The 80% Solution

The new year is a perfect time to resume my blog posts, which fell victim to a heavy schedule of speaking about Plenitude as well as two new courses at Boston College, where I teach full time. It’s a pleasure to be writing again, and to have the opportunity to send greetings for a good 2011. I hope you are healthy and thriving, despite the difficult political and economic circumstances in which the US and the world finds itself.

In the months since I’ve last written, I’ve become more convinced that the economic analysis in Plenitude was on-target. A major prediction, indeed premise of the book is that the labor market was unlikely to recover any time soon. This has now become the new conventional wisdom, in sharp contrast to the official story when the book was written, and for much of 2009 and even the first part of 2010. The punditry now reports that the unemployment rate is expected not to fall below 9% in 2011. Not much is being said about 2012. But sadly, we pessimists are looking too correct. At the current time, after a year of recovery, the economy is producing only as many jobs as are needed to absorb new entrants—the young people who leave school each  year (with or without degrees). If the private economy doesn’t do better than this, the people who have suffered from the 8.5 million or so jobs lost in this recession/depression will never be employed again. There are currently 14.8 million Americans officially unemployed, with many more under-employed, discouraged and marginally attached to the labor force. The November figures for that more comprehensive measure are 26.6 million.

As I noted in the book, GDP growth, the solution for unemployment that remains virtually the only large-scale approach to joblessness, is no longer a viable one. In December, economist Robert Scott of the Economic Policy Institute reported that while US corporations did create 1 million domestic jobs in 2010, they created far more abroad—1.4 million. Outsourcing will continue and is a major reason why just increasing the rate of growth of GDP cannot solve the nation’s unemployment problem. There are currently more than 4 people looking for each available position. And the GOP take on the unemployed is that they are lazy slackers, unwilling to search for work. This is a lie that is likely to become more prevalent. There is increasing cultural pressure to deny the reality of unemployment, as those affected become more socially excluded and less politically potent. A key goal for 2011 is to keep the unemployed in the public eye and active in the political arena. Efforts to organize the unemployed are going on around the country, with informal groups such as UWAG, and official efforts by the AFL-CIO and some individual unions (eg., the Machinists), but these fall well short of what’s  necessary to put these folks back to work.

That’s why it’s time for the 80% solution. It’s a fresh idea that solves a number of problems: unemployment, work-family pressure, and an impoverished civic sphere.

At the beginning of the 1980s, there was a sharp worldwide downturn, and Western Europe was hard hit. The Netherlands took an especially pro-active stance, opting for stable real wages and declining hours of work in order to get people back to work. New government employees were hired at 80% of a full-time schedule. Many got a four-day workweek, which was well-suited to a small country where quite a few young people commuted by train to their places of employment. The 80% schedule caught on, and by the time I arrived in the Netherlands in 1995 as a Professor at Tilburg University, the nation was heavily invested in 80% schedules. Public sector workers were joined by academics. It was possible to be not only an 80% time faculty member, but also a 60%, 40%, or even a 20%, i.e., a one day a week professor. And in what is likely to be most surprising to American readers, the whole banking industry had gone to 80% schedules and a four-day workweek. People weren’t filling up their garages with consumer goods, but they did have loads of time. By 2000, the country  passed the Working Hours Adjustment Act that gave every employee the right to reduce their hours, without losing their job, hourly pay rate, health insurance or benefits. (Benefits are pro-rated).

Dutch hours stood at 1367 in 2009 (2010 not yet available) in comparison to the US, where hours are 364 higher. (That’s about 9 weeks more work here than in the Netherlands). Dutch productivity per hour has been considerably higher than in the US, although right now (2010) it is at rough parity, because they haven’t laid many people off since the 2008 downturn, in comparison to the US, which has had massive employment losses. In the Netherlands, part-time work is the new full-time. Three quarters of Dutch women workers are on PT schedules. Twenty-three percent of men are also on PT schedules, with an additional 9% on a compressed 4-day workweek. What began as an extreme gender imbalance is being eroded as men have also begun to prefer shorter hours of work. Life satisfaction, the well-being of children, and a variety of other quality of life measures are far higher there than in the US. Worktime is a big part of why.

