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Why Do Americans Work So Much?
HughPickens.com writes Rebecca Rosen has an interesting essay at The Atlantic on economist John Maynard Keynes' prediction in 1930 that with increased productivity, over the next 100 years the economy would become so productive that people would barely need to work at all. 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. According to Rosen there would be no mystery in this if Keynes had been wrong about the economy's increasing productivity, which he thought would lead to a standard of living "between four and eight times as high as it is today." Keynes got that right: Technology has made the economy massively more productive. Now a new paper Benjamin Friedman says that "the U.S. economy is right on track to reach Keynes's eight-fold multiple" by 2029—100 years after the last data Keynes would have had. But according to Friedman, the key reason that Keynes prediction failed to come true is that Keynes failed to allow for the changing distribution of wealth.
Greed. Family's in my experience at least have gone from being happy with 1 TV and one stereo in the "family" room to wanting fridges with TVs on them, each person having a cellphone and a tablet etc, each "adult" > 16 wanting their own car etc. We have more stuff. If we lived with the stuff you had in 1930's yeah we could work a lot less.
Income inequality has risen since at least Reagan, don't act like it's something new.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
If we could survive on what we earn in that time, that is.
There certainly isn't enough work for everyone. Well, not quite right, there COULD be enough work for everyone if, and only if, we could sell it. That's the main problem our economy has today, not enough money on the demand side. What drives our economy is consumption, and for consumption you need surplus money to use for it. And that's what's lacking.
Consumption is a self powering cycle. I consume, hence the person whose services I use gets money, who in turn gets to spend that money on consumption. It's amplifying itself. Unfortunately that also works in the opposite direction. If I don't have money, I won't get a haircut. So my hairdresser has to close his business. And can't get his plumbing fixed. Which in turn means the plumber won't get to go on vacation. Which shuts another hotel down. Which leaves that cook without the money to get his car checked. And so on.
We need money in the demand side of our economy. But for that we need people to actually get money for working. Unfortunately we have more and more people working 40+ hours a week and only get enough money to make ends meet with zero surplus at the end of the month. That's not going to work. We have to stop the money accumulation, the only thing this accomplishes is more money on the supply side. There's plenty already, we have more people who would love to invest in something sensible than there are sensible investments.
But for an investment to be sensible, there has to be a market for it. And a market will only exist if you have a demand side with the money to play its part!
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Everything is new under Obama. Before Obama there was no terrorism, no debt, no healthcare premium increases, no illegal immigration, no deadlock in government, no economic downturn, no corporate welfare, no cronyism and more.
Truly we lived in Paradise until Obama made us eat that apple. Which stands for abortion, which Obama also invented.
Since the early 70s hours worked hasn't fallen, and worker share of productivity gains has decreased.
Why? I don't think it's a coincidence that the early 70s is also when we came off the gold standard. Do you get a raise when inflation goes up? I sure don't.
I'm surprised at the comments so far.
Surely the thrust of the article is that the benefits of the increase in productivity have not gone to the workers and the middle class, but to the super rich.
Guess what... if we distributed all that concentrated wealth, we'd still need to work.
Sure we would, and I'm not implying that it is a bad thing to have an obligation to fulfill that separates a person's free time from *his labors.
Look, redistributing wealth entirely and evenly is a dream that spawns in pipes. Economically, someone will always climb to the top of the food chain, but we've let it get way out of hand.
The present concentration of wealth is so dire that we run the risk of consolidating the World's power into a few hundred families.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
The increase in the income gap began around the same time that trickle-down supply-side economics became national policy in the 1980s. Having one president or another in office doesn't magically change the course of the economy. That's driven largely by tax policy, which (last time I checked the Constitution) is controlled by Congress. Which is controlled by wealthy campaign donors who benefit from income inequality.
http://alternatives.rzero.com/
So a very small percentage of people owning almost all America's wealth is the fault of the Chinese?
I know this is going to be an unpopular opinion, but in my opinion it's the fault of those who routinely carry debt. Most people in America don't know shit about finances. They borrow heavily, and wonder why they never have any money. You know who profits? People who don't borrow. Not necessarily even the lenders, rather, just people who don't borrow.
