Sunday, March 27, 2016

Job Growth Doesn’t Mean We’re Getting Richer

Mises.org
March 27, 2016

In response to recent claims by the Obama administration and others that “millions of jobs” have recently been created, I examined the data here at mises.org to see if the claims were true. It turns out that job growth since the 2008 recession has actually been quite weak, and hardly something to boast about.
Nevertheless, our conclusions from these analyses tend to rest on the idea that job growth is synonymous with gains in wealth and economic prosperity.
But is that a good assumption?
In an unhampered market, the answer would be no, for several reasons.
First of all, as worker productivity increases, workers would need to work fewer hours to maintain their standard of living.
Second, as goods become less expensive (as a result of rising productivity) it would also be necessary to work fewer hours to maintain the same standard of living.
This need for fewer man-hours could translate into shorter work weeks and shorter days, but it could also manifest itself at the household level in the form of changes from two-income households to one-income households. Or, people may retire earlier, thus leaving the work force.
In other words, in a well-functioning economy over time, less human labor will be necessary to maintain standards of living, all things being equal. (If consumers wish to constantly increase their standard of living of course, they will choose more labor over more leisure for the sake of more consumption.)

Historical Trends in Work Hours

Even in our hampered and un-free economy, we can still see this basic trend at work. The number of work hours necessary to maintain the standard of living our grandparents enjoyed, for example, is less today than it was in 1950.
If middle-class consumers were satisfied with a two-bedroom residence in an unstylish neighborhood, one car, a single phone line, no air conditioning, and no internet access, many of them would require far fewer work hours than is necessary to maintain a common middle-class standard of living today.
In the 1950s for example, my mother shared a bedroom with three brothers in a two bedroom house in central Los Angeles. She went to a private Catholic school where there were 50 students to a classroom. For her family, there were certainly no European vacations or airline travel to seaside resorts.
And yet, no one would have described this lifestyle as “impoverished” or “lower class.” It was a middle-class lifestyle, but this lifestyle could only be maintained by far more than 40 hours of work at the family business each week, where both parents labored regularly.
This experience was not atypical.
In spite of increases in the standard of living since then, working hours have actually decreased. Indeed, according to Robert Fogel in The Fourth Great Awakening and the Future of Egalitarianism, from 1880 to 1995 the number of hours spent on work during an average day for a male head of household decreased from 8.5 hours to 4.7 hours. Meanwhile, leisure time increased from 1.8 hours to 5.8 hours.
In a separate study by Thomas Juster and Frank Stafford, it was found that from 1965 to 1981 in the United States, “market work” hours per week fell from 51.6 hours to 44 hours for men. For women, market work rose from 18.9 hours to 23.9 hours. We would expect an increase for women over this period as women began to take on “market work” at higher rates than before. This was for wage work only, though, and if we include “housework” we find that “total work” for women during this time period fell from 60.9 hours to 54.4 hours. Women exchanged some housework for market work over this period, but overall, the work hours decreased. Total work for men decreased also, from 63.1 hours to 57.8 hours. (Housework increased for men over this period.)
In yet another study by Mary Coleman and John Pencavel, average weekly hours worked fell for white men from 44.1 hours in 1940 to 42.9 hours in 1988. It fell for white women from 40.6 hours to 35.5 hours over the same period.
The typical standard of living increased over these periods, as the square footage of housing units increased, automobiles became more common, and amenities like telephones, washing machines, personal computers, and climate control became more common. The work itself also became less hazardous over this time period.

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