Why the Cure for a Sluggish Economy Is Actually Longer Vacations
cepr.net
cepr.net
The standing assumption here is that it is obviously Right and Good for everyone to have a job and work and that the Government must, at all costs, do everything in its power to create jobs so that everyone can work. However, not everyone wants to do traditional work- some want to be caretakers to their family, some want to pursue alternative lifestyles such as homesteading, and yeah some just want to be supremely lazy. Assuming that it is always ultimately Right and Good to have jobs for everyone regardless of inclination and ability leads to crazy finagling to "create" jobs and to never even consider eliminating jobs by any means (such as dismantling Government agencies that have been shown to be completely useless cough cough TSA cough cough).
Personally, I think having a base income for everyone in the US would boost the economy way more than job creation and assuming everyone should work. Eliminating homelessness, poverty, and hunger would ensure that every person in society lived at a high basic level of existence and would free up time, effort, and money that is currently tied up in serving the poor, hungry, and homeless. However, I cannot see that ever becoming a reality in the US so the point is probably moot.
However, I do think we can implement better short-term policy as well, with proper maternity/paternity/care leaves and longer overall vacations. Germany and other advanced economies have done so and have clear benefits. We can also improve the tax write offs for dependents, to make one parent staying home longer an option not just for those either really well of or really poor, but for most families.
A couple years ago we had absolutely no credit here, so the Government created an almost free credit line (from R$160k to R$300k) to be used to buy homes. This is a major problem here and was kind of a good move.
As a consequence of that now every place is very expensive, because everybody has at least R$160k (except people like me that hate to borrow money) so places that went for R$50k (not nice ones) are now around R$250k, nice places that where on the range of R$300k are now around R$700k to a million.
If you saved money before the credit line you are in a bad position now, back in 2007 It was possible for a graduate student to work, save and in a couple years buy a small apartment for R$50k in a low middle class neighborhood, nowadays you can't find anything for that amount of money not even in the really bad places, I am not sure it is the right solution, we just inflated prices and people still can't buy homes or they do and will have a debt for live.
So I like that people have credit to buy their places but I hate seeing prices rise like that for no reason besides "But you can get a loan..."
It has absolutely no relation to how a market would react to BI. Home loans are targeted, BI isn't; home loans are granted for buying expensive goods, it should be very hard to buy anything expensive with BI.
Too bad that you brought our experience with real state loans, instead of our experience with guaranteed income (biggest in the world), what is somewhat similar to BI, and could teach some good lessons. Fact is, people that choose to rely on guaranteed income moved to the poorest regions of the country. It would be great to see some data about how those regions fared.
I see a relation to how prices might behave as now the economy is flooded with free money while most people are still working and generating their own income.
And I don't agree that we have the biggest "guaranteed income" ours is a very badly designed system (aimed at buying the poorest votes and deeply exploited) based on bad assumptions on the population and how to distribute wealth, that is why so much money is stolen from it.
Without health and education investment, it's a short sighted project instead of a long run one which would aim to take those people out of misery.
BI is for countries that have solved at least the basic educational and infrastructural problems otherwise it's just a waste of man power to build those.
The increase in price that occurred as a result of the new loans is an excellent example of unearned economic rent, i.e. the owners of the now inflated real estate did nothing to generate value. Thus, the tax system should be structured to capture that inflation via capital gains tax.
Obviously, this would be most unpopular amongst real estate holder. Everyone loves being a petit rentier because, something for nothing.
The other necessary component is prudential regulation. Loans for mortgages need to be constrained by loan-to-personal_income, loan-to-rental_income and price-to-rental_income ratios to control the flow of inflationary credit.
Employers hire to meet increasing demand which leads them to fight over workers via salary. This increase in salary drives up the prices of goods.
The article is about secular stagnation which is the opposite of demand outpacing supply. So policies increase demand in other times and places would lead to inflation. But right now that increase of demand would just balance out the secular stagnation.
Three word answer: money equals power
(hah, I upvoted you by mistake)
If (legitimately earned) money is how society compensates people for providing things we value, why wouldn't influence (what you call "power"?) come along with it?
If you are concerned about "power" being used to violate the rights of people without it, there are systems of law which criminalize such acts without preventing individuals from earning more money (i.e. possibly expanding the "wealth gap").
There are two kinds of corrupt societies: ones where people get rich and then seize power, and ones where people seize power and then get rich; and while both are bad, it's _much_ more dangerous to be the second kind (power leads to money) than the first (money leads to power).
If you remove the artificial incentives to work, no one will work.
