Tackling U.S. Unemployment: The 80% Solution

Guest post by Juliet Schor*

*Juliet Schor is Professor of Sociology at Boston College and author, most recently of Plenitude: the new economics of true wealth.  Her work currently focuses on the relationship between sustainability and American lifestyles.  Juliet’s pioneering research was published in such best-sellers as The Overworked American: The Unexpected Decline of Leisure (1992) and The Overspent American: Why We Want What We Don’t Need (1998), as well as in many other publications.  At Worldwatch, we fondly recall that Juliet contributed a textbox on “U.S. Consumers, Cheap Manufactures, and the Global Sweatshop” to our State of the World 2004 volume. This blog piece first appeared on Juliet’s Economics & Society site at www.julietschor.org/.

A prediction, indeed premise, of my 2010 book Plenitude was that the U.S. labor market was unlikely to recover any time soon. This has now become the new conventional wisdom, in sharp contrast to the official story when the book was written (in 2008), and in the years since then. The punditry now reports that the national unemployment rate is expected not to fall below 9 percent in 2011, with little being said about 2012.

Sadly, we pessimists are looking too correct. After a year of recovery, the U.S. economy is producing only as many jobs as are needed to absorb new entrants—the young people who leave school each with year (with or without degrees). If the private economy doesn’t do better than this, the people who have suffered from the 8.5 million or so jobs lost in the recent recession/depression will never be employed again. There are currently 14.8 million Americans officially unemployed, and another 26.1 million more are under-employed, discouraged, and marginally attached to the labor force.

In the Netherlands, part-time work is the new full-time.

GDP growth, which remains virtually the only large-scale approach to joblessness, is no longer a viable one. In December, economist Robert Scott of the Economic Policy Institute reported that while U.S. corporations did create 1 million domestic jobs in 2010, they created far more abroad: 1.4 million. Outsourcing will continue and is a major reason why just increasing the rate of growth of GDP cannot solve the nation’s unemployment problem.

There are currently more than four people looking for each available position in the United States. There is increasing cultural pressure to deny the reality of unemployment, as those affected become more socially excluded and less politically potent. A key goal for 2011 is to keep the unemployed in the public eye and active in the political arena. Efforts to organize the unemployed are going on around the country, with informal groups such as UWAG (Unemployed Workers Action Group) and official efforts by the AFL-CIO and some individual unions (e.g., the Machinists), but these fall well short of what’s  necessary to put these folks back to work.

That’s why it’s time for the 80% solution. It’s a fresh idea that solves a number of problems: unemployment, work-family pressure, and an impoverished civic sphere.

At the beginning of the 1980s, there was a sharp worldwide downturn, and Western Europe was hard hit. The Netherlands took an especially pro-active stance, opting for stable real wages and declining hours of work in order to get people back to work. New government employees were hired at 80% of a full-time schedule. Many got a four-day workweek, which was well-suited to a small country where quite a few young people commuted by train to their places of employment.

The 80% schedule caught on, and by the time I arrived in the Netherlands in 1995 as a Professor at Tilburg University, the nation was heavily invested in 80% schedules. Public sector workers were joined by academics. It was possible to be not only an 80%-time faculty member, but also a 60%, 40%, or even a 20%, i.e., a one-day-a-week professor. And in what is likely to be most surprising to U.S. readers, the whole banking industry had gone to 80% schedules and a four-day workweek.

People weren’t filling up their garages with consumer goods, but they did have loads of time. By 2000, the Netherlands passed the Working Hours Adjustment Act, which gave employees the right to reduce their hours, without losing their jobs, hourly pay rate, health insurance, or benefits. (Benefits are pro-rated).

Dutch hours stood at 1,367 in 2009 (2010 not yet available) in comparison to the United States, where hours are higher by 364. (That’s about 9 weeks more work in the U.S. than in the Netherlands). Dutch productivity per hour has been considerably higher than in the U.S., although in late 2010 it was at rough parity, because the Netherlands hasn’t laid many people off since the 2008 downturn, in comparison to the U.S., which has had massive employment losses.

In the Netherlands, part-time work is the new full-time. Three quarters of Dutch women workers are on part-time schedules. Twenty-three percent of men are also on part-time schedules, with an additional 9% on a compressed four-day workweek. What began as an extreme gender imbalance is being eroded as men have also begun to prefer shorter hours of work. Life satisfaction, the well-being of children, and a variety of other quality-of-life measures are far higher there than in the United States. Worktime is a big part of why.

If the U.S. started down the 80%-solution road, it would make a huge dent in unemployment. Employers could hire five people for every four jobs that are available. It’s a shorter worktime policy that doesn’t require cutting the hours and pay of people who have jobs. Instead, new people come on at 80% pay and work only four days. It’s especially feasible for younger workers who are getting salaries for the first time and for many of whom shorter hours are appealing.

While 80% pay may not be feasible for people in very low-wage jobs, if these schedules become more widespread across the higher-wage parts of the labor market, they will raise wages. Shorter hours eventually lead to “tighter” labor markets, in which employees can capture more of their productivity gains. Right now, workers can’t get those gains because their labor market position is so poor. With this huge unemployment pool, downward pressure on wages is strong, especially for the lowest-paid. Through this mechanism, the 80% solution could also serve to help alleviate poverty and low incomes. (Combined with a minimum wage increase, it would do even more.)

So spread the word and put the 80% solution on the table at the local, state, and federal level, as the debate about persistent unemployment and the economy drags on through 2011.

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