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.

Comments

distribution of wealth and

[ILongForDarkness]

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.

Re:distribution of wealth and

[nukenerd]

in my experience at least have gone from being happy with 1 TV and one stereo in the "family" .... If we lived with the stuff you had in 1930's yeah we could work a lot less.

But a pre-1980's TV was built by hand while today robots do most of the work. The effort that went into that 1950's TV or 1930's car would make a dozen today.

The real reason for more work today is that most of it is non-productive. As automation has replaced much real work, new non-jobs have been created. It is doing stuff like safety inspections, progress chasing, advertising (half the cost of some stuff today goes to its advertising), making financial cases (that can cost more than the work) and so on ad nauseum. In the book "How to be a Wally" it gives a "Wally's" job description : - "To liaise with other Wallys". That's it, in in a nutshell.

I am a power station engineer and I spend hours sitting in meetings with a dozen other qualified engineers discussing eg whether to replace a slightly leaking seal on a large valve, whether it is cost-effective, whether we have a safety case, whether we can spare a fitter to do it. I generally take the line "Just give me a fucking spanner and I'll go down and do it this morning"; but I am treated as if that would be spoil the meeting.

Re:distribution of wealth and

[Daemonik]

I live in a house built by my own hands on land I claimed after killing the Indians living here. I'm typing this on a telegraph because I'm not the kind of greedy bastard that has to have a newfangled computer. I'm only using the telegraph until I figure out how to make the internet work with an abacus. I keep my food in the root cellar instead of wasting money on one of those refrigerators and keep the house lit by candles made with fat rendered from the animals I raise. TV is shadow puppets on the wall and I ride a horse buggy into town.

YOU sound like the greediest asshole ever with all your modern conveniences! How dare you buy things??

Re:distribution of wealth and

[AthanasiusKircher]

If we lived with the stuff we had in the 1930s you would not have had the economy boom you experienced in the second half of the 20th century.

There's certainly some truth to this, but it oversimplifies things.

Without that demand, nobody would have had a job and no economic growth would have happened.

But take the premise in TFA seriously for a second. Keynes's prediction should have the average work-week around 20 hours by now. To have our current productivity, we would therefore need twice as many jobs as we currently have. But we were reach full employment long before that, so we would have to have significantly lower productivity and consumption while still having enough jobs to go around.

And of course the objection is -- "But don't people who work 20-hour weeks get paid less?" And the point of TFA is that NO -- they still get paid a living wage. The difference in the Keynes future prediction and what we actually got is that that extra money has been siphoned off to the richest folks, rather than rewarding average workers, who might then have to work less hours to still live comfortably.

(Of course, whether that could actually happen given human nature is a separate issue...)

Today the desire remains, what's lacking is the money to actually do it, and as soon as the money for consumption was gone the economy plummeted.

This is also far too oversimplified. Our economy doesn't just depend on consumption -- it depends on irrational assumptions of continuous and perpetual GROWTH of consumption.

You can't have a large corporation today and just continue making the same stuff every year and getting moderate profits that keep up with inflation. Well, you can, but nobody's going to invest in you, because Wall Street has taught us that speculation in growth is normal. Thus, if you're going to attract investors, you need to promise them an irrational and illogical perpetual growth machine that will always beat inflation in its returns.

The consequences of this logic are profound, because it's simply impossible for businesses to sustain such growth over any extended period. Once market saturation occurs, where else do you go? Well, you start doing what we see big corporations in America doing for the past few decades -- you need to keep up the illusion that profits are going up, but you can't get more revenue due to market saturation, so how do you keep up the GROWTH demand of investors?

First, you have the cost of employees. Those darn Americans and their unions cost too much. So, you send manufacturing jobs offshore. Nowadays with the lower cost of global communication, you send service jobs offshore too. And those effects continue to trickle up the offshore game -- to save money, to make greater profits, to satisfy the investment illusion that perpetual growth is possible.

But then you need more money, 'cause you've already sent all your manufacturing (and JOBS! don't forget that's what we were trying to keep in the US!) to China or whatever. But you've exhausted the revenue increases from offshoring, so you make cheaper products, which will break. You make them in such a way that they can't be repaired. Repair shops (which used to be a significant service elements in most American cities) also go out of business... more jobs lost.

