By Stan Siebert, Professor of Labour Economics
Department of Management
Imagine Joe, a carpenter in a small furniture-making business. Joe is paid by the hour, and often works overtime because he is paying off the mortgage. On top of his basic 38 hours, he puts in about 5 hours a week overtime, at time-and-a-half pay. His partner, Mary, also works in the business, as an accounts clerk, most evenings taking home papers to analyse on her pc. These extra hours cannot be monitored, and in any case are unpaid because she is salaried. She is on the management track and accepts the need to put in the extra hours to secure her promotion.
Now imagine that Labour’s 4-day working week becomes a reality. A Commission on Working Hours is established, as called for by the New Economics Foundation Time for Demand set up by John McDonnell, Labour’s shadow chancellor. The Commission informs Joe’s company that workers can no longer work more than 32 hours per week (4 days). The company is not allowed to reduce Joe’s weekly basic pay, so he is as well off as before prior to overtime, but loses all his overtime pay. He is then nearly 20% worse off financially.
However, Mary’s overtime cannot be monitored. Her income is not reduced, and she can continue to impress the company with her diligence. Over the next few years, she gets ahead and becomes a director.
For Joe, difficult decisions must be made. Initially, more carpenters are hired to make up for the restricted hours – “spreading the work” as advocates say. But in time, because of the disruption caused by the Commission on Working Hours, most employees are replaced by CNC machinery. The statistics record this move as “raising productivity”. But jobs are lost. Joe in fact decides to leave the company’s employment, and become a self-employed contractor. He now lacks job security, but at least he has a white van and can work as many hours as he wants.
This story illustrates how working hours restrictions bear most on hourly-paid workers, who generally become yet poorer. Also, their choices are frustrated. The salaried, professionals and managerials continue to work as before, and get ahead. They become relatively better off. Is this what we want?
While we all suffer job stress from time to time, fundamentally jobs are happiness. Becoming unemployed causes great unhappiness as Warwick’s Andrew Oswald has shown in his research, and so also does job insecurity.
The UK labour market offers a rich mix of part-time and full-time jobs, so that people can find what suits them, eventually, so long as the jobs are there. In fact, the latest research Blanchflower shows that about 10% of UK workers want to work more hours at their going wage rates, and 10% want to work fewer. Hence about 80% of the workforce are satisfied, and the remainder are looking for more or less hours, as one would expect in a free labour market.
On this evidence, a blanket push towards shorter hours would help some and hurt exactly as many others. The fact that the people being left in an unstable position will be the hourly paid and poorer workers is an additional worry.
The issue is the use of hourly and other precarious contracts of employment that leaves workers in insecure and often underpaid positions that forces them to depend on overtime.Whilst this is often the reality, I think it is problematic when workers treat overtime pay as basic pay.
The article does little to address the benefits of a reduced work week e.g. the benefits to mental and physical health and the positive effect on productivity, the reduction in worker absenteeism, the reduction in worker commute times per week, the increase in worker free-time. Instead the author looks at this in black and white terms I.e. having a job is happiness and not having a job is unhappiness.