The six-hour work day comes to Sweden

Why do we work so many hours? I mean beyond the obvious answer that the dictatorial employment relationships of capitalism force us to on pain of unemployment. Working hours declined from the inhuman work weeks of the industrial revolution until the mid-20th century, when the hours we work leveled off; in more recent years work hours have been increasing.

It certainly isn’t because productivity has plateaued. On the contrary, advances in machinery and computerization make us more productive than ever before. So why do we still work an eight-hour day after all these decades? (Or more than eight hours in many cases, and not necessarily with extra pay for office workers receiving a flat salary.) An eight-hour day was an outstanding achievement of social movements from the 19th century, when work days lasted 10 and 12 hours.

With the advancements in productivity over the years, we could certainly work fewer hours and still provide all that is necessary. Why not a six-hour day? Or less? In Sweden, there are ongoing experiments with six-hour work days, which so far have met with success. Not surprisingly, given the one-sidedness of workplace relations, these experiments are being done in the name of “greater productivity.” In other words, the standard is to be: Will this be good for the boss’ profits? That it might be good for the workers is part of the equation, but even this is commingled with the idea that rested workers will be more productive workers and thus more profitable for bosses.

Gothenburg, Sweden

Gothenburg, Sweden

Let’s first examine six-hour work days on these capitalist terms. The issue of how much productivity can be extracted out of workers, interestingly, is more explicitly stated in a test case of public workers than it is for private employers, in part due to right-wing opposition. In Gothenburg, Sweden’s second-largest city, two groups of municipal workers are part of a test in which one set will work six-hour days with full pay and the other set continues to work a standard eight-hour day. The hope is that a shorter day will reduce sick leave, boost efficiency and ultimately save money, according to a report in the Stockholm newspaper The Local. A Gothenburg deputy mayor, Mats Pilhem of the Left Party, said:

“We’ll compare the two afterwards and see how they differ. We hope to get the staff members taking fewer sick days and feeling better mentally and physically after they’ve worked shorter days.”

One group of public workers on six-hour days are nurses at an elder-care facility. This experiment is to continue until the end of 2016. Fourteen new staff members were hired to cover the lost hours, but a consultant told The Guardian that the nurses “are less stressed and have more time for the residents.” The city government is closely monitoring the experiment to see if the quality of service is higher with the six-hour work day. Nurses report having more energy at work because they are no longer exhausted from longer days of work, and a Left Party member of the Gothenburg council said quality of life for the employees should also be a consideration. He said:

“Not everything is about making things cheaper and more efficient, but about making them better. Under the Conservative-led coalition government in Sweden from 2005 to 2014 we spoke only about working more, and more efficiently — but now we want to discuss how to survive a long working life so we don’t destroy our bodies by the time we are 60.”

Not an unreasonable thought.

Private employers see benefits to shorter day

In the private sector, a Toyota service center in Gothenburg switched to a six-hour work day in 2002, with no cut in pay, and reports that its profits are up thanks to more efficient use of the center’s machinery. The Swedish Internet company Brath reports strong growth in revenue and profits using a six-hour work day. The company’s chief executive officer, Maria Bråth, believes that employees with time for the rest of their lives are more productive employees:

“That we have shorter days is not the main reason people stay with us, they are the symptom of the reason. The reason is that we actually care about our employees, we care enough to prioritize their time with the family, cooking or doing something else they love doing. … Another big benefit is that our employees produce more than similar companies do. We obviously measure this. It hasn’t happened by itself, we’ve been working on this from the start. Today we get more done in 6 hours than comparable companies do in 8. We believe it comes with the high level of creativity demanded in this line of work. We believe nobody can be creative and productive in 8 hours straight. 6 hours is more reasonable, even though we too, of course, check Facebook or the news at times.”

At the other extreme, working more than 40 hours per week is detrimental to physical and mental health. A study published earlier this year in The Lancet found that people working 55 hours per week had a 33 percent greater risk of a stroke than those who worked 35 to 40 hours per week and a higher risk of heart disease. This study analyzed more than 600,000 individuals, through data drawn from 20 studies, in several countries.

