Beyond Business as Usual
This article was adapted from Juliet Schor's book Plenitude: The New Economics of True Wealth.
Now that we're in the endgame of financial reform, and a second stimulus is off the table, it's looking more and more as if the nation's jobless will be fending for themselves. The punditocracy has declared that the recovery is for real, so 26 million officially unemployed and underemployed Americans will be getting a promise of future growth. But a return to business as usual—"jobs and income will trickle down via growth"—is a disaster, on economic and ecological grounds.
First, it won't work. The Economic Policy Institute calculates that we'd have to add half a million jobs each month for three years to get back to the pre-crash unemployment rate. Given that the biggest monthly job growth number we've seen in this recovery has been 162,000, with a hefty chunk of that attributable to temporary Census jobs and stimulus spending, half a million is an order of magnitude larger than what we can realistically expect. Globalization means that many of the new jobs will be created offshore. Even more significant, growth-induced productivity increases and labor-saving technical change are reducing employers' need for workers. Robots are being used to clean up the gulf oil spill; customer service representatives are no longer people but machines. This is mostly a good thing, but only if the displaced find a livelihood. As Robert Pollin recently argued in these pages, the aggregate output, or overall growth, approach won't get us back to 5 percent unemployment until 2017.
The other flaw in the "grow our way out of unemployment" approach is that it's ecological suicide. The latest findings on climate change are that we have already passed critical, frightening thresholds. We must reduce atmospheric concentrations of carbon dioxide to 350 parts per million as quickly as possible even to have a chance at forestalling catastrophe. As Americans, our responsibility to reduce emissions is unique. Our 4 percent of the planet's population accounts for 28 percent of its total carbon legacy, and our annual per capita carbon footprint is twice the size of many Western European countries'. It's more than quadruple that of China. A bottom-up, technology-based shift to cleaner energy is essential, but its effects will phase in gradually. It's nearly impossible to meet emission targets only by reducing the carbon intensity of each dollar spent. But we can get results immediately by changing the path of aggregate output. As American GDP fell in 2008, so did greenhouse gas emissions.
Progressive economists have mostly responded to the economic crisis with retro-policy, advocating financial reform and spending on infrastructure, including on green jobs. These things are necessary. But New Deal 2.0—expanded federal spending—still relies on climate-destabilizing growth. The retrofits and conservation measures that result from green jobs programs in effect mimic reductions in the price of energy. They free up purchasing power for other goods and services, the production of which causes more emissions. Unless we find a solution that does not rely on expanding overall demand, we'll be addressing unemployment by unleashing even more climate chaos.
The alternative is to transform the labor market by introducing downward flexibility in hours of work. If jobs are restructured to require fewer hours, employers will have to hire more people for a given level of sales. If work time were allocated more equitably, it would not only reduce unemployment; there would be wider benefits to all workers, their families and communities.
The industrialized economies have followed the path of hours reductions since the late nineteenth century. A sizable portion of productivity growth was used to increase leisure time, and between 1870 and 1970 annual working hours in most Western countries fell from 3,000 hours to fewer than 2,000. This history reveals that workers who lost their jobs to technological change and industrial restructuring were reabsorbed into the labor market by a combination of economic growth and falling hours. In most European countries this process has continued, and Germany is notable for containing unemployment resulting from the global collapse by reducing hours. Here in the United States the mainstream economic discourse has essentially banned hours reduction from the conversation.
The United States has been an outlier, as in the 1970s per capita annual hours of work started to diverge from this historic pattern. Americans began to work more, not less, with the average worker putting in 204 more hours in 2006 than in 1973. A combination of high benefits costs (especially for health insurance), weak unions and a slack labor market leading to longer schedules. In the earlier period, when hours were falling, productivity growth was partly passed on as a shorter workweek. When that stopped, one result was that a rising level of GDP was required to produce each job. The average German worker now labors 350 fewer hours per year than his or her US counterpart, as does the average worker in the Netherlands and Norway. The gap with France and Italy is 200 hours. In other words, to employ an American worker, in comparison to a European, 15 percent to 25 percent more hours of work have to be created.
After the economic collapse, some companies did use work-sharing and furloughs to minimize layoffs, but there seems to be little momentum to expand those programs or refashion them for use during a recovery. It's a cause progressives should take up, by advocating the conversion of involuntary share-the-pain measures into desirable workplace benefits. Four-day workweeks have been very popular. New employees can be hired on 80 percent schedules, a policy the Netherlands used to contain unemployment in the 1980s. Survey evidence and the basic maxims of behavioral economics find that people strongly prefer to gain free time at the expense of income they haven't yet received (i.e., future raises) over taking cuts in current paychecks.
Rather than letting hours rise as the economy grows, the green progressive solution will be to use productivity growth to create more time off from the job while keeping pay stable after inflation, at least for higher-paid workers. (Lower-paid workers should get increases and time off, to redress inequality.) There are a number of carrots that governments can use to get us onto this path, such as tax credits, partial-unemployment insurance and subsidies. This will allow our carbon footprint to shrink much faster, because of the additional spending that is not injected into the economy and because as people have more free time, they shift to lower-impact modes of transportation and consumption. One study from the Center for Economic and Policy Research found that if the United States were to shift to Western European work patterns, energy use would fall by 20 percent. Nations with lower hours of work have smaller ecological footprints, after controlling for income and other variables.
Conventionally, those calling for fewer hours of work point to the good that would come from having more time for family and community. And they are correct. But there's an even more transformational path that becomes economically rational as the balance between the availability of time and cash is altered: people reduce their dependence on the formal market by acquiring goods and services through "self-providing." The most common activities are food related, such as growing vegetables, raising poultry or keeping bees. But self-providing is also occurring in household energy generation, and ecologically friendly forms of do-it-yourself home construction, using materials such as straw bale, stone and compressed earth. There's even a small-scale-manufacturing movement, in which people use computer-driven, personal-fabrication technologies to make a range of products, from toasters to bicycle frames.
Across all these activities, the key is to take the time that is freed up from the corporate economy and use it to meet needs. The production methods are clean and green. And creating more self-reliance in food, energy and housing leaves people better equipped to weather the economic and climate storms that will be more likely in coming decades. As alternate ways to feed, house and power ourselves develop, communities become more resilient and self-determining. This is also a strategy for reducing inequality, as people learn new life-supporting skills that create livelihoods and enhance their labor market power.
Ultimately a progressive economic vision is one in which our economic arrangements yield a sustaining planet, creative work and fair distribution. The business-as-usual economy is failing miserably on all those fronts. It's time to diversify out of it, in the process creating low-impact, high-return communities that nourish us and the planet.