mean the opposite in reality.


Working conditions involve one person (the employee) relinquishing self-determination and granting power to another person. Employers can use workers for their goals on this legal basis. The day originally completely free for employees is divided in a time of self-determination (free time) and a time of foreign determination (work)… As a rule, legal limits are set to this division. This division is not only a matter of negotiation.


Limits on working hours prohibit workers from selling their labor power to someone else for the whole day. This has the paradoxical effect that free spaces for recreation and self-development are first created by limiting freedom. By regulation, the pressure of exploitation is taken from employees and a free organization of at least part of the day is possible. This dimension of working hours restriction establishing freedom must always be considered when flexibilization of working hours is discussed.


At the beginning of the 19th century, private autonomy ruled for the amount of the work volume… The underlying liberal idea regarding the regulation of working hours considered legislative incursions in the free development off these conditions as a violation of the individual freedom of the come-of-citizen.


In the last quarter of the 19th century, a pact of socio-political measures limiting freedom of contract was crafted as a reaction to the intensified “social question” under the influence of Christian social reformers. In 1885 the maximum workday of 11 hours was introduced in factories. The introduction of the 8-hour day in 1918 was a provisional measure for combating unemployment. In 1919 it was in force for business enterprises with health protection arguments and not only for factories.


The 40-hour week that arose comparatively late was seen as another step to reduced working hours and creation of greater free time possibilities. In 1969 its legal introduction w as carried out on the basis of a popular initiative introduced by the SPO and supported by more than 880,000 persons after weekly working hours were already reduced on a collective contractual plane.


The possibility of arranging overtime hours was developed hand in hand with reduction of normal working hours. So-called models of flexible working hours go a step further and make possible an uneven distribution of working hours over different time periods (from a week to several years). This has the effect of avoiding overtime charges even with a violation of the 8-hour day or the 40-hour week. The possibilities of flexibility that already existed in 1969 were expanded in the 1990s and since then cannot be ignored in the world of work. Since then the emphasis has hardly been on a reduction of normal working hours and actual working hours. Rather the focus was on creating more exceptions from the basic principle of the 8-hour day and the 40-ghour week that correspond to the demands of the economy.

This trend continues with the last great working hours reform of 2007 that provided further possibilities of expanding normal working hours to ten hours and additional possibilities for performing overtime and simplifying possibilities of flexibility. The engagement possibilities of full-time employees should be as flexible as possible and the resulting additional costs should be kept as low as possible.

Raising the working hours limit to 12 hours in certain cases (holiday time, flextime) now earmarked in the current Austrian government program fits this trend and can be seen as a further development of this tendency to deregulation of working hours.


A far more liberal working hours organization than appears on first view exists in practice according to Austrian working hours law under formal observance of the basic principle of the 8-hour day and the 40-hour week. The chance that the tradition al patriarchal-authoritarian working condition can change to an egalitarian relation negotiated at eye level is also seen in this flexibilization. The goal is a legal- and economic relation between equal partners.


Reality obviously does not do justice to this ideal. A serious power imbalance exists between the parties of the employer-employee relation. The flexibility of working hours often becomes a boomerang that can appear in the example of flextime. In its concept, this form of working hours is fascinating. It offers employees the possibility of determining themselves the beginning and end of daily normal working hours within the negotiated framework. This working hours model seems to be only in the interest of employers… The risk that should be borne by employers is at least partly shifted to employees.


The shady-sides of self-determination granted by employers are clear in the example of flextime. The effective power technique is subtle since it does not directly seize employees in the form of direct instructions. Rather it ensures that the rule connection is internalized but interpreted as freedom. In the scope of the freedoms offered through a deregulation and flexibilization of working hours, employers have to show flexible, permanently available and performance-related possibilities. This can also play a role in dismissal decisions, in occupational ascent or the granting of additional bonuses. Those persons lag behind who for the most different reasons cannot permanently control the negotiated normal working hours. This could involve (usually unpaid) nursing work in the form of child care or care of seniors and the sick and a further gainful activity or political party or civil society engagement. The flexibilization of work concerns different groups of persons in diverse ways and tends to worsen the situation of persons who already have problems on the labor market.


The risks of flexible working hours should be included so more than only a one-sided success story of gained personal freedom is related. Limiting the working day and the working week was originally seen as an emancipatory project that offered free space to workers without pressure of economic exploitation. This should not be forgotten. When this is remembered, a much more differentiated assessment of the current trend to working hours flexibilization results.
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