Studies conducted in the early 20th century, as the working day was progressively shortening toward the eight-hour norm, that productivity was actually greater with a shorter day. For example, the 1913 book Psychology and Industrial Efficiency by Hugo Münsterberg, regarded as a pioneer in applied psychology, summarizing the results of various factory studies, stated:

“It was found that everywhere, even abstracting from all other cultural and social interests, a moderate shortening of the working day did not involve loss, but brought a direct gain. The German pioneer in the movement for the shortening of the workingman’s day, Ernst Abbé, the head of one of the greatest German factories, wrote many years ago that the shortening from nine to eight hours, that is, a cutting-down of more than 10 per cent, did not involve a reduction of the day’s product, but an increase, and that this increase did not result from any supplementary efforts by which the intensity of the work would be reinforced in an unhygienic way. This conviction of Abbé still seems to hold true after millions of experiments over the whole globe.”

It is hardly a revelation that a tired workforce is going to make more mistakes and be subject to more accidents. The common belief by bosses that it is cheaper to force overtime on current workers, even in those cases where it must be paid when employment laws or union contracts can’t be evaded, than to hire new workers to handle increasing workloads isn’t necessarily true. Beyond the benefits to productivity or employer satisfaction, working fewer hours would be a partial compensation for pay that has badly lagged increases in productivity since the 1970s.

We produce more but don’t earn more

This pattern is persistent throughout the world. It has been in place since the early 1970s in the United States and although a more recent phenomenon elsewhere in the world’s advanced capitalist countries, workers everywhere suffer from stagnant wages while producing more. U.S. workers on average earn nearly 12 dollars per hour less than they would if wages had kept pace with productivity gains since 1973. Canadian workers earn on average 11,000 dollars per year less then they would if if wages had kept pace with productivity gains since 1980. Other studies demonstrate lags in wages versus productivity in Britain, France, Germany, Italy and Japan.

The bottom line is that we work more hours because bosses can extract more from us, even if they don’t extract as much as they believe they do when we are pushed beyond an eight-hour day. That a handful of bosses have the foresight to see that more profits can come from shorter work days does nothing to change that basic capitalist equation. Profits ultimately derive from the difference between what we are paid and the value of what we produce — the drive to increase this difference underlies both the stagnant pay of recent decades and the accelerating shifting of production, both manual and office work, to locations with ever lower wages and weaker regulations.

Graphic courtesy of Economic Policy Institute

Graphic courtesy of Economic Policy Institute

What if we worked for ourselves instead? If shorter work days are beneficial to working people — and reduce unemployment by requiring more workers to carry out necessary work — why shouldn’t this be widely implemented? So far, the discussion around the length of the working day has centered around what is best for bosses, as would be expected under capitalism. (And, make no mistake, Sweden is a capitalist country, albeit one that ameliorates some of capitalism’s harshness more than most others countries.) What if the workers ran the company themselves, or managed a public enterprise themselves?

A cooperative enterprise could similarly reduce the work day or possibly even more since it wouldn’t have to generate a large profit for a boss or, in the case of larger enterprises, for the top executives and shareholders. The steady increase in inequality, the immense fortunes held by the world’s billionaires that are far beyond any reasonable possibility of useful investment, the trillions of dollars stockpiled by multi-national corporations, and the immense waste of advertising and planned obsolescence attest to the fact that we work beyond what is necessary to meet human need.

If the economy were organized on the basis of an economic democracy — in which production is oriented toward human, community and social need rather than private accumulation of capital — the work day could reasonably be well less than eight hours. Economic democracy can be defined as where everybody who contributes to production earns a share of the proceeds — in wages and whatever other form is appropriate — and everybody is entitled to have a say in what is produced, how it is produced and how it is distributed, and that these collective decisions are made in the context of the broader community and in quantities sufficient to meet needs, and that pricing and other decisions are not made outside the community or without input from suppliers, distributors and buyers.

By no means is anything written in this article intended to be an argument against shorter, more humane working hours or higher pay today. But as such struggles intensify, as they must, they can help us move beyond reforms that somewhat lessen our exploitation to ending exploitation. If a six-hour work day is better for us, why not have more of the benefits accrue to those who do the work and to the community that supports that work?

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Higher taxes lead to more jobs

Make it harder for people to retain a job, and fewer people will. Adequate pay that makes a job worthwhile is one factor, but frequently overlooked are support structures that facilitate employment.

Contrary to orthodox economic ideology, punishing people does not increase employment.

Countries that provide more subsidies toward services that are complementary to work — such as child care, elder care and transportation — have higher workforce participation rates. This shouldn’t be surprising as we don’t leave the rest of our lives behind when we go to our jobs, however much bosses insist we should. Such a finding can only be controversial in a world dominated by ideologies that insist that conditions be made as harsh as possible to “force” people to work.