That's bullshit view of humanity and frankly, insulting to me as a human being. If you really take a look at "99% of people" you'll see individuals with dreams and passions, most of whom never get to realize them. That nice girl who served you burger and fries in a drive-thru? She wanted to be a pianist, but she had to enter the job market early. She is knitting over the weekend and cares about local problems. That taxi driver who drove you to work probably builds RC planes in the little free time he has, or maybe serves in HOA.
If you really, really look at general population, you'll see people with energy to build, create and experiment. Some of them get lucky and find a fulfilling job. Most of them have to try and cram their real work into weekends, if they even have them. And yes, a lot of them come back from work and go straight to drinking and watching TV - because that's the only thing you can do to relax after you spend all your energy on a 8+ hour job and commute. It's a symptom.
Yes, if you remove artificial incentives to work, some people will stop working. Maybe a lot. They'll go drinking, spending time with friends, and trying to figure out what they really care about in life, now that they have time. And most will likely get bored after at most a month of drinking and start doing something productive. Because humans in general have the need to build, create and improve.
Things will have to be rearranged; some jobs automated, others maybe taken in short shifts out of the sense of social responsibility. But they will get done. Reality is not WALL-E.
If I became a millionaire overnight I would probably take a month off to be supremely lazy. Then I would get back to work in whatever strikes my fancy, probably for VERY long hours.
Do you have any idea how much mindless, painful, miserable work the people of Earth do to allow you to have a computer connected to the internet, with food in your belly, streets to your house, a house to live in, with electricity to turn on? Only on a site for programming could so many people honestly believe such a white-collar-centric hypothesis.
So? Neither is what 99% of companies are doing.
That's why Basic Income is a topic now and not 100 or 1000 year ago. We know we could automate most of that survival-level task, at least in principle; at minimum reduce it to small amount of maintenance job while we push for development of self-healing materials. Also, UBI seems inevitable now - because the market starts to incentivize automation of everything, and that means most people will be out of jobs soon anyway. You prefer them to starve and/or rebel and trash all our progress, or shall we just skip that bullshit and go straight to something better?
> Only on a site for programming could so many people honestly believe such a white-collar-centric hypothesis.
Or maybe this "site for programming" is acutely aware of our current level of technological development.
Irrelevant. Technological progress does not erase work, it merely changes what work the market will pay for people to do:
-People will hire teams of people to play video games with them.
-They will hire teams of costume designers to create wild, highly personalized clothing for them.
-They will pay for live musicians in their living rooms.
-They will pay young beautiful people to lounge around in their living rooms.
-They will pay large teams to plan and cater elaborate parties in their homes.
-They will purchase expensive hand-thrown dishes, because they'll think it shows their authenticity and good taste.
-Homes will be decorated to a degree which we have little conception of today.
-Teams of well-paid cinematographers will produce their home movies.
-People will buy social media teams to write funny twitter posts for them.
If you can't imagine what they will hire people to do, that just says that you're not "frivolous" enough to understand the whims of the people of the future. You'd hate them if you met them, but their system will actually work, unlike UBI.
>"builds RC planes"
Like I said. People don't want to work.
You just changed the examples of not working to be more elitist.
Who tars the roof? Who wades through clogged sewer lines? Who mines the rare metals in your cellphone? Who farms the maggots for industrial fisheries? Who makes the textiles? Who slaughters the cattle? Proctologist? Who embalms our dead? Who does QA for your phone's RAM? Who cleans up the remains at violent crime scenes? Who solders together your alarm clock? Who tears out asbestos?
These jobs (insofar as they need to be done, and some certainly do) will always be difficult, dangerous, and/or repulsive; but with basic income, they'd have to offer enough money and prestige to attract people who are now free to walk away.
No. You said, I quote, "99% of people would rather be screwing, drinking and watching TV all day long".
My examples are all kinds of things you can get paid for if you are lucky and that use skills important for providing value to society.
> Who tars the roof? Who wades through clogged sewer lines?
Initially people, for additional money. Later, machines.
> Who mines the rare metals in your cellphone? Who farms the maggots for industrial fisheries? Who makes the textiles? Who slaughters the cattle?
Machines.
> Proctologist? Who embalms our dead?
People, for additional money.
> Who does QA for your phone's RAM?
Machines.
> Who cleans up the remains at violent crime scenes?
People, for additional money.
> Who solders together your alarm clock?
Machines.
> Who tears out asbestos?
We don't use it anymore.
There's a spectrum between "no one working anymore" and "UBI giving you other choice than work or starve".