You create "planned obsolescence." You spend more and more money on marketing to convince people that they need the newest gadget every year. That marketing money doesn't go to support middle or lower class workers (JOBS!) -- instead it goes to white-collar advertising agencies and such.

Eventually, you need to start tricking people into spending huge amounts of money on your products -- so, you expand the "razor/razorblades" model to products that cost hundreds of dollars. Yeah, you get a "free" iPhone every few years, but it comes with a commitment to a $100+/month phone plan. People wou

Re: Income inequality has *RISEN* under Obama?!?!?

[Anonymous Coward]

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.

Transfer of wealth from the middle class

[Ozoner]

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.

Re:We COULD get by working 10-20 hours a week

[mellon]

(a) there isn't enough work for everyone because the people who have work are doing too much of it.
(b) work isn't some virtuous act that we should all do as much of as possible.

The problem we have is that work is the only metric we have for determining how to share wealth. Think about it.

Re:Income inequality has *RISEN* under Obama?!?!?

[bluegutang]

It's really simple. Reagan entered office in 1981. China opened its economy to the West starting in 1978. Ever since then, the Chinese economy has grown at about 10% per year, and inequality has increased in the US as lower-wage jobs go to China. Any questions?

Women+Boomers+Immigrants = "Labor Shortage"

[Baldrson]

The baby boom started increasing the supply of entry level labor about 1970.

Women's liberation started increasing the supply of entry level labor about 1970.

The Immigration and Nationality Act of 1965 started increasing the supply of labor (not just entry level) about 1970.

The Donor Party liked this because it lowered labor costs. Oh, did I say "Donor"? I meant "Republican".

The Elect A New People Party liked this because 2 of the 3 sources of new labor would vote to Elect A New People. Oh, did I say "Elect A New People"? I meant "Democratic".

So you have a huge influx of labor and this is interpreted as a "labor shortage" by both parties.

Combined with the fact that FDR's "New Deal", in effect, nationalized many of the functions previously performed by the labor unions -- turning the national border into a de facto picket line that, for example, that neoNazi Eisenhower enforced with "Operation Wetback" (deporting most of the illegal immigrants) -- and the labor movement effectively collapsed.

Elizabeth Warren, before she got conned into becoming a politician, was the only mainstream academic to come close to documenting even part of this. See her Jefferson Lecture titled "The Coming Collapse of the Middle Class.

Since 1992, I've been advocating replacing taxes on economic activity with what amounts to an insurance premium for the protection of property rights, and distributing the revenue in a citizen's dividend. In that white paper I predicted a lot of what has now come to pass as a result of centralization of wealth and burgeoning welfare state rent seeking.

Here is a link to a recent synopsis of that proposal.

Happiness is relative

[Aviation Pete]

Psychology studies show it's not the absolute material wealth that makes you happy and content but the relative, in comparison to others in your social group. That's why top executives have spiraled up their pay packages, and why the middle class never lowered their work time below what is filling your day.

When Volkswagen experimented with 4-workday weeks 20 years ago, local plumbers and carpenters fell on hard times because everyone now used the extra day to fix things themselves, or even work on the side on that extra day. While the unions keep telling you that workers would relax during the extra time resulting from reduced work, in reality everyone tries to make a little extra on the side.

Also, having a job gives meaning to your life. Being told that you will be needed less is like telling you that you are a burden - nobody wants to hear that. 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. But to keep up with the Joneses and to feel better for themselves both are now working, and the downside of less parenting seems to be generally accepted.

Re:Income inequality has *RISEN* under Obama?!?!?

[Anonymous Coward]

You're mistaking fault with reason, as many people do. There's inherent barriers to entry--capitalism is about capital used to make further capital which is inherently a self-enriching system for the rich. Further, the overall standard of the living of the world has vastly increased if you include all the Chinese who now have (relatively) good paying jobs along with all the (relatively) cheap goods produced as a by-product of a lot of manufacturing being done in China--the last part materially helps everyone.

