Leisure vs. Worklessness

by Reihan Salam

There is another aspect of Scott Winship’s new Breakthrough Journal essay that merits discussion — please forgive the long excerpt:

As living standards rise, workers might choose to continue putting in the same amount of work and reaping higher incomes, but more likely they will choose to cut back their work hours. Doing so would be consistent with the steady increase in leisure time enjoyed by American workers over the last century. Nobel laureate Robert Fogel projects that the decline in hours worked in the 45 years from 1995 to 2040 will exceed in percentage terms the decline over the 115 years from 1880 to 1995.15 Based on historical patterns, he projects a 30-hour workweek in 2040 and continued declines in the typical retirement age. Writing in 2000, he noted that the fraction of American men aged 60 to 64 that were in the labor force had declined from close to 100 percent in 1880 to 50 percent.

Unlike men, women have increased their paid work hours dramatically, but because their unpaid time doing housework has declined more, their leisure time, too, has risen. Growing demand for leisure and family time, as evidenced by increasingly widespread concerns over work-family balance, suggests that work hours might be on the verge of declining among men and women alike.

Of course, not every worker cuts back his or her hours voluntarily, and the slow recovery of labor markets since the Great Recession has heightened long-standing fears that technological change might throw increasingly large numbers of people out of work. This is the theme of the recent book Race Against the Machine, by economists Erik Brynjolfsson and Andrew McAfee. Fears of mass technological unemployment, as Brynjolfsson and McAfee acknowledge, have existed alongside technological development since at least the time of John Maynard Keynes, but they have not materialized. However, even if technological unemployment were to substantially increase the jobless ranks, as Brynjolfsson and McAfee fear, the economy might increasingly be rich enough that we can easily afford expanded safety nets. Arguably, that is what we are already seeing in the rising number of working-age men receiving federal disability payments. We may have reached a point where living standards are high enough that disability benefits, which are tied to earnings levels, can afford less-skilled men a comfortable (if not luxurious) lifestyle, at least when combined with other income sources.

A rich society with an underclass of financially comfortable unemployables supported by an overclass of highly skilled analysts and a resentful middle class is an unattractive future. But there is no reason that even this worst-case scenario must come to pass. Work-sharing arrangements used by European nations and a number of US states during the recession show how the cost of falling demand for labor can be distributed broadly in the form of reduced hours for multiple workers, rather than landing entirely on the worker who would be laid off. Growing affluence might eventually facilitate a costless version of work sharing, allowing even part-time work to sustain less-skilled workers comfortably. [Emphasis added]

This is an incredibly rich passage, and it brings to mind Matt Yglesias’s recent discussion of cap-and-dividend:

Consequently, the GDP impact of cap-and-dividend is going to look much worse than the GDP impact of a program where the revenue is used to finance an offsetting payroll tax cut. But that’s not exactly because cap-and-dividend is wreaking havoc with the core drivers of prosperity. Rather, America would become a bit more like a northern European country. Our output-per-hour-worked would rise (because low productivity workers would disproportionately shed hours) and on average people would have somewhat fewer material goods (most visible in Europeans’ small houses and cars) and more leisure time. [Emphasis added]

These are the kinds of questions large absolute annual income gains will force us to confront — though the fact that relative gains aren’t as high as we might like them to be means that increases in transfers will be fraught with controversy, the phenomenon of low productivity workers shedding hours as their labor market position deteriorates has been met with a largely undiscussed expansion of the disability rolls that represents a background social transformation of many American communities that looks very different than European worklessness, for complicated, interrelated reasons. Coupled with the incarceration boom, the disability boom is an important part of the economic and social divergence between skilled regions and less-skilled regions, only this divergence operates at the micro level of neighborhoods and Census tracts rather than metropolitan areas. (It is interesting to think about how wage floors might interact with this changing landscape.)

One can understand Scott’s prescription of more and better redistribution to the poorest households as primarily being about breaking the isolation of those living in environments defined by concentrated worklessness and poverty. Though I tend to favor better redistribution rather than more redistribution, I think Scott is thinking about the right set of problems. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.