And no, no amount of usury laws will change that. Usury laws create loan sharks, and unlike legitimate lenders, loan sharks don't answer to the law. Most people are just plain stupid and will borrow money at insanely dumb interest rates, even from dangerous people if they have to, just because they have no idea how to manage their own finances.
Borrowing also includes renting, by the way. Part of this comes from people who insist upon living in upscale expensive areas (i.e. New York, San Francisco) when it's clearly beyond their means, have a super high rent, and then wonder why they live paycheck to paycheck.
I personally have never made a whole lot (my current income at my IT job is just under $50k) but am already taking advantage of the situation. That is, I just paid cash on a shitty house, fixed it up, and now have renters in it paying me every month. (And no, I am not a slumlord, the last owner was, hence it was shitty, however unlike him I'm still in the process of bringing improvements to the property even while tenants are in it.)
Way too many workers are too stupid or lack the backbone to tell their boss, "no, I will not give up my life because you are an asshole and refuse to hire the workers needed"
Boss, "Ok, fuck you then. I'll hire someone else. I have 30 resumes on my desk with people desperate to work here. Bye bye!"
"That is also why today both parents work, even though they could enjoy the standard of living of a single-earner household of 50 years ago."
You are delusional if you really think so.
I think it depends on how you define "standard of living". If you don't pay for any technology invented in the past 50 years (drugs, cat scans, cable tv, cell phones, internet) and reduce your house to the square footage they had back 50 years ago, move to someplace semi-rural where you chopped your own wood and had a garden, then yes, you could approximate the standard of living 50 years ago on a single income. That doesn't mean the second person is not "working" though as now that second person is tending a garden, chopping wood, etc... but the idea that 50 years ago only one person "worked" is also simply not true. Sure, only one person worked outside the home but the other person still very much worked.
A rather compelling argument has been made that widening income inequality is an inherent result of capitalism. The topic is covered in some depth in this book. Borrowing a brief summary from here:
...as long as the rate of return on capital (r) is greater than the rate of economic growth (g), wealth will tend to concentrate in a minority, and that the inequality r > g always holds over the long term...
To what extent this is a problem and what solutions there are can be debated. As long as you avoid debating with those who hold the insane position that all inherent effects of capitalism are good by definition.
Ideology: A tool used primarily to avoid the bother of thinking.
The world where you actually allow other states to develop is a safer, more stable place. This is why no one seriously believes that the Chinese will attack the US short of some small land squabbles and trade issues.
The Chinese will eventually have to deal with the same issues we had to, and their standard of living will rise which will bring their benefits (and expenses) in line with US standards.
The major problem with that is the situations where countries like the US were riding high on a temporary inflated standard of living have to deal with a retraction of that. For all those who loved the 1950s, that was a windfall for the US because we were the only big country with any real undamaged industrial capacity left. That wasn't going to last forever. It was certainly not going to turn into some permanent prosperity situation were you could pay UAW union rates to unskilled workers and a pension forever. The enormous balance of human history has not really had any sense of "retirement" where you are somehow able to live off of capital built up in your life in Florida. Your only real retirement option was having some children, particularly daughters, around when you couldn't work anymore to take care of you, and maybe you owned your house and land.
Anyway, while the world will probably never completely equal out, a rising tide can lift all ships. As long as the barriers don't go up, prosperity elsewhere will eventually spread out and actual standards of living will rise over time. This may hurt for the West and the US in particular, but we shouldn't find ourselves relegated to the 19th Century again.
When I say that, I'm speaking in terms of building your own net worth. Renting a house doesn't do that, instead it adds to somebody else's net worth. Borrowing money and paying interest does the same thing.
Which by the way, my savings alone didn't pay cash for the house I just bought, rather it was the result of having a mortgage on a house in 2011, and selling it in 2014. If I had rented in 2011 instead, I'd have nothing. Instead it was sold at $116,000 above what it was purchased for (after realtor fees, closing costs, and whatnot) and added my monthly savings over the course of a few years to pay cash on another house.
This is exactly why I equate renting to borrowing money. It's also why somebody else is building my net worth. I'm sure some random derp is going to call me out for being greedy, but so be it. Unlike most, I save money, and invest wisely. No amount of me telling this to other people is going to make them change their ways, even when I point out how stupid their status quo is, so I may as well take advantage, and I will.