We've heard this sort of argument before, of course. Back before the emancipation, some white landlord would say "If we let these negroes go, who is going to pick the cotton?" --- We ended slavery, and we should end wage slavery.
Of course. That's why we have machines.
You just answered your own question. In a world with better income equality you wouldn't be getting fucked over so hard you have to work 3 times the number of hours as someone else to make a living wage.
I also find the idea that inequality is what motivates success abhorrent, but whatever floats your boat.
Inequality is only a problem today, because the poor are suffering. If everyone has basic level of living standard (which probably increases as we approach post-scarcity), inequality would seem much less of a problem.
Especially in the US so much "inequality" is a First World problem.
They are doing it for survival not because they have a choice.
They also have no time or ability to increase the overall demand in the economy.
If you said in an interview that you want to work for my company (imagining I had one and was in a position to make hiring decisions) just to spite some other person, or that you'd be taking an attitude of spiteful competition at work, I would have to politely grind through the rest of the interview and then recommend we never call you back again.
So how many people do business in foodstuffs? All of them, maybe.
It does sounds like a sane way to get from where we are to the Star Trek/Culture post-scarcity nirvana. Throw in fusion power for unlimited energy (or dramatically better solar), and baby you've got yourself a stew :-)
Most economists agree that directly handing money to people is completely effective economic policy. For cultural reasons, though, we have the fig leaf.
The two methods we have found are physical coercion or financial coercion.
If all jobs got roughly the same remuneration, most people would take the easy fun job, as much as they claim otherwise.
People don't leave their jobs as parking lot attendants because they're not challenged. They leave because they want to buy a new TV, a car, and some fly threads.
If I could make as much reading all day in a little box, occasionally handing people their change, as I do in tech, I'm going to that parking lot.
It's not the blue-collar jobs you'd have trouble filling. It's the lawyers, doctors, accountants, and so forth.
Outside of the hobby careers (like tech, architect, etc.), most white-collar jobs suck terribly.
Doctors we won't have a problem with because supply of doctors could drop significantly and medical schools would still be full.
Most accountants I know like accounting, and would not quite their job in order to make 10k to sit on their butt.
I also think your view of being a minimum wage worker is very idealized one.
Having worked many minimum wage jobs in college I can tell you I would require a significant raise to work any of them again. Being constantly screamed and cursed at by middle managers, standing for 8 hours straight without a break, not knowing what your schedule looks like in a week, working until midnight, occasionally working 12 hour shifts. No thank you. I would much rather write software, do accounting, or be a doctor.
People don't work shitty jobs because it's easy they work shitty jobs because they didn't hired for a better one.
There is: pay sufficient rewards for doing the work that sucks that it is a net positive, as the utility of the reward exceeds the disutility of doing the work.
Yes, it is. And as much as people would like it to change, it's not going to change anytime soon. So we need to work and have jobs so that we can have places to live and food to eat.
This is less than 1% of the increase in US depository institution (Bank) excess reserves since 2011.
The SBA 2014 amounts are only half what the US provides in foreign aid to other countries.
It represents only .25% of the total value of QE2.
The US can only claim it is serious about economic recovery when it redirects its misguided intervention into its economy, to the sector that creates the most jobs and individual wealth - small business. Until then all the liquidity the USGOV and Fed has and continues to manufacture will be sequestered in large company balance sheets, in offshore tax havens, and on bank balance sheets typically on deposit at the Fed.
Insanity.
Having government come in and force companies to pay more in wages overall doesn’t seem like the best idea. Many companies, especially young companies struggle to keep their head above water and even small changes in wages can push them into closing up shop. There is no discussion in this article about any potential negative consquences. Magically, we’ll increase every company’s expenses and they will hire more people and no company will fold because of it. This is not a realistic scenario they are presenting.
Productivity is not just what people do. It's mostly about the economical environment around them. Same number of similarly-capable people will have one productivity in SV, other productivity in China, entirely third one in Kenya.
There all "kinds" of work around us. Maybe you get access to better work that far outweights the tiny decrease of time you dedicate to it.
Similar for the least aggregate wages can be before the overall economy is not healthy.
Who'd have thunk.
Not gonna buy a boat for 10 vacation days total per year.. Why would I?
25 days on the other hand.. That's a solid three extra weeks of boating. Might buy a boat.
The more important question is, how are similar countries that didn't adopt the 35 hour week doing?
http://i.imgur.com/g9NA76s.png
An extra 5% of working age employment in the US would mean something like 7M more jobs.
We could also make the argument that cutting taxes would spur more spending. If you increase my disposable income, I'll buy some new studio monitors and an Allen & Heath mixer.
