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do make these assumptions. Suppose we do assume that the right
number of additional workers of each skill is available, and that the
new workers do not raise production costs. What will be the result of
reducing the working week from forty hours to thirty (without any
increase in hourly pay)?
Though more workers will be employed, each will be working fewer
hours, and there will, therefore, be no net increase in man-hours. It is
unlikely that there will be any significant increase in production. Total
payrolls and “purchasing power” will be no larger. All that will have
happened, even under the most favorable assumptions (which would
seldom be realized) is that the workers previously employed will subsi-
dize, in effect, the workers previously unemployed. For in order that
the new workers will individually receive three-fourths as many dollars
a week as the old workers used to receive, the old workers will them-
selves now individually receive only three-fourths as many dollars a
week as previously. It is true that the old workers will now work fewer
hours; but this purchase of more leisure at a high price is presumably
not a decision they have made for its own sake: it is a sacrifice made to
provide
others
with jobs.
The labor union leaders who demand shorter weeks to “spread the
work” usually recognize this, and therefore they put the proposal for-
ward in a form in which everyone is supposed to eat his cake and have
it too. Reduce the working week from forty hours to thirty, they tell
us, to provide more jobs; but compensate for the shorter week by
increasing
the hourly rate of pay by 33
3
¼
4
percent. The workers
employed, say, were previously getting an average of $40 a week for
forty hours work; in order that they may still get $40 for only thirty
hours work, the hourly rate of pay must be advanced to an average of
$1.33
1
¼
3
.
What would be the consequences of such a plan? The first and
most obvious consequence would be to raise costs of production. If
we assume that the workers, when previously employed for forty
hours, were getting less than the level of production costs, prices, and
profits made possible, then they could have got the hourly increase
without
reducing the length of the working week. They could, in other
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words, have worked the same number of hours and got their total
weekly incomes
increased by one-third,
instead of merely getting, as they
are under the new thirty-hour week, the same weekly income as
before. But if, under the forty-hour week, the workers were already
getting as high a wage as the level of production costs and prices
made possible (and the very unemployment they are trying to cure
may be a sign that they were already getting even more than this), then
the increase in production costs as a result of the 33
3
¼
4
percent
increase in hourly wage rates will be much greater than the existing
state of prices, production, and costs can stand.
The result of the higher wage rate, therefore, will be a much greater
unemployment than before. The least efficient firms will be thrown out
of business, and the least efficient workers will be thrown out of jobs.
Production will be reduced all around the circle. Higher production
costs and scarcer supplies will tend to raise prices, so that workers can
buy less with the same dollar wages; on the other hand, the increased
unemployment will shrink demand and hence tend to lower prices.
What ultimately happens to the prices of goods will depend upon what
monetary policies are then followed. But if a policy of monetary infla-
tion is pursued, to enable prices to rise so that the increased hourly
wages can be paid, this will merely be a disguised way of reducing
real
wage rates, so that these will return, in terms of the amount of goods
they can purchase, to the same real rate as before. The result would
then be the same as if the working week had been reduced
without
an
increase in hourly wage rates. And the results of that have already been
discussed.
The spread-the-work schemes, in brief, rest on the same sort of
illusion that we have been considering. The people who support such
schemes think only of the employment they would provide for partic-
ular persons or groups; they do not stop to consider what their whole
effect would be on everybody.
The spread-the-work schemes rest also, as we began by pointing
out, on the false assumption that there is just a fixed amount of work
to be done. There could be no greater fallacy. There is no limit to the
amount of work to be done as long as any human need or wish that
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work could fill remains unsatisfied. In a modern exchange economy,
the most work will be done when prices, costs, and wages are in the
best relations to each other. What these relations are we shall later
consider.
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