Why did hours of labor stop declining after 1970?

by Jehu

Earlier this year, The Atlantic asked an important question: Why did Keynes get it so wrong in his prediction that hours of labor would fall?

“For a while, it looked like Keynes was right: In 1930 the average workweek was 47 hours. By 1970 it had fallen to slightly less than 39. But then something changed. Instead of continuing to decline, the duration of the workweek stayed put; it’s hovered just below 40 hours for nearly five decades. So what happened? Why are people working just as much today as in 1970?”

Why haven’t hours of labor dropped as Keynes predicted in 1930? This is a question many writers have raised in the aftermath of the crash of 2008. David Graeber, for instance, pointed to Keynes prediction of fewer hours of work, but noted it never materialized. Instead, argues Graeber, the working class today performs an amazing amount of unnecessary labor that he calls “bullshit jobs”.

“[Technology] has been marshaled, if anything, to figure out ways to make us all work more. In order to achieve this, jobs have had to be created that are, effectively, pointless. Huge swathes of people, in Europe and North America in particular, spend their entire working lives performing tasks they secretly believe do not really need to be performed. … Yet virtually no one talks about it.”


Capital outperforms Keynes prediction …

As both Graeber and The Atlantic article explain, Keynes clearly did not get one side of his prediction wrong, productivity. If anything, productivity has increased faster than Keynes rough calculation suggested it might. While Keynes predicted productivity might increase four to eight times in 100 years (between 1930 and 2030), evidence suggests we have easily exceeded his prediction more than ten years ahead of schedule.

To give you an idea what that could have meant in practical terms: the estimated 105 million workers who each work day commute to and from their jobs by car release about 875 billion pounds of CO2 into the atmosphere each year. A two day, 15 hours work week could have reduced that carbon foot print by 60%, (525 billion pounds of pollution), or from 875 billion pounds of CO2 released to about 350 billion pounds each year.

Essentially, reducing hours of labor would not only have eliminated what Graeber calls bullshit jobs, we likely would not be facing global climate change today.

Keynes clearly did not err in his prediction about how the productivity of labor would increased in the decades following his essay. And he was not alone in his prediction. Bertrand Russell, writing in 1932, included the mass of unemployed locked out of production in the Great Depression in his calculation and argued immediately for even deeper cuts in the work week far earlier than even Keynes predicted — as early as the end of World War I. Said Russell, something akin to Keynes fifteen hours work week did not have to wait another hundred years; with comprehensive planning of production, it had been possible since the Great War:

“The war showed conclusively that, by the scientific organization of production, it is possible to keep modern populations in fair comfort on a small part of the working capacity of the modern world. If, at the end of the war, the scientific organization, which had been created in order to liberate men for fighting and munition work, had been preserved, and the hours of the week had been cut down to four, all would have been well. Instead of that the old chaos was restored, those whose work was demanded were made to work long hours, and the rest were left to starve as unemployed.”

… but labor hours still did not fall

So if Keynes was so on target with his prediction regarding the sheer increase in the productive power of social labor since 1930, and if Russell was right to argue hours could have been dramatically reduced even in the 1930s, what happened? Why haven’t hours fallen to any significant extent at least since the 1970s?

The Atlantic writer went looking for answer and found this paper by Harvard economist Benjamin M. Friedman, “Work and consumption in an era of unbalanced technological advance”. In that paper the economist considers and then discards a number of competing theories about hours of labor have not fallen, including a number of ambiguously named concepts like “habit formation”, “socially induced consumption preferences”, and “network effects”. In the end, however, Friedman settles on a familiar theme. According to The Atlantic, Friedman concluded “most Americans are too poor to work less.”

The gains from increases in productivity have not gone into the income of the working class. This answer, although frank, is no less perplexing than the original question. It is not clear from Friedman’s paper why, exactly, gains from the increase in productivity did not improve the subsistence of the working class. Friedman offers a number of different explanations why this might have happened. Larger shares of output are going to uses that do not visibly contribute to living standards: these include: more rapid depreciation of capital, military spending, and the fact that most of the improvement in productivity ending up as profits for the owners of capital.