Alas, such a world is the one most of us live in, particularly in the English-speaking advanced capitalist countries. I have often noticed that the thinking of middle-class conservatives often boils down to “I had to suffer, so everybody else should have to suffer.” I’ve heard words to this effect from many conservatives. Although people who have enunciated that to me often are people who did indeed work hard to rise from modest circumstances, the reductionist hyper-individualism it reflects is blind to the social solidarity necessary for society to function.

Moving up the vertical scale represents higher rates of employment; moving left on the scale represents higher effective tax rates. (Graphic by Henrik Jacobsen Kleven)

Moving up the vertical scale represents higher rates of employment; moving left on the scale represents higher effective tax rates. (Graphic by Henrik Jacobsen Kleven)

More subsidies lead to a higher percentage of working-age people holding regular employment, and these subsidies are possible through higher taxation. Contrary to orthodox economics, higher rates of taxation lead to more employment. This is the conclusion of a study by Henrik Jacobsen Kleven, “How Can Scandinavians Tax So Much?” Professor Kleven, a professor at the London School of Economics, compared Denmark, Norway and Sweden with other OECD (Organisation for Economic Co-operation and Development) countries (a club of the world’s advanced capitalist and some of the largest developing countries) and found strong correlations between taxation rates and workforce participation.

More social services, more employment

Plotted on a graph, there is a steady progression of countries with higher “participation tax rates” having greater percentages of their population employed. This pattern, not surprisingly, is even stronger for women than men. The author defines a country’s “participation tax rate” as the average effective tax rate when including all income and consumption taxes, and public benefits. This rate is far higher in Denmark, Norway and Sweden than it is in, inter alia, the United States, Japan or Britain. Professor Kleven writes:

“[T]he Scandinavian countries spend relatively large amounts on means-tested transfer programs that create implicit taxes on working and therefore reinforce the distortions coming from the tax system. On the other hand, these countries also spend relatively large amounts on the public provision and subsidization of goods that are complementary to working, including child care, elderly care, and transportation. Such policies represent subsidies to the costs of market work, which encourage labor supply and make taxes less distortionary. Furthermore, Scandinavian countries spend heavily on education, which is complementary to long-run labor supply.” [page 7, citations omitted]

Denmark, Norway and Sweden also have unusually low rates of tax avoidance. Professor Kleven writes that systematic third-party reporting is “crucial” to minimizing tax avoidance. (If your income is reported, it is very difficult to avoid paying taxes on it.) The three countries also have a broad tax base and Denmark in particular allows very few deductions and exceptions.

The United States, in contrast, has a complicated tax system riddled with loopholes. U.S. tax policy for low-income workers centers on the Earned Income Tax Credit (EITC), yet the Scandinavian countries have higher rates of workplace participation without such tax deductions. Because child care subsidies act as a subsidy to labor participation, Professor Kleven argues, those countries have no need for a U.S.-style income tax credit.

Although the author recoils somewhat from his own conclusions at the end of his paper, he does earlier write:

“[E]empirical and theoretical arguments above suggest that public spending on work complements such as child care, preschool, and elder care allows for a more efficient provision of low-income support and at the same time weakens the argument for low participation tax rates at the bottom of the distribution through an EITC. In this sense, it is conceivable that Scandinavian countries (with their large subsidies to work complements and no EITC) got it right, while the US (with its small subsidies to work complements and a large EITC) got it wrong.”

More health care earlier, better jobs later

Perhaps imposing ever harsher conditions on working people makes for a weaker economy? It would seem that several years of punishing austerity has not exactly brought prosperity to the world. Another study daring to offer heterodox economic ideas, just released by the National Bureau of Economic Research, calculates that spending by the U.S. government on child health care through the Medicaid insurance program likely will pay for itself by the end of a recipient’s adult working career.

Providing health care ought to be a human right; it is something that should be provided as a matter of basic humanity to enable better lives. In the U.S., of course, such is not the case; health care there is a privilege reserved for those with full-time employment that provides benefits or for those who can afford it. But, in raw economic terms, Medicaid for children may be cost-free over the long term.

This study, “Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts?,” prepared by Amanda E. Kowalski of Yale University and two economists with the U.S. Treasury Department, David W. Brown and Ithai Z. Lurie, found that children who were Medicaid recipients as adults earn more money on average and thus pay more in taxes than those who did not receive that benefit. These cohorts were followed until age 28, but, projecting the results over a full working career, the authors estimate that the extra taxes accruing to the federal government will amount to 56 cents for every Medicaid dollar. That is virtually identical to the 57 cents that the federal government pays out of every Medicaid dollar.

