Thursday, December 15, 2011

What's Wrong with the Case AGAINST Shorter Working Time? II

2. The fallacy claim 

An example of the fallacy claim appeared in an opinion piece by Kristian Niemietz, "When Paternalism Meets Bogus Economics: The New Economics Foundation's 21 Hours Report," published by the Institute of Economic Affairs, which bills itself as "the U.K.'s original free-market think-tank." According to Niemietz:
This is not ‘new economics’, but a rephrasing of the old lump-of-labour fallacy, the idea that the amount of work which is ‘required’ in an economy is somehow fixed and can be redistributed ‘justly’…

The case for work-sharing rests on a number of assumptions. Demand for working hours must be largely fixed; work must be easily divisible; and the work of one person must be a close substitute for the work of another person. When these conditions hold, an employer will be indifferent between employing A for 40 hours, or employing A and B for 20 hours each. But when the conditions are violated, then work-sharing imposes additional costs per working hour, and the quantity of hours demanded can decrease – the ‘scale effect’.
The second and third assumptions attributed by Niemietz to the case for work-sharing are gratuitous. Work is divisible and workers are substitutable for one another in principle. What Niemietz is indirectly getting at with his two extra assumptions is the idea that reducing the hours of work will necessarily increase labour costs. That conviction is based on the unstated assumption that current arrangements of working time are optimal or at least closer to optimal than would be a more evenly-distributed arrangement of hours. He presents no evidence to support his optimistic assessment of the status quo.

Niemietz's polemic thus boils down to two disconnected assertions about what advocates believe, and the optimality of current arrangements, for which he presents no evidence. As Daniel Kinderman (2001) has pointed out, the "fixed amount" in the generic fallacy claim could represent either a "floor" or a "ceiling." Niemietz relies on a "floor" explanation: higher labour costs will reduce the demand for labour below what it would otherwise be (the floor) . Other versions of the fallacy myth use a "ceiling" argument, in which advocates of shorter work time are alleged to neglect the long-term job creation prospects of economic growth.

There are numerous explanations of the supposed fallacy. Each begins with a plausible molehill of analysis and inflates it into a mountain of dogma. Tucked in behind that surfeit of rationales is a set of propositions that are typically left unstated in current polemics. Unlike the fallacy claim, these propositions are not conjecture; there are more than enough documented affirmations of them to piece together a representative profile – which turns out to be a mirror image of the case for work time reduction. They are the assumption that, if true (but only if true), would vindicate the claim that the case for work-sharing is based on the assumption of a fixed amount of work:
  • the economy does self-adjust to achieve the best of all possible worlds (or, if it doesn't, the proper role of governments and central banks is limited to stimulating growth and controlling inflation);
  • there are no physical constraints on the sustainable consumption of natural resources;
  • unemployment and overwork are the "revealed preferences" or income/leisure choice of individuals; and, finally,
  • any policy interference with the optimizing, self-adjusting process of market choice (other than stimulating growth and controlling inflation) can only make things worse.

Part III

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