The New Leisure Crisis?

Nathan Lambert has posted a provocative Fabian essay on The New Leisure Crisis, in which he argues that:

The idea that these people should ‘contribute to their communities’ is ignorant and Rousseauian. Whatever jobs they might have done are gone. No amount of policy reform – short of reversing the Industrial Revolution – is going to bring them back again.

The solution to mass underemployment, first and foremost, is to recognise there is no solution to mass underemployment.

I’m not as pessimistic about Nathan about the prospects of increasing participation rates. For example, if you’re worried that some individuals have lower marginal product than employers are willing to pay for, then US/UK style wage subsidies (aka EITCs) might be part of the solution. And with rising educational attainment, we might be able to avoid the problem of having a substantial segment of the population for whom job retraining is largely ineffective.

But I did particularly like the way that he’s graphically presented the trends in male and female labour force participation over the past 40 years. It’s a topic that my colleague Bob Gregory has been talking about a lot lately, but I like Nathan’s graph even more than the ones Bob shows, since it allows you to see what’s going on with men and women, part-time work and full-time work, employment and unemployment.

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33 Responses to The New Leisure Crisis?

  1. And what does he mean by ‘Rousseauian’? Whatever he means, it gets some points as being, just when we thought all possibilities had been exhausted, a new insult for John Howard.

  2. Sinclair Davidson says:

    While I know the definition, I’m always unsure what ‘underemployment’ actually means in practice. Should we be worried about ‘overemployment’? I suspect, at the limit (or even before the limit), that underemployment (like externality) is one of those clever intuitive ideas that is actually quite empty when you think about it for some time.

    It is a nice graph, but without some additional understanding of the choices made by the individuals themselves, there isn’t much we can say about it.

    And what Andrew said.

  3. Nathan Lambert says:

    The point of the graph is that there is less work to do per capita than there was in 1967. The point of the essay is that this is a long-term trend and one that is likely to continue, with far-reaching consequences.

    It’s at:

    .

    Also I should mention that the winner of the Fabian’s essay contest was announced this afternoon. According to their email:

    “The winner of the inaugural Australian Fabians Young Writers’ Competition for the Race Mathews Award is Michael Janda, a political economy student at the University of Sydney, and Vice-President (Education) of the Sydney University Law Society. Michael’s piece “The New Aristocracy” was selected from hot competition, and will be published in The Australian tomorrow, Monday the 18th of December.”

    Could be worth checking out if you get the Oz tomorrow.

  4. Nathan Lambert says:

    The comments engine obviously doesn’t like angle-bracketed links, I’ll try posting the link without them:

    http://www.subrepublic.com/new_leisure_crisis.html

  5. Sinclair Davidson says:

    The point of the graph is that there is less work to do per capita than there was in 1967.

    Sorry Nathan. I can’t see that from the graph. I see the distribution of working patterns have changed. More people have more part-time work. this can be either good or bad at both the individual and aggregate levels. I’m not sure what you mean by ‘less work per capita”. Given the economy has grown substantially since 1967 with an increase in market size, specialisation and the division of labour I’m happy to agree that the nature of work is probably quite different (even for ‘similar’ job descriptions). But given productivity growth the work per unit of GDP may have fallen. I will have to read your paper – as I say nice graph.

  6. Nathan Lambert says:

    Yeah, sorry, Sinclair, you’re right. The above graph has to be read along with the ABS 6291.0 series, which shows that average hours of work have followed a similar pattern — declining to 1983, and then plateauing in the years since.

    But in the period since 1983, a significant amount of housework has been professionalised. So if you take ‘work’ to include both household chores and traditional employment, then the average Australian has less of it to do. They have more leisure time, to put it another way. And as I said, this is a long-term trend that is likely to continue.

  7. Kevin Cox says:

    Such people as Darwin and James Packer were or are not in the paid work force, as are mums with young children who decide to stay at home and look after the development of their kids. Older carers who devote their lives to looking after aging partners are in the leisure classes so is the artist who decides to live in a garrett.

    There may be a case for saying that the fewer people in the paid work force the “richer” a society.

  8. derrida derider says:

    The point of the graph is that there is less work to do per capita than there was in 1967.

    Economists have a name for this view – the lump of labour fallacy – and it is indeed a fallacy. There is as much work to do as we choose to have done. If we all wish to live in holy poverty, we can all not work. Or if we choose to get rich by working ourselves to death, then we can do that too.

    The kernel of truth I think you’ve struck on is that we shouldn’t get all moralistic about this – condemning people as “bludgers” or “workaholics” is pointless and wrong headed, so long as both bludgers and workaholics are preapred to wear the

    If you mean that

  9. derrida derider says:

    Whoops, accidentally hit post before I’d finished:

    … so long as both bludgers and workaholics are prepared to wear the consequences of their choice (and, as a proponent of a basic income, I’m happy to limit the consequences of the former a little – but that’s a long argument).

    The much wider choice of work represents a real welfare gain – we are no longer forced into a binary choice of either zero and 40 hrs a week. The increase in part time work would only be a concern if it was disguising increasing and forced underemployment, but there is actually surprisingly little evidence of that. When I were a lad in a rural region there was a lot of underemployment, forced and unforced, in the form of seasonal work – but we seem to have lost all that.

