Vacation: The Key To Economic Recovery?

Vacation: The Key To Economic Recovery?

Mark Engler: Vacation and Economic Recovery

In a blog post a few weeks ago I mentioned ?Take Back Your Time Day.? The idea behind this alternative holiday, which falls on October 24, is to highlight the fact that, since the 1970s, Americans have been working ever-longer hours on the job, especially relative to other advanced industrial countries. Come October 24, if our country?s workload were on par with the rest of the industrialized world, you would have the rest of the year off.

Now economist Juliet Schor, a thinker at the forefront of the ?Take Back Your Time? movement, has written a piece for the Nation suggesting that more vacation time may in fact be critical for an economic recovery. Here?s the gist:

The industrialized economies have followed the path of hours reductions since the late nineteenth century. A sizable portion of productivity growth was used to increase leisure time, and between 1870 and 1970 annual working hours in most Western countries fell from 3,000 hours to fewer than 2,000. This history reveals that workers who lost their jobs to technological change and industrial restructuring were reabsorbed into the labor market by a combination of economic growth and falling hours. In most European countries this process has continued, and Germany is notable for containing unemployment resulting from the global collapse by reducing hours. Here in the United States the mainstream economic discourse has essentially banned hours reduction from the conversation.

The United States has been an outlier, as in the 1970s per capita annual hours of work started to diverge from this historic pattern. Americans began to work more, not less, with the average worker putting in 204 more hours in 2006 than in 1973. A combination of high benefits costs (especially for health insurance), weak unions and a slack labor market leading to longer schedules. In the earlier period, when hours were falling, productivity growth was partly passed on as a shorter workweek. When that stopped, one result was that a rising level of GDP was required to produce each job. The average German worker now labors 350 fewer hours per year than his or her US counterpart, as does the average worker in the Netherlands and Norway. The gap with France and Italy is 200 hours. In other words, to employ an American worker, in comparison to a European, 15 percent to 25 percent more hours of work have to be created.

As Schor mentions, Europe has been way ahead of us in using work-sharing programs to soften the economic downturn. As part of the response to the crisis in Germany, a short-work program has been introduced to quell unemployment. The short-work program is a state-sponsored reduced workweek (involving four, or sometimes three work days per week) in which German companies facing financial woes can participate. It allows them to reduce working hours and prevent layoffs. The German government, for its part, provides a subsidy to the employees of the companies so that they can continue to earn a full income despite working less. As reporter Ilya Rzhevskiy points out, the benefits to the reduced week program are wide-ranging:

The company achieves the goal of saving on employee expenses without the need to cut staff. The government keeps the unemployment rate low. The employees get to keep their jobs, earn a full income, and also have more free time.

Different versions of work-sharing programs have been in effect in Germany since the 1970s, but the idea has taken on a new level of importance during the global recession. The New York Times? ?Economix? blog has cited it as one of ?Germany?s Secrets for a Steadier Job Market.? Work-sharing programs have been implemented in many other countries as well, from Western European states such as France, Belgium, and the Netherlands to Latin America nations such as Chile, Costa Rica, and Uruguay.

Schor writes about some of the potential benefits?economic and ecological–of importing this to the United States:

After the economic collapse, some companies did use work-sharing and furloughs to minimize layoffs, but there seems to be little momentum to expand those programs or refashion them for use during a recovery. It’s a cause progressives should take up, by advocating the conversion of involuntary share-the-pain measures into desirable workplace benefits. Four-day workweeks have been very popular. New employees can be hired on 80 percent schedules, a policy the Netherlands used to contain unemployment in the 1980s. Survey evidence and the basic maxims of behavioral economics find that people strongly prefer to gain free time at the expense of income they haven’t yet received (i.e., future raises) over taking cuts in current paychecks.

Rather than letting hours rise as the economy grows, the green progressive solution will be to use productivity growth to create more time off from the job while keeping pay stable after inflation, at least for higher-paid workers. (Lower-paid workers should get increases and time off, to redress inequality.) There are a number of carrots that governments can use to get us onto this path, such as tax credits, partial-unemployment insurance and subsidies. This will allow our carbon footprint to shrink much faster, because of the additional spending that is not injected into the economy and because as people have more free time, they shift to lower-impact modes of transportation and consumption.

Schor rightly includes the caveat that, when implementing something like this in the U.S., there needs to be some attention devoted to those at the lower end of the job spectrum. For people who don?t have living wage jobs, receiving more time off and less income is simply not viable, even if the increased-leisure-time part of the equation sounds good. But there are time-off proposals that do have clearly progressive effects. One of them is a plan currently being promoted by the Drum Major Institute (DMI) and the Progressive States Network encouraging states to require companies to provide paid sick leave for their employees. In an op-ed for the Providence Journal Amy Traub and Nathan Newman note that a shockingly large percentage of the private-sector workforce does not have the ability to call in sick to work without losing a day?s pay, even if they have a visibly nasty case of the swine flu. Thus, unless they have extra money to burn, they must clock in and risk infecting their co-workers?something that is hardly a boon to our economy.

As an example of paid sick leave done right, Traub and Newman cite a program implemented in San Francisco, which granted vacation days and paid sick time-off and did not harm job growth. According to DMI, the San Francisco Chamber of Commerce recently told The Wall Street Journal that paid sick leave had not been a major problem for businesses. Traub and Newman write:

In the first year after San Francisco implemented its law, job growth remained strong, especially compared with surrounding counties that did not guarantee paid sick time. Once the recession hit, the entire country suffered rising unemployment, yet San Francisco still fared better than the counties around it?or many other cities that failed to guarantee workers? time off for illness. Although we can?t infer that guaranteeing paid sick time actually increases economic growth, there?s no evidence that it harms employment.

Could the economic crisis have a silver lining if it leads us toward a saner balance between work and home life? I’m not going to romanticize unemployment or the real pain caused by economic recession. After all, Wall Street speculators have a way of making sure that working people bear the brunt of the burden for their mishaps. But I do think there’s a point here worth noting: Economic growth is not the same as happiness, and GDP is a very poor measure of social wellbeing. Frenzied boom times can mean that people feel compelled to work harder and longer–and even then, increases in real wages can be slim for those not at the top.

In contrast, while they?re not fun to live through, economic crises can be an opportunity for us to rethink what we really want out of the economy: More living wage jobs, yes. Endless hours toiling in the shop or at the office, no.

Socialist thought provides us with an imaginative and moral horizon.

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