Working Harder Makes Your Boss Richer

Recently, Republican presidential candidate Jeb Bush remarked that in order for the economy to grow, “people should work longer hours.” Bush’s comment was intended to describe how the sluggish growth in the U.S. economy could be fixed. If people simply worked harder, the economy would be in better shape. This is the sort of bootstrapping myth that the right-wing usually applies to poor individuals generalized to the economy as a whole. As can be expected, taking an economic myth on the individual scale and generalizing it the national economy doesn’t magically make it true. Let’s take a look at the facts. 

In 1950, the average workweek per worker was between 37 hours and 42 hours a week. The discrepancy comes from how the numbers are calculated. In spite of this, a very simple trend is observed: work hours per week from the nineteenth century to the mid-twentieth century declined. We can attribute this mostly to the mass workers’ struggles for a 5-day workweek and other important social movements.

By 2014, the average workweek for full time workers was 46.7 hours a week.  50 percent of Americans who work full time report working more than 40 hours a week.  What caused this upwards trend in the workweek?

There have been 3 fundamental structural changes in the workforce since 1950 relevant to our topic. The first is those who work full-time today work more hours per week than their 1950s counterparts. The second is that the ratio of part-time to full-time workers has increased over time. And thirdly, the percentage of the population participating in the labor force has declined over time. How are these phenomena related? Let’s take a closer look.

1. Productivity Through the Roof

These trends are incomprehensible unless we look at them through the lens of rising productivity of labor. Productivity is roughly measured by counting the output per hour that a worker produces given the same level of input. For example: A worker in 1950 produces 100 widgets per 40 hours a week. Today, a worker produces 400 widgets per 40 hours a week. We can then say that the worker today produces 4 times as much output. In other words, today’s worker is 400% more productive than a worker in 1950.

These numbers were not randomly chosen. According to the Bureau of Labor Statistics (BLS), American workers are on average 400% more productive than they were in 1947. Changes in productivity can be largely attributed to application of new technologies (think computers, mechanization of labor, automation, etc.), different workplace organizational techniques (further division of labor, different management techniques, etc.), and other methods. The following chart compares the level of productivity to employment from 1947 to 2011. I’ll return to the employment side of things in a bit.

Source: http://www.nytimes.com/2012/12/12/opinion/global/jobs-productivity-and-the-great-decoupling.html

At the same time, wages have not kept pace with productivity increases. As the following chart shows, hourly compensation for labor roughly kept pace with increases in productivity from the 1950s to 1970. From 1970 to present, productivity has skyrocketed while wages have stagnated.

Source: http://www.outsidethebeltway.com/wp-content/uploads/2012/07/wages-productivity-Figure-A.png

2. Working More and Making Less

As we have seen, productivity is through the roof and wages have not kept up. The number of hours full-time workers (i.e. those working more than 35 hours a week) have has increased. In addition to all this, real wages have stagnated.

Real wages are wages that have been adjusted for inflation by measuring the amount of goods and services a given amount of dollars can buy.  Real wages can decrease if wages do not keep up with inflation.  When workers pushing for a minimum wage of $15 an hour today say that the minimum wage has not kept up with inflation, they mean that the current minimum wage does not have the same purchasing power as the minimum wage in 1970 or earlier did.  The BLS calculates purchasing power by estimating how many goods a given amount of dollars can purchase on the Consumer Price Index (CPI). For more information of that, see this website.

For now, it’s just relevant to know that the $15 an hour movement is right.   The minimum wage in 1970 adjusted for inflation was higher than the minimum wage today. In other words, real wages for those making minimum wage has decreased.

An increase in productivity means an increase in the total value produced. If more value than ever before is being created, while wages stagnate, where has all the value gone? The answer is to the capitalist class; that is the class of people who own the means of production. The majority of gains from productivity increases went to the top 1% of income holders.

3. Part-Time Workers on the Rise

At the same time, full-time workers are working harder, for longer hours, at stagnating wages, more Americans than ever before are working only part-time. In 1968, the BLS reports that 13.5% of the U.S. workforce was employed part-time. Today that number has reached 18.6%.

