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A Proposal for Work Sharing to Lick Unemployment

by William McGaughey

 

The voters have spoken in the 2010 mid-term elections. They want jobs and they want moderation in stimulus spending so as not to increase the deficit. But we do not have enough jobs. This is not a cyclical recession that will self-correct. Large business organizations are sitting on piles of money, afraid to hire.

There’s a way to light a fire under these employers, create many American jobs fast, and not run up the debt. It’s called “work sharing”.

The German government is doing this effectively. The German “Kurzarbeit” program encourages employers to cut the work week while allowing hourly wages to remain the same. It reimburses employees at 60% of lost wages when hours are reduced by 10 percent or more.

It is reported that this approach costs one seventieth as much as a job created through stimulus spending. Germany’s unemployment rate in October 2010 was 7.5%. It has come down substantially over the past five years.

There’s a quick and dirty way to achieve the same result in the United States - without spending any taxpayer money. That would be to amend the Fair Labor Standards Act and have the new provisions remain in effect so long as the national unemployment rate is 6 percent or higher. The proposed changes would be as follows:

1. The standard workweek under FLSA would be reduced from forty hours to thirty-two hours per week, effectively creating a four-day workweek.

2. The employee would not receive money from the extra half-time premium which is earned for working hours beyond the standard. Instead, it would go to the federal government. In other words, this perverse incentive for employees to work longer hours would be taxed away.

3. The money collected by the federal government from the half-time overtime premium would go into a fund which would be used to supplement workers’ lost wages from the shortened weekly hours.

4. The exemption for managerial and professional employees would be substantially curtailed - perhaps, restricted to the top person in the firm. Self-employed persons would continue to be exempt.

If the unemployment rate drops to 6 percent or less, then we could go back to a forty-hour workweek. But maybe Americans would want the shorter work hours to remain, especially if market forces drive up the rate of hourly wages by the law of supply and demand and consumer confidence returns.

Shorter work hours have traditionally been a way to keep employment stable as labor productivity steadily improves. In contrast with most other industrialized nations, the United States has lately refused to consider that policy. The chickens have come home to roost. Today’s unemployment is partly a result of the failure to reduce work hours after many years of cumulative increases in labor efficiency due to investments in technology.

During the 1956 national campaign, Vice President Richard Nixon, a Republican, spoke of the day, “not too far distant”, when Americans would be working only four days a week and “family life will be even more fully enjoyed by every American.” In 1979 and again in 1982, Rep. John Conyers, a Democrat, introduced bills in Congress to shorten the workweek by amending the Fair Labor Standards Act to create a 32-hour standard. Sen. Eugene McCarthy, also a Democrat, who once chaired the Senate Special Committee on Unemployment, made this proposal the focus of his later political campaigns.

Perhaps this approach is something that might enjoy bipartisan support if we could get beyond the ideological rhetoric. It’s not unlike the 19th Century proposal for the eight-hour day. Let’s move forward once again.

 

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