The real issue with wealth inequality isn't the inequality per se. At some level, it functionally is equivalent to just a number in a bank or a portfolio with a set number of stock. There's still plenty of opportunity to functionally advance into the very-well-off business owner, even if very few can enter the realm of the super rich; the argument that such has to be a real possibility is absurd for the same reason it'd be absurd to think that every musician must have the opportunity to be a mega star or there won't be enough music made.

No, the real issue is how money in politics has a corrupting influence over the process and the mega rich are quite capable of altering the laws so that, oh, we see workers in the US who are compoundedly hurt by the influx of investments from factories (and the like) from China. It's cheaper to buy a smear campaign against raising minimum wage or raising taxes, even by 1%, on the top 1% of earners to offset the massive budget deficits that the 1% so heavily, indirectly, benefit from. Personal dogma of the 1% is enshrined in law above the will of the people. And while all of this will in the long-term being corrected as China's economy moves much closer to a developed state, that still means potentially decades of an oppressive "elite" who have undue influence over the system.

But, again, in the long-term, it doesn't (mostly) amount to a lot. The drug war isn't a by product of this. General "tough on crime" over-sentencing isn't a by product of this. The US won't default on its debts, even if it finally comes to raising taxes on the top 1%, because the 1% doesn't want to move from the tax/regulation paradise it bought. In general, so long as the 1% continue to be focused on numbers in a bank as more of a game, the actual real harm is mostly minimized and doesn't matter a lot*.

* One could argue about the cutting of social services, but I think that's a broader egotistical issue of Americans who subscribe to Social Darwinism and has been, sadly, a cornerstone of the US for a long, long time. The same with racism, issues of gun violence, etc. Cultural issues like that are mostly unrelated to the China/US trade relation.

Re:70s

[allcoolnameswheretak]

It has nothing to do with the gold standard. Corporations move their HQ to tax havens like Ireland and pay next to nothing on their profits. Executives collect obscene amounts of bonuses in addition to their ever increasing salaries, and then shove their billions into "charities" that are of course under their control but it makes them look great in the public eye. Meanwhile most of the tax burden has been shoved on to the middle class. All of this thanks to bullshit conservative policy making that protects the wealthy, and thanks to an elitist lock-out culture of Harvards and Yale's only the wealthy can afford, it stays that way. But this is not just a U.S. problem. Every year it gets harder and harder for the middle class to maintain the standard of living, despite the increase in productivity. In Europe it used to be you could use your hard earned, taxed income as an employee to buy a house, or company shares, or other investments as provision and to start building a fortune. Today more and more rocks are placed in your path and when you perform these investments you are taxed again and again, every time money exchanges hands. Meanwhile the super rich have their financial advisor in Monaco handle their financial transactions and don't leave a penny in taxes.
If you are down you are supposed to stay down, and politicians are not interested in changing that as they are eager to curry favor with their rich audience, for when their time in politics is over.

Re: Income inequality has *RISEN* under Obama?!?!

[Anonymous Coward]

No, because global warming doesn't exist. I know this because the weather outside is cold, thus proving once again that Obama lied to us.

Re:Income inequality has *RISEN* under Obama?!?!?

[ArmoredDragon]

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.)

Re:Because they are stupid.

[Anonymous Coward]

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!"

Re:Because they are stupid.

[Kjella]

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"

It's rational under US labor laws where you'll get laid off at the next opportunity, if they don't fire you on the spot for calling your boss an asshole. They'll hire the next guy, the "good" company you find that gets 40 hours/week is out-competed by the "bad" company that gets 60 hours/week and they either change their tune or go bankrupt. As long as it's one worker against the company, the blackmail is going to work. That is why most European countries have mandatory overtime pay where few are exempted.

I don't think I could work at any place without overtime pay, unless it's genuinely management which is exempted here too. It's not about the total compensation, it's about the incentive. One hour isn't free for me, so it shouldn't be free for my manager to ask for another hour. All businesses have something they want to do worth more than $0, so that just mean pile on the tasks until I am working overtime no matter how efficient I am. Sure that means that short term I could stretch my hours and bill overtime. Or more correctly, I have to say to my boss this can't get done in normal time, do you approve use of overtime. Maybe he feels he must approve to reach the deadline, even though he feels I shouldn't have needed it.