If the US started down the 80% solution road it would make a huge dent in unemployment. Employers could hire 5 people for every 4 jobs that are available. It’s a shorter worktime policy that doesn’t require cutting the hours and pay of people who have jobs. Instead, new people come on at 80% pay and work only 4 days. It’s especially feasible for younger workers who are getting salaries for the first time and for many of whom shorter hours are appealing.

While 80% pay may not be feasible for people in very low wage jobs, if these schedules become more widespread across the higher-wage parts of the labor market, they will raise wages. Shorter hours eventually lead to “tighter” labor markets, in which employees can capture more of their productivity gains. Right now workers can’t get those gains, because their labor market position is so poor. With this huge unemployment pool, downward pressure on wages is strong, especially for the lowest-paid. Through this mechanism, the 80% solution could also serve to help alleviate poverty and low incomes. Combined with a minimum wage increase, it would do even more.

So spread the word and put the 80% solution on the table at the local, state and federal level, as the debate about persistent unemployment and the economy drags on through 2011.

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22 Responses to “The 80% Solution”

  1. Sandwichman says:

    I’m currently working a “60% solution” and for three out of the last four weeks, 40%… and loving it. Historically, the four-day workweek is about 50 years overdue. Then Vice President Richard Nixon foresaw the prospect, “in the near future”, during the 1956 election campaign. JFK speculated on its imminence a month before he was assassinated. A conservative projection of the pre-world war II trend would give the U.S. a 32-hour work week PLUS seven weeks annual vacation. We got a Cold War instead. Apparently the Cold War rages on.

    But mainstream economists continue with the mantra that unemployment “creates more jobs than it destroys”. Their faith, by the way, is based on a marvelous piece of 311 year-old analysis, Consideration Upon the East India Trade, that Dani Rodrik debunks in his new book, The Globalization Paradox.

    What the free-traders and growth fanatics overlook is the social costs of trade, growth, long hours, technology whiz bang or whatever.

  2. Dave Gardner says:

    It continues to amaze me that this solution is not mentioned routinely when the subject of jobs and employment is discussed by the pundits.

    Thanks for doing your part, Juliet, to raise the issue!

    Dave Gardner
    Producing the documentary
    GrowthBusters: Hooked on Growth

  3. Juliet Schor says:

    thanks dave! hope the film is going well.

  4. [...] This post was mentioned on Twitter by Susan Marie Swanson, Dave Gardner. Dave Gardner said: #GrowthBusters interviewee Juliet Schor on the only realistic solution to #unemployment. Also moves us toward… http://fb.me/RAjhhrHo [...]

  5. I did an analysis of oil consumption compared to the number of jobs, and concluded that there is a close link in the US. The Oil Employment Link – Part 1. If world oil consumption goes down in the future, I would expect there to be more and more pressure on job availability.

    It seems like the approach you propose might be helpful, but a lot of folks aren’t making much now, or are spending 100% of what they make.

  6. Juliet Schor says:

    Gail, many thanks for your post.
    To your past point, this approach is most successful as a forward looking strategy in which productivity growth gets channeled into shorter hours. It’s also a way to take people from no income (unemployed) or partial unemployment to 80%.
    The oil employment link is interesting, but could be severed by alternative energy sources.

  7. vera says:

    Finally, someone with economic sense recommending something perfectly doable. After reading way too many pie-in-the-sky schemes from alternative economists, I say, thank you, thank you. More please! :-)

  8. Juliet Schor says:

    thanks Vera. Spread the word about this, and you can look at some of my earlier posts, which deal with worktime and other aspects of this issue. all the best, juliet

  9. [...] posted from Juliet Schor’s blog [...]

