Americans Work Too Long for Too Little

David Rosen

American workers annually work more hours than workers in any other post-industrial, “1^st world,” country.  In 2014, an average American worked 1,789 hours per year or 34.4 hours per week, placing the U.S. at 17^th in the OECD’s list of developed countries; German workers rank 1^st in terms of the lowest total annual hours worked, nearly one-quarter less per year at 1,371 hours or 26.4 hours per week.

In the 2016 presidential campaign, job growth and the minimum wage are major issues, but job satisfaction and the workweek are non-issues.  Many Americans feel they are living in desperate times and it seems better to have no job than one that doesn’t pay a living wage or is fulfilling.  While the official unemployment rate is slowly falling,those no longer looking for work are increasing and wages remain stagnant.

In the seven decades since the end of World War II, the U.S. has lived two lives.  The first life occurred during the postwar era of recovery and prosperity popularly known as the “American Century” that lasted from 1945 to the mid-1970s; it is the era that Trump invokes when he opines about “Making American Great Again.”  The second phase evolved from the mid-‘70s through today and is marked to the eclipse of the short-lived “American Century.”

The decline in the quality of working life during the last seven decades is revealed by examining four key factors: (i) changes in the length of the workweek, (ii) productivity gains, (iii) wage stagnation and (iv) the rise of personal debt.  Together, they suggest a modest – if fundamental – way to begin to address the problem.  One suggestion is to drastically cut the workweek while maintaining current wages.

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For many Americans, the 40-hour workweek remains the labor standard.  According to the St. Louis Federal Reserve, at the beginning of the post-WW-II recover, in December 1945, manufacturing workers worked 41.2 hours per week; seven decades later, in December 2015, little changed for manufacturing workers who worked on average 41.7 hours per week.  However, as the Fed makes clear, total workweek hours for all private sector workers declined by nearly a quarter to 33.8 hours.

The average workweek means little in itself, but its value comes in terms of two decisive factors, productivity and compensation.  A 2015 study by the Economic Policy Institute (EPI) found that while “net productivity of the total economy” for the period 1948 to 2014 grew by a staggering 238.7 percent, the “average hourly compensation of production/nonsupervisory workers in the private sector” grew by only 109 percent.

The EPI broke up this past seven-decade period into two subsets and assessed compensation and productivity accordingly: (i) 1948-1973: productivity increased by 96.7 percent an hourly compensation by 91.2 percent; and (ii) 1973-2014: productivity grew by 72.2 percent and hourly compensation increased by only 9.2 percent, a 90 percent decline.  It found that during the postwar era of the American Dream, from 1948 to 1973, ”the hourly compensation of a typical worker essentially grew in tandem with productivity ….”  However, in the four decades following 1973, productivity continued to rise but wages stagnated.

During this long postwar era, as the St. Louis Fed detailed in a 2012 report, consumer spending ceaselessly grew as a proportion of GDP:

* 1951-1960 = 62.3%

* 1961-1970 = 61.8%

* 1971-1980 = 62.5%

* 1981-1990 = 64.5%

* 1991-2000 = 67.3%

* 2001-2010 = 70.0%

In conclusion it warned:  “Can American consumers continue to serve as the engine of U.S. and global economic growth as the did during the recent decades?  Several powerful trends suggest not, at least for a while.”

How was consumer spending able to increase while wages stagnated?  The magic of postwar American life was debt.  Secured installment loans, including mortgages and car loans, predated the war; unsecured loans, including credit cards, student loans, paydays loans and lines of credit, followed.  And debt skyrocketed by nearly 65 fold; between 1952 and 2015, per person debt jumped from $160 to $10,600 – and this was during a period when the U.S. population only basically doubled from 156 million (1952) to 319 million people (2015).

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In 1930, the British economist, John Maynard Keynes, predicted that within 100 years, the average workweek would drop to only 15 hours.  His forecast was based on a projection of a modest global economic growth of about 2 percent per year.  According to one scholar, Keynes believed that “in a world with so much wealth, we would naturally choose to increase our leisure time rather than simply accumulate additional wealth.”

Capitalism outsmarted Keynes.  While economic growth exceeded Keynes’ modest proposal, it fostered a postwar world in which people in the U.S. were seduced by all the sexiness, glitter and false consciousness of consumerism.  And while wages stagnated, people were enslaved by ever-mounting debt.  The year 2030 is only 14 years away, but it does not look like the 15-hour workweek is in anyone’s future.

It’s time to readjust the traditional relations between productivity, the workweek and wages.  In 2000, Eric Rauch wrote, “An average worker needs to work a mere 11 hours per week to produce as much as one working 40 hours per week in 1950.”  He adds: “if productivity means anything at all, a worker should be able to earn the same standard of living as a 1950 worker in only 11 hours per week.”

Globalization is restructuring capitalism and, with it, the U.S. economy.  It is fueling the rise of inequality, refashioning social relations and increasing the wealth and power of the 1 percent.  It is also transforming work-life.

So why not rethink the relation between the workweek and compensation?  The push for the $15 per hour minimum wage is a noble effort, one that brings real benefits to the lowest sector the working class.  Switzerland failed effort to provide a basic income of about $2,500 a month (2500 Swiss Francs) suggests a new way to think about income; Andy Stern, the former SEIU president, recently suggested a U.S. version, but for about $1,000.

While well intentioned, these proposals don’t go far enough.  One way to secure the benefits of the enormous productivity gains that have taken place since 1975 is to cut the workweek without cutting wages.  For example, what if manufacturing workers currently (2015) working 41.7 hours per week had their workweek cut to, for example, 20 to 25 hours but kept the same salary?; similarly, what if private sector workers working 33.8 hours could have their workweek cut to 15 to 18 hours at the same salary?  The business sector could take full advantage of productivity gains without having to increase wage expenses.

Such a scheme is, of course, utopian – and intentionally so.  But maybe that’s what’s needed in a time marked by dire predictions as to the nation’s economic future and the lack of real political imagination.