Of this latter category, Friedman writes:

“Until the 1970s, Keynes was right on both fronts: per capita output grew at the upper end of the range he predicted, most families’ incomes grew even faster (inequality was mostly narrowing during that period), and the workweek continued to decline. But with widening inequality from the early 1970s on, the growth of most families’ incomes became far slower than he had predicted, and the workweek stopped declining. The latter combination has persisted ever since.”

Friedman concludes:

“The primary reason is that Keynes’s prediction for rising living standards has also been unfulfilled. With declining real wages (looked at another way, widening inequality), the median family income stopped rising at just about the same time that the work week stopped getting shorter.”

Lower wages lead to longer hours?

So, we continue to work long hours, long after Keynes prediction have been fulfilled, because Americans are literally too poor to work fewer hours? Well, not so fast. Friedman has overlooked another powerful competing argument made by Karl Marx who suggested poverty, rather than forcing people to work longer hours, is actually produced by longer hours.

According to Marx, the worker is misled into thinking she can escape poverty by working longer hours when her additional labor simply reduces her wages. In Wage Labour and Capital, Marx explains how this might result. The increase in productivity means one worker can do the labor of five. At the same time capitalist firms can replace five workers by one. Technological improvement increases competition between workers, who now are forced to sell their labor power on more unfavorable terms — working more hours for less income. At the same time, the introduction of improved machine reduces the skill required from the worker on the job. Thus technological improvement simultaneously increases the number of workers who now qualify for the job.

In a powerful passage, Marx gives us a glimpse into the inevitable results of technological improvement: the worker drives down her own wages by working more hours and faster:

“The laborer seeks to maintain the total of his wages for a given time by performing more labor, either by working a great number of hours, or by accomplishing more in the same number of hours. Thus, urged on by want, he himself multiplies the disastrous effects of division of labor. The result is: the more he works, the less wages he receives. And for this simple reason: the more he works, the more he competes against his fellow workmen, the more he compels them to compete against him, and to offer themselves on the same wretched conditions as he does; so that, in the last analysis, he competes against himself as a member of the working class. “

The paradox of labor hours

Marx offers a credible model for why hours of work are not the result but the cause of the poverty and inequality we see today. Moreover, Marx’s argument dovetails with an observation Keynes famously made almost one hundred years later involving the fallacy of composition. The fallacy in this case is what Keynes identified in the so-called “paradox of thrift“; defined this way by Wikipedia:

“The paradox of thrift (or paradox of saving) … states that if everyone tries to save more money, then aggregate demand and therefore income will fall and will in turn lower total saving (the autonomous portion that changed initially plus the portion induced by the level of income) in the population, because the tendency to save is directly related to the amount of income received. The paradox is, narrowly speaking, that total saving may fall even when individuals attempt to increase their saving, and, broadly speaking, that increase in saving may be harmful to an economy.”

To Keynes’ paradox of thrift, which explains the fall in demand by the increase in savings, we can add the paradox of labor hours, where workers drive down their own wages as they compete to sell their labor power and to work ever longer hours. The mechanism here is simple and easily understood: The aggregate supply of labor is a function of the number of hours individuals choose to work. If more hours are supplied by individuals than is required for production of commodities, the wages paid for labor will fall. On the other hand, if wages are falling, people think they can offset this fall by working more or more people per household can work.

It is thus possible for people to be fooled into supplying ever greater quantities of labor hours to capital thinking this way they can escape poverty; when, in fact, it leads to the opposite result: the more hours they work the more they reduce their own wages.

Two conflicting models

The above arguments, Friedman and Marx, result in two different and, perhaps, equally compelling explanations for why Keynes prediction for fewer hours of labor never materialized. In the first, Friedman, labor hours stopped falling because the subsistence of the working class did not keep pace with the improvement in productivity, leading to what one writer cited by Friedman calls immiseration of the working class. As wages stagnated, workers demanded more hours to to offset their stagnant income. In second argument, Marx, the situation is reversed: wages fall because labor hours did not. The subsistence of the working class did not keep pace, and inequality increased, because hours of labor stopped falling.

The distinction here is subtle and often confused in the literature. But which of the two is a better fit for historical evidence? I will examine this next.