What Borsch-Supan overlooked in his discussion of the economic impact of reducing hours of labor

by Jehu

How reducing hours of labor affects the so-called economy is, according to Borsch-Supan, determined by six questions:

  1. What effect does reduction have on wages?
  2. What effect does reduction have on productivity?
  3. What effect does reduction have on expansion of constant capital?
  4. What effect does reduction have on workers’ overtime?
  5. What effect does reduction have on prices?
  6. What effect does reduction have on output?

great-depression2soup-lineIf you notice, the questions Borsch-Supan asks actually can be reduced to three:

First, his questions on productivity (1) and output (6) are simply two side of the same coin. How much of any reduction in hours of labor result in an improvement in the productivity of labor power?

Second, his questions on prices (5) and wages (2) can both be reduced to the general price impact of hours of labor reduction on the prices of all commodities, including labor power. To what extent, if any, will a reduction in hours of labor result in a change in the prices of commodities.

Third, his question on overtime (3) and capital investment (4) suggests a trade-off between extending hours of labor by various means versus intensifying labor. To what extent will any legally mandated reduction in hours result in the extension of actual hours of labor by means other than employing additional labor power or intensifying labor by adding improved methods of production.

Preliminary to the discussion of his findings, I want to point out that there are a number of problems in the way Borsch-Supan goes about establishing whether the employment effect of a reduction in hours of labor predominates over improving the productive power of social labor. First and foremost among these problems is the value blindspot of the bourgeois simpleton economist. For the economists all paid labor has value in the tautological sense: by definition the exchange value of a commodity is its price. Thus virgin land, if it is sold in the market, has value equal to its price, although no human labor has been expended producing it. This presents a problem when it comes to calculating the impact of reduced hours of labor, however.

If labor theorists are correct, there is a huge mass of superfluous labor time being expended in the “economy” right now. This is labor time that is in excess of the socially necessary labor time required for production of labor power (wage goods) and profits (capital goods). According to Borsch-Supan, bourgeois economist research suggests this superfluous labor time (which they call ‘production inefficiencies’) may range anywhere from 4-12 hours out of a 40 hours work week. According to this 2007 essay by Chris Harman, over the past four decades labor theorists have arrived at estimates of anywhere from 20 hours to 26 hours out of a 40 hour work week in the United States. My own calculations suggest this superfluous labor time may actually be in excess of 36 hours of labor time out a 40 hours work week.

For the moment, let us leave the exact proportion of wasted labor time out of the discussion and simply accept that some given portion of social labor is wasted. If we assume for this discussion that wasted labor is only five hours, a reduction of hours of labor should reduce or eliminate this wasted labor time before there is either an employment or investment effect.

Since wasted labor time produces nothing, eliminating this labor time has no direct effect on the production of either wage or capital goods, but it does have an indirect effect in this way: The labor time that is wasted is paid for in the same way productive labor time is paid for: in the form of the price paid for labor power and goods.

Washington’s defense department or the department of motor vehicles in a state, for instance, purchases and consumes a host of commodities — buildings, desks, computers and other technology, heat, electricity, living labor, etc. They are also supported by a rather large ancillary industrial complex devoted to producing for this sector. The reduction of labor time, if it eliminates this sort of activity, eliminates these costs. The production related to this waste are reduced proportionally by the reduction in hours of labor devoted to this the defense department and the DMV. With a reduction in the superfluous economic activity, the employment of labor power must fall as well and, with this, a fall in the prices of commodities generally.

Now suppose a country with five social hours of labor time waste were to reduce hours of labor by five hours — from 40 hours to 35 hours. The entire effect of this reduction would be an employment and output effect and, moreover, both would be decidedly negative. There could be no increase in output or productivity, but wages and prices would fall, because “demand” for labor power and goods in the area of wasted activity fell. Competition among sellers of commodities, including labor power, would intensify, resulting in a fall in both wages and prices.

The net effect of a reduction of hours in the particular case of superfluous labor time is the same as a depression, with a fall in both employment and output plus rapid price deflation.

There will be a pronounced drop in total employment, total wages and prices and total output, without a corresponding increase in productive power of labor or investment. This is the problem the Troika ran into when it forced reductions in the state sector on the working classes of Greece and Spain. According to data published last week, 4th quarter GDP for Greece is still contracting at an annual rate of 2.6% after almost six years. The reduction in public employment did not result in an improvement of profits, because, for the most part, the only thing eliminated in labor restructuring was superfluous labor time.

This might seem like an argument against reducing hours of labor, but this overlooks the real situation: Over time there has been an accumulation of superfluous labor within the capitalist mode of production resulting from the effort to avoid a devaluation of capital. If society avoids getting rid of it, by state economic intervention, this fictitious activity does not go away: the state’s intervention only makes the eventual crash worse. This superfluous labor time has no actual value and must, sooner or later, result in a nominal devaluation of the existing capital. Only by reducing hours of labor can this superfluous labor time be addressed in an orderly fashion.