The increase in the ratio of part-to-full-time workers is directly related to the way increases in productivity are used in a capitalist economy. Capitalism is roughly an economic system where the means of production are privately owned and geared towards generalized commodity production, i.e. goods that are created with the sole purpose of realizing profit on the market. All applications of new technology in the workplace are viewed in line of realizing higher rates of profit.

Because of the gains of the workers’ movement in the nineteenth and early-to-mid twentieth centuries, full-time workers are entitled to some meager benefits, pensions, safety standards, and other things. Part-time workers largely fall out of this schema and are not entitled to the same standards of benefits, pensions, and so forth. The shift to an increase in part-time workers was possible when productivity and the actual organization of the workplace made it so that the amount of necessary full-time workers was reduced. Part-time work everywhere has thus exploded and proliferated into virtually every sector of the economy.

4. The Overworked and the Unemployed

Lastly, the increase in productivity causes a simultaneous increase in unemployment if the rate of accumulation of capital is not matched by the rate of investment. In other words, if productivity gains leads to the creation of more capital than can be profitably reinvested into the economy, then the result is a surplus of capital. This surplus of capital – or overaccumulation of capital – will lead to stagnation in the economy in the form of slow growth and higher rates of unemployed workers, among other things. (For the background info on this argument, see Paul Baran and Paul Sweezy’s classic book Monopoly Capital and John Bellamy Foster and Robert McChesney’s The Endless Crisis).
What this leads to is masses of people overworked alongside those with no work or precarious employment prospects. The unemployed form what Karl Marx called the “industrial reserve army.” This reserve helps serve the expanding needs of capital by having at hand a group of people desperate to work. In times of overaccumulation, when capital needs less workers, more workers fill the ranks of this reserve, which increases the labor competition for each job. In short, increased unemployment has a downward pressure on wages. Marx accurately describes this phenomena in the following passage:

If the means of production, as they increase in extent and effective power, become to a lesser extent means for employing workers, this relation is itself in turn modified by the fact that in proportion as the productivity of labour increases, capital increases its supply of labour more quickly than its demand for workers. The over-work of the employed part of the working class swells the ranks of its reserve, while, conversely, the greater pressure that the reserve by its competition exerts on the employed workers forces them to submit to over-work and subject them to the dictates of capital. The condemnation of one part of the working class to enforced idleness by the over-work of the other part, and vice versa, becomes a means of enriching the individual capitalists. (Capital, vol. 1, 789; emphasis mine)

The data fits this description today. The Labor Force Participation Rate – the percentage of the workforce employed – is at a 38 year low.

Source: http://www.zerohedge.com/news/2015-01-09/labor-participation-rate-drops-fresh-38-year-low-record-929-million-americans-not-la

In Section 1, we saw that there was a 400% increase in productivity from 1947 to 2011.  We can now understand the other half of that chart.  Productivity and private employment were never equivalent because increases in productivity always lead to some displacement of workers by creating surplus workers.  However, the “Great Decoupling” as call it in the New York Times, can be attributed to the outpacing of productivity compared to the outlet for profitable capital investment.  The market is saturated with capital.  And by the 2000s, productivity increases exacerbated the problem for capital for finding a profitable outlet for investment.

In short, the economy is much more complicated than Jeb Bush says. If people work longer hours, this will lead to further stagnation caused by the overaccumulation of capital. What we need is not longer work hours at miserable pay. Rather, we need to more equitably divide up the gains of labor productivity. This would include sharing the work by decreasing the amount of hours each person works and employing more people and increasing the rate of hourly compensation to equitably match the amount of value produced.  This cannot happen in an economic system that puts profit above human needs. Workers must self-organize and challenge the domination of capital by taking control of the means of production and running them democratically.  It is only when we democratize the economy that we can hope for real, substantive equality and liberty — whether that be in our private lives or political equality and freedom.

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4 thoughts on “Working Harder Makes Your Boss Richer

  1. Precisely! Thank you for your well-delivered essay. Interesting to read this just after I watched a video with of a talk by Richard D. Wolff, a kindred spirit.

    Like

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