Irish Economy
The rich today work longer hours than the poor - Part 3
By Michael Hennigan, Finfacts founder and editor
Jun 16, 2014 - 8:25 AM

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US jobs Source: Prof Larry Summers - see link below

The Economist wrote in April that for most of human history rich people had the most leisure. "In 'Downton Abbey,' a drama about the British upper classes of the early 20th century, one aloof aristocrat has never heard of the term 'weekend': for her, every day is filled with leisure. On the flip side, the poor have typically slogged. Hans-Joachim Voth, an economic historian at the University of Zurich, shows that in 1800 the average English worker laboured for 64 hours a week. 'In the 19th century you could tell how poor somebody was by how long they worked,' says Mr Voth." However, in recent decades in developed economies, it's the rich who work longer hours than the poor.

Robert Frank of The Wall Street Journal in 201o cited research by Daniel Kahneman, the Nobel Prize-winning psychologist, which showed that “being wealthy is often a powerful predictor that people spend less time doing pleasurable things and more time doing compulsory things and feeling stressed.”

His study found that people who earn less than $20,000 a year, for instance, spent more than a third of their time in passive leisure, like kicking back and watching TV. By contrast, those earning more than $100,000 a year (more affluent than wealthy), spent less than a fifth of their time in passive leisure.

However, as the sharing/ freelance economy gets bigger, it's inevitable that the typical longer-hours for traditional self-employment than employee jobs will become common in the economy.

Even before the disruption threatened by Uber type smartphone apps impact many more sectors than taxi driving, taxi drivers in Dublin for example are working long hours to make a livable wage.   

In 1930, John Maynard Keynes, the renowned British economist, wrote in a 1930 essay titled 'Economic Possibilities for our Grandchildren' [pdf]

We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the nineteenth century is over; that the rapid improvement in the standard of life is now going to slow down -- at any rate in Great Britain; that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.

I believe that this is a wildly mistaken interpretation of what is happening to us. We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another.

The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption; the improvement in the standard of life has been a little too quick; the banking and monetary system of the world has been preventing the rate of interest from falling as fast as equilibrium requires."

Keynes forecast that incomes in the developed world would rise eightfold between 1930 and 2030 and they are already up sixfold but he also predicted the rise in incomes would cut the workweek to 15 or 20 hours.

Larry Summers, a renowned contemporary economist, who famously became at 28, one of the youngest tenured professors in the history of Harvard University, says that in some key sectors, technological advance could render key sectors insignificant in terms of employment. "The obvious example, of course, is agriculture where today less than one percent of the population [of US] produces enough food for all of us and much more. Headed in this direction also, potentially, is manufacturing. The most recent data I’ve been able to find, which are about five years old, suggest that in China a smaller fraction of the workforce is engaged in manufacturing employment today than was in 1990, despite the tremendous progress and gains in competitiveness that the Chinese manufacturing sector has enjoyed."

Summers, who served as President Clinton's Treasury secretary and as chief economic adviser to President Obama, last summer in a lecture, 'Economic Possibilities for Our Children,' [pdf] in tribute to his Harvard colleague, Martin Feldstein, highlighted not only falling hours worked but permanent unemployment: the 1950s and 60s, one in 20 men between the age of 25 and 54 was not working. If you do a simple extrapolation based on trend and cycle to the period a decade from now, between one in six and one in seven men between the age of 25 and 54 will not be working.  And as you would expect, these patterns are substantially more pronounced if you are less educated."

He added: "I think it is also fair to say that the evolution and growth of disability insurance is substantially driven also by the technological and social changes that are leading to a smaller fraction of the work force working. At the same time, as has famously and repeatedly been noted, the share of income going to the top one percent of our population has steadily increased."

Research [pdf] published by the Economic and Social Research Institute (ESRI) in December 2012, showed that in 2010, 22% of households in Ireland were jobless compared with an average of 11% for the EU15 and in Spain and Greece, where the rates of unemployment are the highest in the developed world, the percentage of households without a working adult stood at 10% and 7.5% respectively. The Irish rate in 2007 was 15%.

While wages will continue to be under pressure, Summers points to the relative costs in delivering health and education relative to goods (see chart above). 

Declining regular work; Rising low-paid freelancing in Ireland & elsewhere - Part 1

Knowledge workers in Ireland; Low-paid manufacturing grafters in China? - Part 2

Part 4: Upcoming.

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