“On the other hand, the ‘market’ for free time hardly even exists in America. With few exceptions, employers (the sellers) don’t offer the chance to trade off income gains for a shorter work day or the occasional sabbatical.” … “Employees rarely have the chance to exercise an actual choice about how they will spend their productivity dividend.” – Juliet Schor, The Overworked American: The Unexpected Decline Of Leisure (1992, p. 3)

Top regrets of the dying, no. 2: “I wish I hadn’t worked so hard.” (in Bronnie Ware, The Top 5 Regrets of The Dying, 2012)

“Also with the knowledge that right now we spend about the first 25 years of our lives learning, then there’s 40 years that’s really reserved for working and then tucked on at the end of it are about 15 years of retirement. And I thought that I might be helpful to basically cut off 5 of those retirement years and intersperse them in between those working years.” – Stefan Sagmeister, TED Talk: The Power of Time Off

“Empty your mind, be formless, shapeless – like water. Now you put water into a cup, it becomes the cup, you put water into a bottle, it becomes the bottle, you put it in a teapot, it becomes the teapot. Now water can flow or it can crash. Be water, my friend.” – Bruce Lee

So, why does reduced demand result in fewer people getting to participate into the labor market – having access to earning opportunities at all? Of course this can mean that aggregate supply simply exceeds aggregate demand, because the interest rate is too high. But no matter what the interest rate, companies would still lay off workers when not all of them are needed. We would still have to keep the economy running at its full production capacity to prevent unemployment. This means that even if people preferred to spend and work less, the amount of work done in the economy could not drop! We could not even move towards a fully automated economy where robots do most of the tedious work and people have more freedom to do what inspires them – the kind that people have been dreaming of for centuries.

Additionally, most mainstream economists agree that (in the current system) some unemployment is unavoidable. Unemployment rates below a NAIRU level (Non-Accelerating Inflation Rate of Unemployment) of around 5-9 % would cause inflation to hurtle out of control. Unemployment seems to be unavoidable! And, perversely, it is even considered a tool for controlling inflation.

This is clearly a market imperfection. In an efficient market, supply should tend towards meeting demand – and that should not be conditional to how much is traded in total. And the relevant question is, how this imperfection can be solved: How can we get work efficiently allocated to people according to their willingness to spend and invest, regardless of aggregate demand! It should not be how we can trick people (or the government) into spending and investing more and more just to keep everyone full-time employed by any means.

What if supply really met demand in the labor market? (from Fixing the Root Bug, chapter 2.3.2)

What if supply really met demand in the labor market? (from Fixing the Root Bug, chapter 2.3.2)

Probably the most controversial part of the Root Bug hypothesis says that companies piling up work on as few employees as possible has negative economic and social externality effects. In other words, “centralizing work” on few suppliers might be an efficient option for any individual company, but it is not efficient in terms of the whole economy when we require people to produce as much (in market value) as they consume (as a market economy does). Reducing (purchased/employed) labor does not have negative externalities – on the contrary, eliminating waste (unnecessary work) is what allows increasing labor productivity and higher total real income (purchasing power) or more spare time. The problem is that it is not profitable for companies to let everyone participate in the work available, even when they’d be allowed to pay every employee according to her perceived productivity.

And hence, the de facto unit of labor is, in most industries, a human being! This quantization of labor into “jobs” makes the economy non-adaptable, fragile and unfair: There isn’t always competition over employees between companies, and hence employees don’t always have options. Sharing work needs to be made legal, socially acceptable and profitable.

Mainstream economics has taken it as a natural law that labor exists in these quantized chunks, “jobs”, and that, therefore, allowing everyone to participate in the economy requires that the system runs at its full production capacity. This requires that aggregate demand grows at the same rate as labor productivity increases. Alternatively (or even simultaneously, which is a bit contradictory) some economists assume that employees would have the option to work less if they really wanted to. Unfortunately, they don’t see the game-theoretical problem that exists in reality: Merely asking for a chance to work less can increase an employee’s risks of losing his job – and being stuck long-term unemployed. We could call this the “Consumer’s Dilemma”, which is a kind of “Prisoner’s Dilemma“.

When talking about reducing the amounts that individual people work or any kind of “work sharing” (in an economic context), public discourse tends to equate this directly with shortening the legal workweek or otherwise sharing work more equally by force (e.g. by “degrowth” advocates like Peter Victor and Tim Jackson (2009, p. 80). Bu this  is hardly optimal, as some people want to spend and/or invest more as well.

The alternative would be to simply facilitate working less, by eliminating risks of long-term unemployment and making sharing work profitable for employers. This, together with a working interest rate mechanism keeping the macroeconomy in balance, would allowing people’s earnings to better correlate with their consumption and investment preferences. But this option does not even seem to cross anyone’s mind.

Of course, currently, there are lots of artificial fixed costs per employee (mandated in labor legislation and collective agreements) and e.g. labor reduction penalties that increase the risks of recruiting and hence the costs of sharing work. But even without them, “natural” overhead costs (training, management, selection etc.) would still make it more profitable for companies to minimize their headcount and pile up work on current employees (which is often easy due to a constant fear of unemployment). Paradoxically, employees only have room to negotiate for working less in sectors with a labor deficit, which makes the labor deficit even worse – especially in situations where deficit results from limited education opportunities.

Section 4.1 in Fixing the Root Bug explains/presents in more detail:

  • Different forms of labor flexibility (and how companies are sure to invent new solutions as the nature of work changes)
  • How mid-term flexibility (within 1-5 years) is what’s relevant for macroeconomic stability and economic security
  • Why all legal fixed costs per employee need to be removed
  • How labor reduction restrictions actually increase income insecurity, by making it even less profitable to share work
  • Why we need to turn income taxation into a “Pigovian tax on overcentralizing work” in order to make sharing work sufficiently profitable (and how this is the only reason why labor or any transactions should be taxed at all)
  • How such a work-sharing incentive (or, rather, work-piling disincentive) could be implemented as simply as possible with minimal bureaucracy
  • The role of the education system in maximizing social mobility, labor market adaptability, human potential and happiness
  • How a preset number of education opportunities (a “planned economy” in the supply of labor and human capital) is by no means compatible with the wage mechanism of the labor market and e.g. removes almost all justifications for income differences (the function of which would be to balance structural supply and demand imbalances)
  • Other “root bugs” and “game mechanical flaws” in our current education paradigm
  • The role of company cultures (peer-pressure, managerial attitudes etc.) in facilitating more employment flexibility
  • How our outdated Protestant work ethics are having detrimental effects for both individuals and the whole economy
  • The need for social security systems and how to implement them so that they do not cannibalize anyone’s incentive to work – including discussion on the challenges and potential future of a citizen’s dividend).

The ways in which this small change in rules, making sharing work profitable, would turn many economic phenomena, causalities and power structures upside down are discussed in volume 3 in Fixing the Root Bug (and briefly in the Why section of this site).