But that is not something that should be compensated with free hours, if my boss is not happy with the work/$ he's getting from me the correct time to deal with that is performance reviews and raises. If my work was poor, regular hours or not I should get laid off anyway. So we're talking about the cases where the work is good, but the boss just wants it cheaper. It's like a constant "renegotiation" of your hourly wage, doesn't matter if it's creative work one hour of "software development" is an hour. You get what you get inside that time slot.

Or the tl;dr version:
If you have 120 hours of work that needs doing, hiring 3 people costs 300%.
In the US, hire two and hound them to work 150% and it costs 200% + whatever compensation you manage to get.
In Europe, hire two and pay 150% for the last 20 hours and it costs 200% + 150% = 350%.

That makes it pretty obvious why Americans work so much and Europeans so little. We get more expensive the more you work us, you get cheaper.

Re:We COULD get by working 10-20 hours a week

[Solandri]

No, the problem is loans. The top 1% aren't amassing wealth by stealing it from the other 99%. The 99% are willfully agreeing to hand it over to them in the form of interest on all sorts of loans.

Productivity gains haven't translated into increased real income for two main reasons: Increased cost of housing, and increased cost of education. The market price for homes is determined almost entirely by how much people are willing to pay, not by how much it costs to build. If cost were the predominant factor, homes would depreciate as they got older, like cars. Instead they appreciate because of widespread availability of credit (loans) and increased demand (population is increasing, land area is not).

Look at the long-term inflation-adjusted home prices. From the 1890s to 1930s the average real home price decreased as you'd expect from technological progress making them cheaper to construct. But in 1934 the National Housing Act was passed, then Fannie Mae was created in 1938, then the GI Bill after WWII. Real home prices began climbing until they stabilized at nearly double what they were pre-1930 (the graph is a log scale). All of these programs allowed people to cheaply borrow money. If you double the amount of money people are able to use to bid on a home, of course the price of a home is going to double. It happened again during the housing bubble of the 2000s. Extremely low interest rates and relaxed lending standards meant a lot of money was borrowed cheaply, and when lots of people can borrow lots of money, they bid up the price of large purchases like houses.

The same thing has been going on with college education. People wring their hands over the increasing cost of college tuitions which have been vastly outpacing the rate of inflation, asking why is this happening? It's damn obvious why it's happening - the widespread availability of college loans. We've got a perverse positive feedback loop where college gets expensive, people argue that students need assistance to pay for it so we make programs to provide them low-interest loans. That borrowed money allows students to bid up the price of tuition (the school raises the price beyond a point where the student would normally decline to attend because of the high tuition, but instead they get a student loan and pay the higher tuition). That allows tuition to increase even more, leading to people arguing for more student assistance.

So it's the loans which are causing the rise in price of these non-commodity big-ticket items, which are eating up a huge portion of our productivity gains since the early 1900s. The next question is, who is the beneficiary of all these loans? Well to loan someone money, you have to have money. In other words, the 1%. You get a 30-year mortgage whose amortization means half of your total payments will go to principal, half to interest. Basically you're buying a house, and agreeing to pay for an identical house for a 1%er. (Slightly less due to inflation, but we're in a low-interest rate period. At an 8% interest rate, it's 62% interest, 38% principal. At the 16% interest rate of the early 1980s, its 79% interest, 21% principal.)

You want to stop the transfer of wealth to the 1%? Get rid of the loans. Ratchet back the maximum duration of a loan to 15, then 7 years, and make it harder to roll over balances from end of one loan to the start of another. Cap the interest rate so the percentage that's paid to interest over the life of the loan can't exceed 25% or 33%. Yes this will make it harder to buy a house or get an education - that has to happen if you want the price of those things to drop. People will have to learn to save first, buy later; instead of buy now, pay for it later. If you want to assist low-income people trying to buy a home or go to college, do it with supply-side subsidies. Build more government-funded or government-sponsored housing to increase the supply of housing. Create more public universities with capped tuitions to increase the supply of education. Don't do it with things like loans which create more demand.