Mandated shorter workweeks backfires

In 1982, France cut the maximum work time to 39 hours per week in an effort to curb unemployment. This was economically flawed, and unemployment went up. Nonetheless, France cut the workweek to 35 hours in 1998, which yielded similar results. Moreover, there's been wide speculation that this law helped create a staffing shortage in hospitals and nursing homes during the summer European heatwave that left thousands of French citizens dead. (Spain, by comparison, reported 42 deaths).

Elements of the French public, and even government officials, want to end or reform the 35-hour mandate. Despite these shortcomings, this all doesn't stop radical left-wing groups in the U.S. calling to enact similar federal 'shortened-workweek' mandates here.

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Wages are a function of the

Wages are a function of the price? I thought the wage fund doctrine (Nassay Senior) held that wages were related to "marginal productivity." Maybe that's what the guy means, but I don't think wages are a function of price at a given time- that flies in the face of the premises of the "wage fund", which holds (obviously) that wages are paid or fixed before the product is sold. Maybe I'm confused. I agree though that France's actions are economically unsound for the current economy.

Anyway, I think underlying this assumption is a power difference though. Are Japanese CEOs 1/24th as productive as US CEO's? Or are their prices 1/24th the US price? There seems to be something fishy going on.

Wages are related to both

Wages are related to both prices and marginal productivity. In Macroeconomics, real wages are represented by the ratio W/P, (W=actual wages;P=Prices). W/P=MPl, or real wages=marginal product of labor.

so prices as in CPI, then.

so prices as in CPI, then. A recognition that dollars are only worth what you can buy with them. That's just an adjustment- it doesn't mean that prices are wage-determining, right?

I don't understand your

I don't understand your question. The W/P ratio is itself an adjustment for changing prices, which is why real wages are represented by W/P and not just W alone.

Not sure why one needs to

Not sure why one needs to complicate things with the macroeconometric analysis.

Laborer values labor less than the goods offered (wage) minus ancillary costs. The employer values labor greater than goods offered for labor plus ancillary costs.

Not only does the goods offered (wage) increase, but also ancillary costs for the employer increase. Ancillary costs for the laborer should remain about the same. The range of overlap where trade can occur has been made smaller, thus fewer trades will be made. If fewer people are trading labor for wages then unemployment must be higher.

Micha, what I mean is that

Micha, what I mean is that prices are important in valuing the wage. The guy whom's article is linked says that "wages are determined by price" which implies to me that he thinks wages are determined by the price at which the goods produced will be sold, at that was my problem with it. Clearly you wouldn't get very far claiming that wages are actually determined by the consumer price index.

matt, Micha, what I mean is

matt,

Micha, what I mean is that prices are important in valuing the wage. The guy whom's article is linked says that "wages are determined by price" which implies to me that he thinks wages are determined by the price at which the goods produced will be sold, at that was my problem with it.

That is not what the writer wrote. Read the following passage:

Economists call this the "lump of labor" fallacy. It is wrong because work is not homogeneous, either geographically or in terms of skills. Nor is the demand for labor fixed. Most importantly, it is a function of the price. If unions raise the wage rate above the market-clearing level, then unemployment is going to rise. Similarly, if government mandates a rise in wage rates, as France did by reducing hours at the same weekly wage, then you are also going to see higher unemployment.

He says that the demand for labor is a funtion of the price of labor. In other words, the word "price" comes into play as describing wages, i.e., wages are the price of labor.

This has nothing to do with the price of goods or the CPI.

The guy whom's article is

The guy whom's article is linked says that "wages are determined by price" which implies to me that he thinks wages are determined by the price at which the goods produced will be sold, at that was my problem with it.

That is not the implication that an economist would see. Rather, it implies that the value of a wage (the real wage, or W/P) is determined by the price at which all consumer goods are sold, i.e. how much purchasing power the employee recieves as compensation for his work. A high nominal wage is useless in an economy with skyrocketing inflation - look at pre-WWII Germany, where the bills received in wages were more efficiently used as fuel for furnaces than as a means of exchange.

Hmmm. I guess I should have

Hmmm. I guess I should have actually read the article in question. I thought matt's question was related to the macroeconomic factors influencing wage determination, not the microeconomic factors influencing the supply and demand for labor. Of course demand for labor is a function of price, just like the demand for any good is a function of price.

ahhh... looks like I

ahhh... looks like I misread.

Ah, but at the same time,

Ah, but at the same time, the Bush administration has made moves to eliminate the arbitrary 40-hour cutoff point for overtime pay.

The overtime pay law has frequently been a thorn in my side. When I was perfectly willing and able to continue working at my base hourly wage, the employer had no choice but to pay me "time and a half" for my additional hours.

The result (for me) usually wasn't that I was able to continue working and being productive, at a higher rate of pay, the result was usually that I was sent HOME at the precise moment after which I would have exceeded 40.00 hours for the week.

Nice to see the

Nice to see the "lump-of-labor fallacy" claim mixed in with the W/P=MPL assumption. W/P=MPL is a special case that is no more likely to occur than the proverbial lump-of-labor. Both are versions in disguise of the wages-fund doctrine.