We have a class where we have implemented systems so they have the same income regardless how much wealth they already have, or what they do. It's welfare for these protected people, paid for by the rest of taxpayers.
The result is they don't work, they spend all their income on alcohol instead of a comfortable lifestyle which it could pay for. They also whine all the time about inequality. Why can't their handouts be greater than the average national wage?
A rather compelling argument has been made that widening income inequality is an inherent result of capitalism.
Which is easily defeated by a consideration of history. Wealth inequality has narrowed under capitalism as well (eg, various times during the Industrial Age when advances in technology were met by uses of that technology).
...as long as the rate of return on capital (r) is greater than the rate of economic growth (g), wealth will tend to concentrate in a minority, and that the inequality r > g always holds over the long term...
This a broken model since it doesn't consider the liquidity or utility of wealth. I call wealth which has a high notational value, but isn't even remotely that valuable in reality (especially in terms of conversion to a liquid form of wealth) "fake wealth". For example, I might have trillions of dollars suposedly = in specialized derivatives. But if that can't be converted to real dollars and used for something, then it's not actually worth trillions of dollars.
This leads to the problem that "r" above is an exaggerated number with little relevance to the real world. You won't care if I decree that every hair on your head is worth a million dollars, unless I begin paying you a million dollars apiece for those hairs. Yet I just created meaningless wealth inequality by my meaningless decree.
This is a real thing because we have a number of cases of trillions of dollars in perceived wealth evaporating overnight. It's a common cause of recessions.
Bottom line is that the growth of liquid wealth is going to be fairly close to economic growth and it can go either way and often does. There's no point to measuring wealth inequality when the wealth being measured is mostly useless.
OK. So once we follow your idea and successfully drive wages - ie: costs - down to slightly-more-than zero, who is going to buy the stuff business produces ?
Why would that happen? Is regulation the magic sauce for making sure you don't starve because you forget to ask for a paycheck? This sentiment reminds me of The Incoherence of the Philosophers, a work which among other things proposes that reality itself goes on as it does only because Allah wills it so. So do we have an economy and people getting paid for their work only because the regulators will it so? I'm not feeling it.
You need to consider that there's a revenues side of the ledger as well as an expenses one.
Somewhat lower wages is still better than no wages when it comes to generating revenue, wouldn't you think?
The thing that is missed here is that reducing profits also reduces living standards.
No it doesn't. An economy running on a razor-thin profit but still producing excess of everything it needed would have high living standards.
Here's what's missing: leisure time and spending, risk taking, insurance, research and development, and business expansion. But I'm sure that government will continue to take and squander much more than that razor thin profit margin as is their due.
Er, no. Living standards are declining because all the regulations that protected normal people's incomes have been systemically destroyed. That's why real incomes for almost everyone in the US have gone nowhere for thirty-odd years.
It's a nice story except that it isn't true. The labor regulations haven't changed much; benefits and unemployment regulations haven't changed much; minimum wage is still around; and health care has actually been expanded. What has changed? Well, nothing really. It's just part of the ongoing half century of economic shift to the developing world and growing wage parity between developed and developing worlds.
Everyone knows what works. Post-WW2 USA (until the neoliberals took over in the '70s, brought in the morally bankrupt NAIRU, deregulated everything, started selling off public assets and disassembling the public services - again, a common problem throughout the western world, though some countries had their Reagans and Thatchers much later - here in Australia, for example, we didn't go full retard until the mid-90s) was the quickest and most widespread increase in wealth and living standards in human history. It was a time of increasing real wages, a large and financially secure middle class, relatively high social mobility, large-scale public investment and full employment as a policy goal rather than a bete noir.
In other words, those darn Reagans and Thatchers didn't ban the billions of people who are eating your lunch, labor competition-wise.
And the great incongruity of your post is that the actual quickest and most widespread increase in wealth and living standards in human history happened after the period of time you mention. It is happening now, not in the 1950s. Now is the time of increasing real wages, creation of a global large and financially secure middle, relatively high social mobility, etc. What happened in the developed world then is now happening everywhere. But I guess all those people are kind of hard to see from whatever podunk country you're from.