A 2010 report from UK think tank New Economics Foundation generated plenty of publicity by suggesting that a 21 hour standard work week would significantly improve wellbeing by giving people more time for family, friends, neighbours, and leisure activities.

Interestingly, economist John Maynard Keynes envisaged in a 1930 essay on the Economic Possibilities for our Grandchildren the following situation:

Thus for the first time since his creation, man will be faced with his real, his permanent problem - how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.

More specifically he predicted that if population stabilises, then:

By 2030, the grandchildren of his generation would live in a state of abundance, where satiation would be reached and people, ﬁnally liberated from such economic activities as saving, capital accumulation, and work would be free to devote themselves to arts, leisure, and poetry.

The productivity gains imagined by Keynes as the source of this freedom from work did eventuate. Everywhere we look we can see far greater output per hour of labour, from agricultural production all the way through the production processes in our complex 21st century economy.

However, recent research suggests that leisure time has been relatively constant since 1900, and time spent on home production activities (cooking, cleaning etc) has actually slightly increased. Additionally, while time spent at work over a lifetime has decreased since 1900, most of this is the result of more time spent studying.

How is it that we continue to fill our time not with leisure, but with work, study, and household chores?

There are many reasons (as discussed here). I would argue the fatal flaw in Keynes’s comments was the assumption that some kind of consumer satiation would be reached. Although he did acknowledge that there are basic needs, and what he called second class needs:

Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs-a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes.

We now know that consumer demand is insatiable (though we might debate whether this is the result of our culture or some universal human acquisitiveness). But the most interesting part of the story for me is that we could all work less with very minor reductions to our standard of living but for coordination barriers between households. This coordination problem is a hindrance to individuals seeking to make the choice of leisure over work.

To properly explain how the coordination problem occurs at a national level, we need an analogy closer to home. Instead of businesses and industries improving productivity across the economy, imagine yourself improving your productivity during your working life. You start on low pay as a youngster, and edge your way up the ladder to better paying jobs over time.

Immediately we can see the analogy is sound. Most people don’t take their gains in productivity (as reflected by increases in their salary) as leisure time. Rather, they continue to work the same hours, or more, and receive the higher income.

Why?

The answer is a cooperation problem with striking similarities to the classic prisoner’s dilemma. You see, if you take your productivity gains as leisure time, and the next person doesn’t, they can bid up prices for essential consumer items (such as land). However, if you both cooperate and each take more leisure time, you will both face accessible prices since neither party is capable of paying more.

In our analogy, if everyone took some of the economy-wide productivity gains as leisure time our total production would fall by some fraction of the reduction in work hours, and because each person’s income is lower, there would be less opportunity for people to outbid each other on prices, or out-consume each other in status displays.

Furthermore, as our productivity increases (or our hourly rate of pay in this analogy) the gains at the margin from working just one more hour, or one more day, are far greater, tempting us further to preference work over leisure time. If you make $100 per day rather than $400 per day, your decision to reduce work time comes at a lower opportunity cost.

Of course accompanying this coordination problem and incentive structure are embedded social norms and workplace practices (which Keynes may have expected to be easily overcome).

Is there a solution?

At an individual level the answer is dependent on your preference for leisure time as opposed to consumption of leisure goods and services. Some people may decide that having time without plenty of money to spend as they please is not their ideal situation.

The answer is more vague at a society wide level. Yes, we can regulate maximum working hours and penalty rates for overtime. However, penalty rates increase marginal benefits from overtime hours. Maybe instead we could have anti-penalty rates. After a certain number of hours by law your pay decreases per hour, until after say 30hours, there is zero benefit from working any longer.

However regulating working hours is a tricky game. Such a law would encourage a cash economy for labour in order to avoid the laws (and avoid taxes), allowing individual workers to bypass the rules to get ahead.

In fact, in the spirit of free choice I would discourage further regulation of hours. Instead I would opt for solutions such as more public holidays (which also allow a coincidence of leisure for more workers), and labour laws that encourage secure part time work.

Of course I don’t want to presume that coordinated reduced working hours are something which society as a whole desires. But if we do, there are options, and perhaps my grandchildren will be so lucky as to face Keynes’s leisure dilemma.

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