In 1840, the average workweek was estimated at 69 hours in England, 78 hours in France and the United States, and 83 hours in Germany. Today, we see a huge decrease in workweek hours which leads us to question that what factors have led to a decrease in workweek hours while increasing the real wage. In a competitive economy, there is an increase in real wages due to the individual efforts of employers in order to secure maximum return. Can the same optimistic result be predicted if the work hours are reduced?
High unemployment levels combined with changes in the composition of the labour force and evolving societal expectations work have provided a strong drive to the reconsideration of traditional working hours. Unions are placing significant emphasis on a decrease in working hours. Measures proposed to achieve a reduction working hours fall into two categories: decreasing annual working time through a reduction in weekly hours of work, a restriction in overtime and an extension of annual vacations, all aimed at increasing the number of jobs available; and shortening the total working life through early retirement schemes aimed at reducing the size of the labour force.
One major force behind the shorter hours is argued to be the union organizations. Through bargaining power, unions can obtain shorter hours of work with undiminished money earnings. However, this will only create a general rise in unit labour costs and prices throughout the economy. Moreover, decreasing hours of work will diminish the total aggregate of real output unless compensated by increased labour effort. Thus, decrease in production and an increase in prices will reduce labour's real wage.
It is commonly believed that by decreasing work hours, unemployment will be reduced. However, this is not necessarily true for the following four reasons:
1. If the basic wage rates are unchanged (labour is willing to accept a decrease in wage), unit costs are likely to rise if the workweek is shortened. This will be result of multiple factors including: training personnel, technical difficulties of work sharing, shortages of key skills, and additional supervision to just name a few.
2. Labour's demand on the other hand involves less hours with no loss of take-home pay. Employers are likely to react to such major cost increases as they would to any increase in marginal cost. When the prices rise, demand will decrease leading to a new equilibrium at a lower point. Since the new equilibrium is at a higher unit price for labour, there is no incentive to hire any additional labour. Thus, if the demand curve for labour has elasticity of one or greater, then the re-employment objective of the shorter-hour movement must fail.
3. Often unemployment is targets the unskilled, the young, and the minority groups. Employing individuals in these categories will require a great deal of training and education. Therefore, decreasing hours will not solve the problem of unemployment unless it is accompanied by an extraordinarily successful restraining and integrative program. Realistically, the cost of these programs plus the increase of shorter weeks will most likely discourage employment.
4. Reduction of work hours will most likely have no effect on unemployment that is a result of technological advancement and/or automation. Although automation and technological advancement have caused a series of unemployment, they have also created different jobs and built new industries at the same time. Therefore, the effect of these technological advancements varies greatly from industry to industry and even from one labour force group to another, making some industries more heavily automated than others. A general reduction in work hours will therefore affect all industries (both heavily automated and lightly automated industries). This would either be a bonus or a threat to the employed.
Another reason for the decrease in hours and increase in real wage is believed to be the advancement in labour saving machinery and also the improvement of production methods. This enabled the worker to produce more goods in a shorter time period.
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