  10. [...] Juliet Schor, socióloga e economista, coloca a questão: como criar emprego para quem o perdeu durante a crise? O crescimento económico não chega, dado que a relação entre o aumento do PIB e o aumento do emprego se tem desmoronado à medida que uma parte crescente da produção é deslocalizada (e, acrescentaria, à medida que o sector financeiro ganha peso relativamente aos sectores produtivos). A solução passa, então, por repartir o trabalho existente de forma mais equitativa. [...]

  11. Sven Fockner says:

    In Germany we have something called “short work”. It kicks in if a company is going through a crisis. Employees will work less or not at all, but keep their job. If their wages fall below a certain level, the government will pay the difference.
    Mercedes Benz did that a lot in 2009. They sent people home on Friday. Nobody lost a job and now that Mercedes is growing again everybody is still on board.

  12. Juliet Schor says:

    Thank you Sven. I have written about the short work system, including the German case just a bit, in earlier posts. It’s a great success story what Germany did after the crash. I wish more Americans knew it. All the best, Juliet

  13. Susan Labin says:

    I am so heartened by your article. This is what I am also working on, and in particular to show the effects of a reduced work schedule in various areas of our lives.

    See our recent blog post:

    http://www.huffingtonpost.com/susan-n-labin-phd/reducing-unemployment-in-_b_803764.html?ir=Politics

    I would be interested in continuing this conversation: susan@susanlabin.com

    Thank you for your inspiring work!!

    Susan

  14. THOMAS says:

    HELLO JULIET,
    THANKS FOR THE INTERESTING ARTICLE. IT’S TIME THAT SOMEONE THINKS OUT OF THE BOX AND LET’S FACE IT, TOO MANY PEOPLE, NOT ONLY IN THE US BUT WORLDWIDE AND NOT ENOUGH JOBS FOR ALL OF THEM. A NEW WAY, A NEW THINKING IS OVERDUE.
    WORKING ON 80% MAKES SENSE AND MIGHT OPEN AN OPPORTUNITY FOR THESE, WHO ARE LOOKING FOR A JOB. A SOCIETY WITH MORE THAN 10% UNEMPLOYMENT HAS TO LOOK FOR ALTERNATIVES. INCREASING GROWTH WON’T WORK AND HOW MUCH GROWTH WOULD WE NEED IN ORDER TO OVERCOME THE PRESENT UNEMPLOYMENT. I AM NOT A SCIENTIST BUT MY GUESS WOULD BE 3,5 UP TO 5% ANNUALLY AT LEAST AND THAT IS NOT ACHIEVABLE UNDER THE GIVEN WORLDWIDE ECONOMIC CIRCUMSTANCES.
    A POSITIVE SIDE EFFECT OF THE 80% MODEL MIGHT BE, THAT PEOPLE WOULD HAVE MORE PRIVATE TIME AND IMAGINE THEY WOULD DEDICATE A PART OF IT FOR VOLUNTARY, SOCIETY BENEFITING WORK. MY GUESS IS, THAT THEIR CONTENTEDNESS WOULD INCREASE QUITE A BIT. COULD BE A WIN/WIN SITUATION.

    BEST
    THOMAS

  15. Juliet Schor says:

    Susan,
    How nice to get yours and learn about your work. Let’s definitely connect via email. Best, Juliet

  16. Juliet Schor says:

    Asbolutely! Thanks for yours Thomas–you might want to connect with Susan (below), the Take Back Your Time Day movement, Moms Rising.
    There are a least a few out there working actively on achieving this vision. Best, Juliet

  17. Joseph Ludford says:

    I am not an economist or sociologist and did not know about your work until I bought your new book. What a surprise – “Plentitude” is a seminal book that I hope gains a wide audience. I’d like to mention three other books that came to mind as I started reading your book: James Martin’s “The Meaning of the 21st Century”; Robert Reich’s “Aftershock”; and James Macgregor Burns’
    “Leadership”. Martin deals with human survivability in the face of resource limitations; Reich deals with the effects of wealth concentration; and Burns deals with the building of political instututions as the industrial revolution and capitalism were developing. Thank you for your fine book.

