Henry Hazlett's Economics in One Lesson, chp 8, Spread the Work schemes, pg 48:
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.
Shouldn't that paragraph read:
For in order that the new workers will individually receive one-fourth 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.
The preceding narrative talks about the number of man hours remaining the same from before the work is spread to afterwards.
Seems like one for the errata, to me. But perhaps I'm missing something.
Wha? Why would the old workers receive only one-fourth of the dollars when they are working three-fourths of the time...and there is no change in wages?
His statement is correct.
Assuming the man hours originally worked were 40 and that doesn't change with the introduction of a new worker.
If the new worker works 30 hours(three fourths) and the old worker also works 30 hours((three fourths)).... that equals 60 man hours, not 40.
"We assume that the working week is cut from forty hours to thirty, with no change 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."
?
Perhaps you're thinking the ratio has to be 1:1? What makes you think the workforce would double? He's simply saying "cut the workweek by 10 hours." If you cut out one-quarter of the time worked, you end up needing to hire a new worker for every three workers you currently have, just to get the same number of man hours. (And of course Hazlitt is detailed enough to recognize that you have to assume "that the right number of additional workers of each skill is available, and that the new workers do not raise production costs.")
He's illustrating the fallacy behind the idea that it is good/useful to cut worker hours so that you need to hire more people. There may be more people working (i.e. employed) but that doesn't change productivity (i.e. total hours worked)...
"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 he realized) is that the workers previously employed will subsidize, 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 themselves now individually receive only three-fourths as many dollars a week as previously."
In other words, you and your two friends each used to work 40 hours per week, and make $400 each. But now you each only work 30 hours per week (and therefore earn only $300), so that a new guy can have a job working that same 30 hours, making that same $300.
The employer is still getting 120 hours of labor, and paying $1200 for it. It's just that now it's split among four guys instead of three. You and your two friends are in effect subsidizing the fourth man.
Hazlitt closes with the observation:
"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."
Coo?
Ah, I see where the problem is.
In your example you say the number of hours worked will amount to 120. That is clearly more hours than the original 40 man hours worked. I was thinking the 40 wouldn't increase as the total number of man hours required to be worked.
When Hazlett says 'there will be no net increase in man hours,' I understood that to be mean the original 40 hours would not increase and therefore whatever hours were reduced from the old workers would be made up by the new workers joining the team. i.e. if the old worker(it happens sometimes that you get one employee. add one worker and you have doubled the work force) had his week cut by 10 hours to 30 hours, any new workers would be making up the remaning 10 hours to reach the 40 man hours.
Maybe I just don't understand the word 'net' in that paragraph, in that case.
As this is described by Hazlett as a spread-the-work scheme, my assumption was that the employer, in his example, had no desire to increase the total number of hours worked.... only the number of workers, in order to satisfy the new laws.
jimaustri123:In your example you say the number of hours worked will amount to 120. That is clearly more hours than the original 40 man hours worked.
Wha? No it isn't. If three guys work on a job for 1 hour....that's 3 man hours. Do you understand this? You're focused on this "40 hours" as if that's all the hours that get logged at the business. This is not the case. The total man hours worked per week = hours in a full time workweek * number of workers. (Assuming all workers are full time).
The whole point is that EACH MAN WORKS 40 HOURS PER WEEK. Do you get it? EACH MAN. This means that if there is more than one single guy working in the factory, then there will necessarily be more than just 40 man hours logged in the business. If two guys are working a full week, that's 80 man hours. If there are three employees, that's 120 hours. If there are 40 guys working, that's 1600 man hours per week.
Do you understand?
Hazlitt is saying "what happens if you decrease the workweek to 30 hours, in order that you can hire new full time workers"...as in everyone works the same number of hours per week.
You are assuming that an old worker drops down to 30 hours and someone new else comes in to just work 10 hours per week. What good is that? Part time workers are always counted as "unemployed" if they would prefer to be working full time anyway...so this does not help the "unemployment" problem.
The idea is to decrease the number of hours in a "full time" workweek, so that more people can be hired at full time, and earning the same money. If some people get to work more hours than others (and therefore make more money than others) you'll have people complaining that the scheme still isn't fair, and the part time workers are still basically unemployed...or at least "underemployed." The whole purpose of the scheme is to "spread the work". If egalitarian sensibilities is what's getting you to spread the work in the first place, why the hell wouldn't you be spreading it evenly?
Do you understand this now?
This is correct. And the total number of hours worked DOES NOT CHANGE. Do you get this yet?
In the original scenario...picture you have three employees. All working full time. Full time means 40 hours per week. THIS DOES NOT MEAN THAT THERE ARE ONLY 40 HOURS WORKED AT THE BUSINESS. When you work full time at a business...how many hours do YOU work? Do you work 40 hours yourself? Or do you only work the number of hours needed to get the combined total of work hours put in by all the employees to equal 40 hours in a week?
The way you are calculating this, if a business has 100 employees, each employee only has to work 24 minutes per week. That will give us the "40 hours per week." Do you see the problem here?
So three employees, EACH WORKING 40 hours in a week...would equal 120 man hours at the business per week. Understand? The employee workweek is 40 hours. You multiply the number of full time employees, by 40 to get the total number of man hours logged at the business per week.
In Hazlitt's scenario, he is asking what happens if everyone's workweek is dropped to 30 hours. ALL THREE EMPLOYEES now work 30 hours EACH. This would mean the total number of man hours logged at the business per week would go down (as would the cost of the business's labor inputs...because you're paying less in total wage). HOWEVER...the whole purpose of the scheme is to hire more workers. So the money that is saved on the wages of the three original employees who are now working fewer hours, is used to hire a NEW full time worker, at the SAME 30 hours per week as all the other employees.
This means that the total wages does not change, nor does the total man hours change, but there are now FOUR people employed at the business instead of the original three.
Do you get it? The work that used to be done by three people is now spread among FOUR.
Thus, all employees earn three-fourths of the original wage. Or, "the new workers will individually receive three-fourths as many dollars a week as the old workers used to receive, the old workers will themselves now individually receive only three-fourths as many dollars a week as previously."
Understand now?
John James is it really necessary to be so condescending?
Sorry if you felt I was being that way. I take it this means you get it now?