Studies of Economic Change

Working Hours

The reduction of the hours worked is the necessary solution to reduce the unemployment rate and to increase the employment rate. In comparison to the alleged targets of the employers and the assumptions of the forecast of the unemployment rate we will see now the number of hours worked under the condition of the minimum labour force participation assuming political passivity and the maximum labour force participation of the 15 to 64 year olds:

Alleged targets of the employers and their associations:

Two points argue for going back to work 40 hours a week. First the decrease of the unemployment rate is an indicator for the increase of the labour demand. But this is in fact based on the increase of marginal including short-time employment and the export surplus. At second the low wage increase supports the international competitiveness of companies. One single company might increase its market share but a statement about the development of the total market is still not possible. But it is for sure that the low productivity rates caused by low wages endanger the competitiveness in the long-term.

Assumptions:

The end of the 80th of the last century was characterised by the agreement of reducing the hours worked to 35 hours a week by the collective bargaining parties. This process has come to end with hours worked of about 38 hours a week on average in the midst of the 90th of the last century. The basic forecast of the unemployment rate assumes weekly hours worked at this level.

Basic forecast assuming the minimum labour force participation (political passivity, see chapter 2):

Now we want to answer the question of the weekly hours worked which ensures full-employment theoretically. Even if the labour force participation of the 15 to 64 year olds remain constant which represents the minimum level hours worked of 32.5 to 34.0 hours a week ensure full-employment.

Basic forecast assuming the maximum labour force participation (see chapter 2):

If the labour force participation of the 15 to 64 year olds increases to the maximum possible level weekly hours worked of 30 hours or below are possible. According to the demographic development a further decrease of about 1 to 1.6 hours is possible which should be neglected at the moment.

Conclusion:

The assumptions have led to the conclusion that the reduction of hours worked is the only controllable variable of the economic performance. The analysis of the demographic development has shown that the increase of the labour force participation of the 15 to 64 year olds to the maximum level secures the pensions even without increasing the retirement age and decreasing the retirement pays. Consequently the hours worked have to be reduced to about 30 hours a week or below to ensure full-employment and to secure the pensions.