There is a measure in economics
called labor productivity. This is is a really important statistic
because it tells us a lot about how any particular economy functions, and
perhaps most importantly what it values. Remember above all else Economics is a study
of how people interact with things of value. So what labor productivity measures
is the amount of output generated for every hour of work done
in a particular nation. It’s a pretty simple figure to work out so long as
you have the data, it’s just national GDP divided by total hours worked in a given year, in a given
country. But what it tells us is truly remarkable. Workers today are amongst the hardest
worked individuals in history, while simultaneously being the most efficient. Sure, they have traded in grueling
factory floors and coal mines for airconditioned offices so they probably don’t
get quite as much sympathy as their industrial revolution contemporaries but the world
today is marred by different challenges. Hustle culture and the glorification of
roles like surgeons, investment bankers, and corporate lawyers have set a
precedent of on-call all the time, under the guise of professionalism
or being a team player. Expectations and key performance
indicators are increasingly monitored, scrutinized and increased year on year. Now the discussion around overworking
is not a new one, but it tends to focus on the mental health implications of this
reality rather than the economic impacts. Now we are going to be leaving that
aspect of this discussion to the side for this video and instead focus just on
the economics of the overworked world. Partially this is because
there are many people far more qualified to talk about mental
health and partially because well, sometimes for things to get changed it needs
to make economic sense for them to be changed. So the health implications of 100 hour weeks
aside, we really only need to answer one question. Does people working longer and harder
make for a more prosperous economy? Yup thats right we can be a society of
the most miserable and overworked shells of human beings imaginable and it likely wont
change if the answer to that question is yes. its economics that got us into this mess, so
maybe it is economics that will get us out. Intro add Now if you are watching this video while at work
and hoping that it will vindicate you putting your feet up for the rest of the day while working
from home, you might leave a little disappointed. Work is very important, both on an
individual level in the sense that it provides income to maintain quality
of life, but also on a national level because it provides the amenities that we
in the modern world have come to expect. Even what we would consider essentials,
You turn on a tap and water comes out, flip a switch and the lights go on, go to the
shops and there will be food available to buy, and, well all of these services are
the result of massive supply chains full of people that are
putting in a lot of effort. This hopefully shouldnt come as a
huge surprise to anybody watching, especially those viewers from developed countries
where these things are almost considered a given. But that actually might be part of
the problem, we have entered the Age of entitlement If we were to look back to the early
1900’s we would start to see a world somewhat resembling our own in the modern day. For the first time in history nations such
as the united states were seeing more people living in urban environment rather than the
country. The driving force behind this was jobs. Good paying jobs with defined
benefits and expectations. This new reality where people would
work for a large company rather than for themselves or another family on a farm
brought with it some pretty big perks. For starters these kinds of jobs
normally paid pretty well. What’s more is that the income was alot more predictable. A family working their own farm may be financially
ruined after a few bad seasons that was outside of their control. Whereas even if a factory workers
company went out of business they could likely find work in another factory across the street,
which for alot of families was a really big deal. Now the trade off to this stability was marginal
utility, which sounds weird but let me explain. The productive capacity of a farm is ultimately dictated by the amount of land it
has and the quality of that land. Once crops are planted and maintained there is
not much marginal utility to any additional hour of work. We explored this in our video
on do we need to work 40 hours a week, which also looks at some insights that
we won’t have time for in this video. But in general a farmer putting in 100 hour
weeks is not going to make corn grow any faster or a cow make any more milk, so
in a sense their best economic approach is to put in the bare minimum effort
while maintaining a healthy harvest. And again this is not to say that farmers don’t
work hard they definitely definitely do probably harder than I could ever imagine sitting
here in my loverly airconditioned office. it’s just that their outcomes are not directly
determined by the hours that the put in. Factory workers on the other hand were. A factory worker mounting
gearboxes in a new Ford Model T could produce more cars in a 12 hours
shift than they could in a 12 hour shift, because their output was almost directly
proportional to their time on task. Because of this the average worker in the US
at the time was pulling in over 60 hour a week. Now remember this was an average figure aswell.
