I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Thursday Thinker, I share a smart idea or theory.
In 1930, economist John Maynard Keynes suggested that there would come a time, possibly a century after that (i.e., about now), when capitalism would provide for all our needs and the work week would decrease from the then-standard 50-hour work week to something more like 15 hours a week.
That hasn’t happened. While wealth has increased as Keynes predicted, the average work week for a full-timer is 40 hours.
In a speech given at the Bruno Kreisky Forum in October of 2013, Robert Skidelsky shared ideas from the book How Much is Enough? that he wrote with his son Edward.
In the book, the father-son duo asked “why do we work the hours we do?” and came up with six possible answers:
- The joys of work – but the majority of workers show “pervasive job dissatisfaction, distrust, and disengagement.”
- Fear of idleness – that people wouldn’t know what to do if they didn’t have work organizing their lives.
- The appeal of novelty, especially the array of consumer goods such as “the unfolding sequence of iPads” we are offered.
- The social construction of wants, where people determine what they desire based on what other people have.
- Rising income inequality where the actual wealth goes to a very small proportion of people, leaving many living in poverty or close to it.
- That earnings, hours, and conditions of work are created by the “business class” not by the individuals who must seek work to fund their lives.
Today, thirteen years after that talk that Skidelsky gave, there are at least two more important financial reasons why someone would not work less than full-time, if they didn’t already have established funds to live on:
- In the United States, health care and health insurance looms as the most expensive and difficult-to-obtain element of an individual or family’s budget. For the most part, only full-time jobs offer health insurance benefits and even those can be extremely expensive. Health insurance plans increasingly have not just outrageously high premiums but also very large deductibles and out-of-pocket maximums. For most people, working a part-time job does not provide health care coverage that is acceptable.
- Healthy people face having to fund a retirement that may last 30 or 40 years and that may require expensive memory care (along with expensive health care too). You can’t save a reasonable amount for retirement by working 15 hours a week.
I planned to write a blog post about what is enough? But instead where I came around to is the incredible expense of modern life, especially health care and health insurance as well as planning for a long-term retirement that may include expensive long-term care.
Why should we not expect health care and long-term care costs to come down? Baumol’s Cost Disease gives a partial explanation. This theory, developed by economists William Baumol and William Bowen in 1965, explains why prices rise in industries that experience little to no growth. In high-productivity sectors such as manufacturing or tech, automation and innovation allow workers to produce more goods per hour. Employers raise wages without increasing the final price of the product. Then workers in low-productivity, labor-intensive sectors (healthcare and education for example) demand higher wages to stay in it, otherwise they get pulled into the high-productivity sectors. The low-productivity sectors therefore must raise their prices.
That’s only one reason why healthcare and long-term care costs so much. Other reasons include the U.S. third-party payer system, where consumers are somewhat insulated from prices (less and less in an era of high-deductible plans), asymmetry of information (how much and what kind of healthcare do you need anyway? only the doctor knows), administrative bloat, and regulations that result in higher spending and costs (such as the MLR requirements in the ACA).
Regardless, we are not living in a world where productivity brought on my capitalism has made it feasible for the average U.S. adult to work only 15 hours a week. Keynes was wrong!