Just increasing vacation time results in a higher labor cost and thus raises prices, negating the benefit.
If you include intangibles like quality healthcare and reasonable amounts of vacation time, then I'd argue that France is far wealthier than the US.
Not me, I'm going to buy some expensive speakers
I guarantee if you asked Americans if they would trade their 2.5% (or whatever) economic growth for Germany's 1% in exchange for 20 days guaranteed vacation per year, most would say "hell yes". The people who wouldn't take the trade are those rich enough to not need the vacation.
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Policies aimed at shortening work hours can have a dramatic impact on imbalance of supply and demand. If the amount of vacation time is increased an average of one week a year, this amounts to a two percent reduction in supply of labor.
Government-mandated longer vacations are not actually reducing the supply of labor. It doesn't make people disappear. It just makes them work harder for the rest of the year to make up for the extra week of vacation. Combine that with stagnant demand (no rises in income = less consumption and also less tax money = less govt spending) and you haven't solved anything.
The real cure for a sluggish economy is a large-scale, man-fought war (barring any kind of nuclear event). War simultaneously boosts demand as the government ramps up spend across a bevy of sectors (industrial, aerospace, medical, food, science, tech) and the labor force decreases for obvious reasons.
Longer vacation is a much nicer and more politically correct thesis though.
Remember, people compete with each other, so do companies. They're not trying to hit some predetermined level of yearly productivity. If you give vacations to everybody, they'll actually spend some off time, that's that.
This was actually tried. In Russia a full week of vacations was introduced, around the New Year. Did people start working harder? No. Did anything collapse? No.
Only if you win, and only if nobody is actually fighting you on your soil.
The only reason the USA is such a superpower now is because literally everyone else involved had their infrastructure decimated.
Look at Japan, Germany, the UK, and France now. They were devastated (both infrastructure and population-wise) and now they are among the strongest economies in the world, coming in behind the US and China at numbers 3,4,5,6 respectively in terms of nominal GDP.
Just as forest fires burn down old trees and put nutrients back into the soil to spur new growth, so does war force countries to rebuild and rethink.
I'm not advocating for war, but it's a much more defensible thesis in my opinion (large temporary increase in aggregate demand, large permanent decrease in labor supply), much more so than increased vacation time.
There would not be any new people. They're barely replenished with all the set of tricks you can pull.
Any soldier who falls in battle means, since wives need husbands and since it's customary to let youth fight, your nation is smaller by two. Permanently. That's what we have today, anyway.
https://en.wikipedia.org/wiki/Post%E2%80%93World_War_II_baby...
Yes, now. After decades of depression.
Send them all to war, half of them will come back happy to be alive.
If you're a merciless dictator, that's definitely the easiest way to make your people happy.
Companies would squeeze more work from their labor pools if the government mandated longer vacations, especially from homogenous/low-wage workers due to the mismatch of labor supply and demand that points in the firms' favor at the moment. I don't think people would necessarily feel motivated to work harder for the rest of the year after a long vacation, but I think many would feel like their job security threatened by someone who was willing to put in more hours than them to make up for this new government policy.
Even for people who could work harder to make up for lost time, I don't agree with the assumption that they would. Remember, everyone has that vacation time, and is required to take it. There's no need to work harder to make up for it.
I'm assuming they would work harder not because they were happy and motivated by getting a longer vacation, but because the firm might go out and hire someone who would put in the extra work due to the oversupply of labor and the undersupply (and shrinking due to automation, mismatched skills) of jobs.
The government spends as much as they can on all those things because people believe their very existence is at stake. Too bad we can't find that sense of urgency any other way.
That's only true in certain exemptions, such as the computer-related occupation exemption and the executive/administrative/professional exemption. FLSA exemptions have either both a kind-of-work and pay qualification (as for the computer occupations exemption), or just a kind-of-work qualification (as in the motor carrier exemption), none have just a pay qualification.
> raising this to a sane figure ($70,000?) would create a lot of jobs and improve quality of life for employees
Alternatively, it would eliminate a lot of the jobs in the covered areas that are currently paid less than the new threshold. (I tend to think it would be a net win overall, but it wouldn't be one sided in its effects.)
As for whether it would eliminate or increase number of jobs of a given type, that depends on how many companies could afford to pay their employees better while still having sustainable business models; I'm not equipped to say how many would.
Simplifying that, we will gain more by producing less?
They're basically arguing that e.g. instead of 10 workers producing 10 widgets, you have 12 workers produce 10 widgets with each of them taking more vacation. Labour costs go up, some more wealth gets shifted back to labour, and this increases aggregate demand without changing supply.