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Why we don't have a 10 hour work week.
I am not an economist, but it feels like there is an easy and obvious solution to why we don't have a 10 hour work week despite increased economic productivity.
Let's say I work 40 hours a week. I get paid 100k per year. Now, let's say I negotiate with my employer a deal to work only 20 hours a week. How much should I get paid?
The answer, of course, is much less than 50k. Although I will be doing half as much work, the overhead of my employment (health care, HR, managing me) has not decreased by 50%. Perhaps, depending on that overhead, the value of my half-time employment is now only 25k a year, or maybe even 0!
Let's take this a step further. Let's say I'm a surgeon that trains for 10 years and then works for 30 years after training. Let's assign a cost of 1 to the training years and a benefit of 1 to the working years. The surgeon has a net value of 20. If now, he only works half as much, his net value doesn't go to 10, it goes to 5. We now need to train 4 times as many surgeons.
People naivëly assume that, as a society, we have a choice to work half as much and be half as rich. I don't think this is the case. By working half as much, we might see a 75% or more reduction in material prosperity.
This is obvious when we look at who works. Contrary to what most people think, rich people work more. People who earn more per hour tend to work more hours. They get highly compensated for additional labor, and are therefore more incentived to perform it. This is as it should be. A society where the highly skilled work fewer hours is one that seems a massive decline in standard of living (as per the surgeon example above) Expensive assets need to be utilized more completely than cheap, replaceable assets. We can afford it if the poor work few hours. In fact, in the United States and other western countries this is already the case.
This obviously has huge implications for inequality. Too reduce inequality, we have to reduce the rewards that high-income people get for their labor. But this will cause a large reduction in the hours worked by high skilled people and will cause a much larger decrease in GDP than the reduction in hours. By tolerating inequality, we can have a much higher level of economic output, and thus more money to be spent on social welfare programs. The costs to reduce inequality are very high indeed.
This isn't entirely theoretical, there are European countries with more generous paid leave and lower unemployment rates that have much lower hours worked per worker. You can look at GDP per Capita per Hour Worked per worker and see how that correlates with productivity. Matt Brunieg has an old blog post comparing U.S. and the Nordics that suggests the relationship is relatively linear and they at least are able to work less hours per work and maintain comparable GDP/hour, and obviously there are tons of confounding variables. They do this by giving people long summer vacations rather than shorter work weeks
https://www.peoplespolicyproject.org/2018/05/31/work-levels-in-the-us-and-nordic-countries/
Given the demographics of the Nordics (and the oil wealth in Norway), shouldn't we expect the Nordics to have a GDP/hour worked far in excess of the U.S.? The fact that they don't is interesting.
What if we only looked at U.S. workers of at least 25% Nordic descent and reran the comparison? I think we'd see Nordic-descended U.S. workers far outstripping their peers in Nordic countries in terms of GDP/hour worked.
I think we should always be careful using Nordic countries as comparisons. "Let's take a look at these high-IQ, ethnically homogenous, high-trust societies. Now compare them to the United States!".
Norway does outstrip the U.S. in GDP/hours worked because of oil, at least in the 2016 data.
If Danish Americans have higher productivity than Danes it could be due to American institutions and increasing marginal returns on hours worked. It could also be that Danish Americans, as members of a much larger society with a wider range of IQ's can primarily occupy managerial and technical roles, where a larger share of Danes in Denmark end up mopping floors, waiting tables and taking care of kids because there isn't a population of low IQ people to do it for them.
I'll grant the Nordics aren't a perfect comparison class but what country that has achieved a major reduction in hours per worker is? Just going off Wikipedia's Labor Productivity & average hours worked list Germany has a GDP per hour of 68.85 vs. the US's 73 but 1300 hours per worker vs. America's 1,765. The UK has a much lower GDP per capita 54.35 but much closer hours worked, 1670. France has 68.63 GDP/hour and 1514 Hours worked.
OP is proposing a highly non linear relationship between hours workers and productivity. No one has reduced hours worked to the 20 hour work week (~1000/year) but within the range of hours per worker we see internationally the countries with the fewest hours worked have pretty high productivity. If you assume there is even a linear relationship than Europe is a bunch of sleeping giants economically that could increase their GDP by 20% overnight by skipping summer vacation.
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