A Different Approach to Economic Stability

An increasingly common discussion in America today is how we can create an economy where everyone can earn a living wage. Some of the common suggestions are a higher minimum wage and higher taxes on the top earners. Different economic models could suggest positive or negative outcomes from these ideas, but regardless of how effective they might be, I feel there is a deeper problem that they fail to address. 

Since the industrial revolution, companies have been striving to replace human and animal labor with technology. Today, computers are replacing jobs once held by humans. We as a society are working towards a day when every job will be automated. We could argue another time whether or not full automation will ever occur, but it is undeniable that, through constantly advancing technology, we are making the economy more efficient. The farther this trend continues, the fewer people will be required to keep the economy running, and thus fewer jobs will exist. We are creating an economy that can provide for far more people than it needs to run.

We can put safety nets in place for those who end up losing jobs due to this slimming down, but the problem will still stand that there will not exist enough jobs to accommodate everyone. So how do we tackle this problem? By working less! (I promise I am not just looking for a reason to slack off; this is a holistic argument with no personal agenda) The 40-hour workweek (which is short compared to what many people actually put in today in the US) is so ingrained in American society that we take it for granted, but is it actually the best system?

Let’s look at an example: Investment bank A hires three college grads; each works 60 hr/week, and makes $100,000 a year. Investment bank B hires four rather than three and has them work 45 hr/week and make $75,000 a year. A and B will get the same amount of work for the same about of money, but bank B has employed one more person. Wherever that extra employee would have ended up working now has an additional position to fill – one less unemployed person.

In this example, the shorter work week scenario would still provide a comfortable wage for a college grad, but you may say that this is an uncommon exception and that cutting the hours of a less lucrative job may result in too low an income. Well, if we look at the whole picture, this effect may not be as large as expected. When the lucrative job cuts hours and takes on more employees, we can assume people filling those jobs had a similar wage, but most likely slightly less. When they jump up, their positions are vacated, plus their original employer will also cut hours and need more employees on top of those needed for vacated spots. Accordingly, more people can move up from a lower paying job to this job. This effect can cascade down, ultimately leading to people holding jobs at better-paying companies than they would otherwise. Sure, their hours may be cut, but in general people would make higher wages per hour. I can’t claim to know how these two phenomena would balance since I am not an economist, but I do believe it will lead to greater wealth equality.

The biggest problem with this solution is implementation; certainly it would have to be a movement created at the corporate level. A single employee deciding to lead the charge by working less probably wouldn’t last long at that job. This idea would probably have to spread before companies would act on it. On top of the economic benefits discussed, it would simply make life better; everyone would have more time to spend with family, pursue hobbies, etc. Perhaps a partially time-based economy could even emerge, where instead of people being rewarded for good work with higher wages, they would be rewarded with a shorter work week (improbable, I know; just a thought).