There were still non production workers and for every one of those individuals
who was working 40 hours a week there was someone else working
80 hours a week to maintain this. This all started to drop very suddenly over
the course of just 2 and a half decades. Between the years of 1913 and 1938 the
average working hours in the US dropped from 58 hoursa per week to just 37 hours
per week. Lower than they even are today. Now there were of course alot of
world evens in this time period, the end of world war 1, the roaring twenties
and the great depression just to name a few. It would be foolish to say that these events didnt
have some impact on these working arrangements, but there was something more, and
something much more significant. Industrial Capital was starting to
become the centre piece of business. Look at factory from the early 1900’s, then look at a car factory from the 1930’s
and then look at a car factory from today. The common theme is that in there was less and
less workers using more and more machinery. The ford model T was built with hand tools, the
form mainline was built with heavy machinery, and the ford f150 barely has any actual hands
touch it the entire way though assembly. This was great because using machinery meant
that workers could do the work of many men in the same hours. This was
why workers were able to loose 20 hours per week while still
increasing GDP during these decades. At this time people were starting to contemplate
a future where workers would only be on the job for 10 hours per week, if they needed
to go in at all. People were speculating over a time where all the needs of man would
be provided by technology, and in many ways, we are there today. But of course the dream
of a leisure lifestyle did not come with it. The first big hiccup was world war 2, which
moreso than any other war in history was a battle of industrial potential.
Mechanised warfare was the name of the game and he who had the most tanks, and
planes and ships would shurely be victorious. This did two things, for starters it
introduced women to the workforce in a big way, while the men were off fighting, the women
of the waring nations would be responsible for alot of the assembly jobs that
were previously conducted by men. The second thing it did was put
alot of pressure on people to work more and more. It was no longer a
matter of producing cars for families, it was producing tanks for soldiers, who would
legitimately be fighting for their way of life. Putting in some extra overtime for
uncle sam was far more compelling than putting in overtime for henry ford. We can see the impact of the
war very visually on this chart but after all was said and done
things never really went back down. The average working hours of
the average full time worker have never been as low as they were in the later
1930’s despite leaps and bounds in technology. why ? because america entered the
golden age of entitled capitalism. The 1950’s and sixties saw massive increases in
living standards for average american families. People went from living in the cities to living
in the suburbs with big blocks and a car or two. But along with that came the loss of free
time. Suddenly getting to work involved a commute which added hours to the working day
without even adding hours to the working day. What’s more is that businesses that wanted to
cater to this new class of middle income american consumer had to work around their schedule, which
meant being open on weekends or later at night. Some of you watching may be able
to remember back to a time when shops were not open on sundays, and if
they were they would be closed by 1pm. If a customer facing business
tried to do this today they would be driven out by more
flexible competitors very quickly. Now this expanded timeframe has a
trickle on impact for everybody. A standard 9-5 middle manager might get calls
from weekend operations during their off days to tell them of some kind of incident and
suddenly they are firing up the laptop at 3pm on a saturnday to get everything sorted
so it doesnt blow up over the weekend.
Sound familiar? To many people it won’t if
they work in roles completely removed from any type of customer service, but
we have ultimately become a society that is obsessed same day shipping, 24 hour
opening times, and the customer is always right… Part of the reason we have become so obsessed with
this type of flexibility is because we need to get things done now, because we don’t have a free
time in our calendar until 2 weeks from now. Of course, entitled consumers are not the
sole reason for our overworked reality. That technical capital, you know the
machines that were supposed to make us so efficient at our work that we only
needed to put in 10 hours of work per week? Well it certainly did get alot better. We
got amazing technology that mean we could produce things almost from scratch with
no human intervention. but we also got technology that was better at making sure we
were always available to answer an urgent call, send a quick email, or be there to solve
an issue that just can’t wait to monday. Now alot of people will righully look
at this chart and say ahh, well you know sure we aren’t living in some dream
world of 10 hour working weeks, but its still certainly not as bad as back in the
day when people were putting in 60 hour weeks. And they would probably be right we are better
off today then we were 100 years ago, yippee, But this all ignores one other thing,
today everybody is putting in their hours. In 1960 around 25% of households were dual
income, and this was primarily comprised of younger couples just starting out. Of
course exceptions existed but it was rare. Compare this to today where over 60% of households have two income earners and
the core of the problem come to light. Not only are we slowly working more and
more hours, but more of our hours are not being reported, and what hours we do have left
after commuting are then been used on household chores because the prevalence of a dedicated
homemaker has fallen into serious decline. The standard 40 hour work week was designed
to have 5 days with 8 hours of work. Those working days would be split in 3, 8 hours
at work, 8 hours to sleep and 8 hours for leisure, not the ten hour utopia, but when you throw in a 2
day weekend that was all yours it wasn’t half bad. Today this looks more like 9 hours at work, 2
hours commuting, 2 hours helping another working partner out with household chores, 4 hours of
free time, and 7 hours of sleep. All topped off by some weekends where that iphone might go
off with a workplace emergency at any time. This breakdown might even be overly
optimistic. A 2003 study found that full time working americans had an average