Professor Kowalski, in summarizing the study, said:

“Although it will take years to know the long-term impact of current expansions of Medicaid undertaken as part of the Affordable Care Act, this study shows that the investments that the government made in Medicaid in the 1980s and 1990s are paying off in the form of higher tax payments now.”

The study did not take into account the extra tax money paid to state and local governments, nor benefits from decreases in mortality and increases in college attendance. If all factors could be calculated over a lifetime, it is conceivable that Medicaid for children will actually be a direct financial benefit. Such a crass calculation shouldn’t be necessary, but the U.S. health care system exists to provide corporate profits rather than provide health care, which is why U.S. spends much more on health care than other countries while achieving inferior results.

A society that provides the infrastructure for a productive, balanced life, as opposed to one that imposes grim struggles to survive, is a healthy society. We are, after all, a social species, something that the ever more propagandized individualist ideology of capitalism seeks to erase.

Nationalizing banks works for the short term; why not permanently?

U.S. President Barack Obama famously sneered that “Sweden had like five banks” when dismissing the idea of a government takeover of the U.S. banks that brought down the world economy. He did so despite acknowledging that Sweden had swiftly overcome its early 1990s financial crisis by taking over its largest banks.

The president was channeling a prevailing mythology within the United States — namely, that Sweden is a socialist country. Socialist! Run, run for your life! Therefore anything Swedish must automatically be so horrifying that we must not allow any thoughts about it to enter our minds for even a fleeting second.

Sweden is actually a capitalist country (albeit one with social-welfare policies to ease capitalism’s harshness), and the solution that it used to put its big banks back on their feet was well within the confines of capitalism. Actually, Sweden did not go as far as its neighbor, Norway, which also nationalized big banks to overcome its own early 1990s financial crisis.

Sweden and Norway made the banks — and their executives, directors and shareholders — pay for the crisis they caused, rather than making their taxpayers pay for it. Unsurprisingly, deregulation and speculation were behind the Scandinavian meltdowns.

Rather than following the Scandinavian model, the U.S. government shoveled trillions of dollars into its big banks following the 2008 financial meltdown without forcing any changes in banking practices or management. Or much of anything — it was the world’s biggest blank check. As a result, the banks are bigger than ever, the bonuses executives give themselves are as big as ever, not a single financier has been brought to justice, the financial crisis goes on and we remain at the mercy of the financial industry.

Sweden and Norway may not be large countries, but, despite President Obama’s sneering comment, they are not tiny, either. Sweden, in fact, has more than 100 banks. What Sweden and Norway have in common with the U.S. is that their banking industries are dominated by a few large banks. The four biggest banks in the U.S. in the first months of the economic crisis — JP Morgan Chase, Citigroup, Bank of America and Wells Fargo — accounted for almost two-thirds of the assets of U.S. commercial banks. Thus, as Keynesian economist Paul Krugman once noted in his blog, “as far as this discussion is concerned, we’ve got, like, four banks.”

Norway wipes out shareholders, fires bankers

Because Norway took stronger measures than Sweden, let’s start the comparison there. Four banks accounted for almost 60 percent of bank lending in Norway on the eve of its crisis, and three of them would get themselves into deep trouble. Norwegian banking had been tightly regulated, but in the mid-1980s a series of measures lifted most regulation of banking and housing and eliminated capital controls, sparking a wave of speculation in the forms of a boom in new lending and a real estate bubble. Household consumption rose dramatically, based on debt incurred via the new loose credit, and bank managers began to be paid based on growth in lending.

A simultaneous drop in oil prices (Norway is dependent on oil exports) led to a devaluation of Norway’s currency (then on a fixed exchange rate) and a trade deficit. As the real estate bubble began to burst, several of Norway’s small banks failed, a problem that could initially be contained because the Norwegian government had continued to enforce a requirement that all of the country’s banks contribute to guarantee funds; these funds covered depositors. But continued financial turbulence caused two of the country’s four biggest banks to fail and a third to be on the brink of failure.

The guarantee funds had been depleted due to the failures of the small banks, and private investors were unwilling to invest with their own capital. The Norwegian parliament stepped in and injected capital directly into the banks, taking ownership and enforcing several conditions, including these:

  • Existing share capital would be written down to fully cover losses — shareholders would be wiped out.
  • Managers and members of the board of directors would be fired.
  • Banks must reduce operating costs and downsize some activities.