  18. Juliet Schor says:

    Dear Joseph,

    Many thanks for your very nice comment. Perhaps it is not an accident that you put those books together with mine. I lived on Burns’s farm many years ago when I was teaching at Williams College. He is quite amazing. Reich is also know from when we were both at Harvard. I’m so glad you found my book useful. All the best, Juliet

  19. Website says:

    Website…

    The 80% Solution | Juliet Schor…

  20. David Bley says:

    I just caught your interview on PRI “To The Best Of Our Knowledge”. I was thrilled that someone was actually thinking about the big picture, which the government and Wall Street seem to be incapable of, and publically proposing solutions. There seems to be a groundswell of people working at changing the way we live. There are people building and living in “Tiny Houses” to reduce consumption of building materials and energy and to get rid of “The Thirty Year Mortgage”. There are people advocating and implementing changes to education to add teaching of manual arts to the curriculum, so the we can actually make things. There are movements to add individual high tech manufacturing and the sharing of high tech knowledge freely. I am excited that these concepts may be widespread enough to exceed the 100th monkey criterion.

  21. Juliet Schor says:

    Dear David, Thanks for yours. My book talks about Tiny Houses and other ways that people are living low impact, low cost lifestyles, including the high tech versions. I agree that these are the lifestyles of the future. All the best, Juliet

  22. Steve Hingle says:

    I heard you on WPR. I’ve been thinking about reduced hours and am so glad you’ve raised the issue. As a CPA, I love technology and efficiency, but it’s clearly putting people out of work, and the same old solutions won’t work.

    We’ve got corporations with lots of cash, but they won’t hire. We’ve got salaried employees working 70 hours per week and more, while their neighbors struggle to find work. As I attempted to research unpaid overtime, I was shocked that I could not locate a single study in the U.S. of unpaid work. I did find a U.K. government study which showed that professionals tend to work between 2 and 5 more hours PER DAY when they are salaried (“Investigating hours worked measurements” by the Labour Market Division of the Office of National Statistics), and The U.K. Daily Mail reports that teachers and lawyers put in an extra 17 hours per week unpaid (“900,000 toil for ten hours a week unpaid”). I see this as exploitation of the professional. People seem to think that it’s okay. “I’m a professional, so my company can make me work like a dog, and that’s just the way it is.” We need people to question this thinking. (I’d also love to see government and universities conducting studies similar to the U.K.’s.)

    My solution would be to eliminate the salaried exemption, and to phase it in over several years so as not to disrupt people’s wages. This would make everyone an hourly worker, with overtime paid at time and a half. Instead of a 40 hour cutoff, professionals would start off at 55. In subsequent years, the hours would be reduced by 5 hours each year until we got down to 40.

    It would be nice if business saw the benefit of people working reduced hours. Excess hours means people aren’t getting enough sleep, exercise, relaxation, or proper nutrition, and aren’t spending time with their families and friends. And they’re stressed. All of this is proven to reduce people’s happiness, satisfaction, work engagement, creativity, productivity, good decision-making, and health – I could go on – all leading to reduced profits. (Check out Shawn Achor’s excellent book, The Happiness Advantage, on positive psychology and business. We might also wonder whether overwork of CEO’s and politicians might account for them seeming to be out of touch with their own humanity, and therefore making decisions that serve their own dark needs instead of the greater good.) Unfortunately, I don’t expect business to lead the charge.

    That leaves two options: unionization of all professionals, and congress. Either of these require the people to step up and speak out. Lawyers, who have some of the highest unpaid overtime, might ask whether the salaried exemption could be considered arbitrary and capricious. Lower income workers should support the charge, because it means more opportunity for everyone.

    That’s it for now. Thanks again, Juliet!
    Steve Hingle, CPA for Nonprofits in Madison, WI
    Certified Life Coach
    steve@hinglecoaching.com

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