of 3 hour of free time in a given day, this is including weekend! of which only about 1
and a half hours was continuous and uninterrupted. Alright alright so more people
are working more hours and thy are available for more hours beyond that,
to accommodate to this more in demand world, businesses have become more available to
work around peoples busy schedules that were made so busy by accommodating
to an increasingly in demand world. Great This also says nothing of other
pressures like globalisation and the increased cost of living,
but here is the thing though. Is the fact that people are working longer hours
with less free time actually bad for the economy? Sure we probably all know it
isn’t great for our sanity, but on a macro level lets look at
this like a cold hearted economists. What are those hours worth? If we look at annual labor hour figures for
oecd nations we will find an odd corelation. The nations with the lowest annual working
hours, are the wealthiest per capita. Germany is a great example of this,
it is the wealthiest nation in europe but the average working time of it
labor force participants are only 1363 hours per year. This is a pretty
similar story in places like the netherlands, denmark and norway who all put
in less than 1500 hours per year. Compare that to the US with 1783 hours per
year, or the real workaholics in greece, korea, and mexico who are all putting in
over 2000 hours per per worker per year year. So given this it is pretty obvious to
see that there is a negative correlation between working hours and wealth. But the golden rule of
statistics is that correlation doesnt equal causation so what
would really be causing this. Maybe these countries can get away with
working less because they are already rich. Well Germany seems like the market
leader so lets start with them. In Germany, you go to work, to work. Lunch breaks are short, team bonding exercises are
almost non existent and once you clock off you are out of there. This is well documented as a result
in there non customer centric business culture. Alot of tourists are quiet surprised when
traveling in germany to find that hotels and shops don’t have the same kind of
flexibility they might find in the US. Thats because the customer is seen as an equal
and not something to be put on a pedestal. The same kind of attitude is held with
working overtime, where putting in extra hours is not seen as a sign of commitment to
your work, but rather a sign of inefficiency. Now this has some really big benefits. For
starters workers in germany generate more output even with there reduced working weeks.
This is because their roles are normally strictly defined and closely monitored for
output. If you want to impress your boss you work more efficiently, you dont
answer text messages on a sunday. This also leaves more time in the day for other
endevours. This might be as straightforward as training to make them even more efficient workers,
but germany actually falls behind on that as well. Only 33 percent of german workers aged between
25 - 35 have any form of tertiary education, this is well behind the OECD
average of 44.9 percent. So what gives here, despite been less educated and working less hours these countries are
still better off than their overworked peers? Well here is the deal. Free time is
really important for a few key reasons. For starters it gives people time to shop, even if those shops don’t bend and scrape
to accommodate the consumer in every way that is still fine because people are not having
to bend and scrape to accommodate their workplace. The second is that it avoids slack labor. We explored this in our video on the 40 hour work
week but most roles in the modern world today should be based on output and results
rather than time in a chair. Letting people work towards results means they
might be able to pick up a second job where they can again work to achieve results
rather than working to the beat of a clock. Even if they don’t feel like working a second
job they will be far more refreshed and efficient when they do get back to their desks given
that they havent been worked half to death. Remember that labor productivity
measure from the beginning of the video, it was a measure of output over hours worked. A
nation is going to do much better on this metric if the hours that are being worked are being
worked by well rested and results driven workers. And this hints nicely at the final big
win for more leisure time in a society, it gives people the opportunity
for euntrepaneirship. The biggest hurdle for most people starting
a business is finding the time to do it. Alot of people don’t have the luxury
of quitting their day jobs and loosing regular income while getting something off
the ground so potentially million dollar idea’s get lost with people that don’t
have the capacity to make them a reality. An easy example is something like this youtube
channel. I am sure alot of you watching probably have ideas for video’s of your own but many of
those will go unreaised because making videos takes alot of time and effort that people in
modern professional roles dont have to spare. Now obviously a single youtube channel
isn’t going to change the world, but enough people working on passion project
is going to yield some very exciting results. Go and watch our video on why sweden a
country that is probably better known for its strong social policies is actually one of
the world biggest hotbeds for eunterpenership, to find out more about that. Final Thoughts Work is very important, and until the robot
revolution it will continue to be very important. But as with all good things
it is best used in moderation. We have fallen into a trap of chasing
the last hours of free time in our lives, has this made us richer? Well we
have become richer while doing it but the statistics are starting
to tell a different story. As for a solution? Well its a
difficult thing to walk back on, no business wants to be the first to shut off
their phones to customers, and while we are locked in that stalemate everybody is living in
a world where we are atleast partially on call. On an individual level if you really
wanted to fight the good fight, consider setting aside a day per week,
like sunday, where you don’t buy anything. It probably won’t do much individually but
if we slowly challenge the idea that “we have the right to buy at any given time”,
we might be all the better off for it. Of course when you do make your
purchases you should make sure you are getting to most out
of them, and you can do this With acorns!
UBI and lower working hours. Financial freedom and possibility of entrepreneurship for all should be our goal for the 21st century.