The banks were now owned by the government, which acted like an owner. But that ownership was exercised not directly by the government, but through a special agency created for the purpose of managing the taken-over banks and staffed by specialists to avoid political interference. Eventually, the Norwegian government sold all the shares of two banks and retained a minority interest in the third to block a foreign takeover of what is now the only one of the major banks to be based in Norway. By 2001, the government had earned a net gain for its troubles.

This program specifically avoided guaranteeing bank losses. It was designed so that taxpayers would not assume the risk, which would only encourage more risk-taking by bankers. In a report on these events, the deputy governor of Norges Bank (Norway’s central bank) wrote:

“If the government injects new capital into a crisis-stricken bank, it is important that the value of the existing shares are written down as far as necessary to cover the losses. Otherwise, the government would implicitly be using taxpayers’ money to subsidize shareholders of a failed or failing bank and would give rise to serious moral hazard problems.”

Sweden forces banks to write down losses

The Swedish government did not impose conditions as stringent as those imposed in Norway, but did make shareholders absorb some of the pain and nationalized the most troubled big banks. Financial deregulation in the 1980s led to reckless lending and a real estate bubble in Sweden. When the bubble burst in 1991 and 1992, Sweden fell into a recession and unemployment quintupled in three years.

The Swedish government declared it would guarantee all deposits in all banks, committed itself to recapitalizing banks in trouble and said any bank seeking government money would have to first write down its losses. Sweden did seize the most troubled big banks, although in one case (in which it already owned a majority interest) the government paid the full price for acquired shares rather than wiping out shareholders.

Sweden then set up two “bad banks” and transferred non-performing loans made by the taken-over banks to them. Privately owned banks would have forced immediate bankruptcies to shut down and seize the assets of the small and midsize businesses that had taken out these loans they could not repay. In contrast, the government “bad banks” took control of the businesses and worked to stabilize them for eventual re-sale, the proceeds of which would recover the bad loans.

For the most part, however, Sweden forced shareholders out of failed banks and imposed stringent risk-management measures and overhead reductions. But by issuing a blanket guarantee of all bank loans, the government benefited shareholders of the banks that had not been taken over, a contrast to Norway. But, similar to its neighbor, Swedish taxpayers benefited when the government later sold its shares in taken-over banks.

U.S. rewards bankers for destroying economy

In contrast, the U.S. government, during both the Bush II/Cheney and Obama administrations, handed out vast sums of money with no strings attached. Wall Street executives, on loan to the government, “advised” the presidents that unconditional and unlimited bailouts to their companies could be the only solution. As a result, financiers remain free to speculate at will and give themselves vastly bloated salaries and bonuses. A good example is provided by a Dartmouth University professor, B. Epsen Eckbo, who wrote during the first months of the economic meltdown:

“It’s a zero-sum game: if the tax-payer doesn’t insist on the best possible deal, some other party to the bailout will reap benefits at the tax-payer’s expense. A clear case in point is the $8 per share windfall to shareholders of Bear Stearns, when the government debt guarantee of that firm caused JPMorgan to raise its takeover bid from $2 to $10. This type of shareholder windfall, which we also saw in Sweden as the stock market responded to the government’s blanket debt guarantee, would have been avoided had the government taken an equity stake in the bailed-out bank.”

The Obama administration did take an equity stake when it bailed out the automobile manufacturers General Motors and Chrysler, with the potential to earn a profit from doing so, while saving jobs directly and indirectly associated with the two companies.

Why not do the same with big banks? Or, why don’t we not be timid and go further: Why not eliminate financial speculation through public ownership of banks? Norway and Sweden did solve their banking crises, but not underlying economic weaknesses — Norway remains dependent on high oil prices and Swedish unemployment, while well below its peak, remains far above what it was before the early 1990s crisis.

In fact, there is a successful example of state-owned banking inside the United States. It is the Bank of North Dakota, wholly owned since 1919 by that state’s government. The Bank of North Dakota operates as a commercial bank, taking deposits and making loans, and also is where the state government deposits its revenue.

The state’s tax money, therefore, is invested in local infrastructure projects rather than being used for speculation by national banks as other states’ revenues are. So successful is the bank that it has given $300 million in profits to the state government in the past ten years.

North Dakota is the only one of the 50 U.S. states to have its own bank, and while the local economy is currently strong due to an oil and gas boom, it certainly serves as an example. Why not replicate this success elsewhere?

As long as we are asking questions, why should something so critical to a modern economy as finance and banking be in private hands for private profit, and be conducted recklessly at the expense of everybody else? Why shouldn’t banking be a public utility, operated for public good? Otherwise, it is only a matter of time before the next financial crisis, when, once again, the profits will be privatized and the losses socialized.