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  11. Nathan Lambert says:

    If you’ve read my essay and you’re wondering ‘How could something so brilliant have FAILED to win the essay contest?’, well, the winner is here:

    http://www.theaustralian.news.com.au/story/0,20867,20942690-7583,00.html

  12. Nathan Lambert says:

    I should say, I’m no expert on land tax, but the winning essay by Janda strikes me as solid and well-written, and deserving of the prize.

    Maybe Andrew can post on it as well? No doubt he’s more familiar with the intricacies of the argument than I am.

  13. Tim Watts says:

    Re the Fabians Comp:

    I have to say I liked your article better than Janda’s winning piece Nathan.

    I think Nathan was angling for a new progessive perspective on your topic. I thought Janda’s Land Tax article was far less thought provoking – advocating a new tax is hardly a bold new progressive vision.

    Plus I don’t know how you can describe a group that comprises 70% of the population (land owners) as “the new aristocracy”. Seems to be very ‘old labor’ class warfare to me. Thoughts Andrew? Or even better – is Mr Janda reading?

    For Full Disclosure, like Nathan I am fellow ‘disgruntled non-winner’ of the competition. So grain of salt required.

  14. Nathan Lambert says:

    Derrida Derrider accuses me of the “lump of labour fallacy”: the assumption that the amount of work to do in society is fixed.

    As any economics undergraduate knows, this isn’t the case. The labour market is not underpinned by some fixed list of “things to do”, but by people’s preparedness to work. As long as the average citizen wakes up each morning prepared to contribute, society will find something for them to do.

    Or at least, that’s the conventional wisdom.

    The problem with the conventional wisdom is that it doesn’t explain the most obvious trend in the labour force data, which is that the average working week has been decreasing for 200 years, and shows every sign of continuing to do so.

    Apologists for the Howard government often have difficulty accepting this, because it flies in the face of current Treasury lines about “tight labour markets” and “record low unemployment”. But better educated right-wing thinkers, like Peter Saunders at the CIS, accept it.

    In fact, the shrinking working week is a key exhibit in Saunders-and-co’s argument that modern welfare is too generous. He and his fellow travelers believe we need stronger ‘work incentives’ to push people back into work and return the economy to 1950s levels of employment.

    My argument is that although work incentives have an undoubted effect, it’s also true to say that even stronger work incentives, like beating the unemployed with sticks, would return the economy to its 1850s levels of employment, when everyone worked six days a week and Sunday was the only day of rest. The question is ‘What would we necessarily gain from this?’.

    To me, it seems the welfare-to-work lobby are toiling hopelessly in the face of two massive, long-term trends: rising productivity, which means that less work is required to keep us in material wealth; and the “new colony” effect, which means that expanding economies create critical jobs first and less critical ones second. Whether they realise it or not, when people talk about 21st century ‘job creation’, they’re not talking about new mining or medical roles. For the most part, they’re talking about more telemarketers and PR consultants and other jobs so marginal that nobody in the last 5,000 years of civilisation thought to do them. I don’t think it’s surprising that the people forced to do these jobs — often, the cheap white-collar output of the universities — show a decreasing tendency to stick to them.

  15. Nathan Lambert says:

    Further to Tim’s comments above…

    Having re-read Janda’s essay, I’m struck by the three problems, or potential problems.

    The first is whether his proposed land tax would be paid by land-owners, or whether it would be passed on to tenants and consumers. Obviously the high rents paid by Surry Hills coffee-shops having little to do with the intrinsic value of the land, and everything to do with the large numbers of caffeine-addicted, price-insensitive customers that stream by. I suspect that a land tax would ultimately be borne by these coffee-drinkers. In that respect the losers from Janda’s policy would be people with low incomes who are nonetheless forced to consume in the inner-city: administrative workers, CBD shop assistants and (kind of amusingly) Sydney University students.

    I might be wrong about that. I know the modelling of these pass-through effects can get complex.

    But the second obvious issue with a land tax is valuation. It’s much harder to establish a tax basis than for income tax or GST.

    And third, there are the political issues Tim raises above. I think he’s right to say that political parties looking for a compelling message to sell to the electorate are not necessarily looking for another tax.

  16. Don Arthur says:

    Technology “abolishes them at the core of the economy, in agriculture, transport and manufacturing, and only partially recreates them at the periphery, in the form of call centres and marketing departments.”

    I’m going to take some convincing on this. If I spend my days making plastic santas or growing tulips I’m working in the ‘core’ of the economy but if I operate an MRI machine or deliver cogntive behaviour therapy I’m in the ‘periphery’?

  17. Nathan Lambert says:

    Don…

    The gist of this argument is the “new colony” rule of job creation: societies create more crucial jobs first, and less crucial ones second.

    Of course, it’s always possible to come up with exceptions.

    But if you look at the broad patterns of Australian employment since 1984, you’ll see the evidence: employment has fallen in mining, utilities, agriculture, and manufacturing, while increasing in property services, recreation services, personal services, accomodation and retail.

  18. derrida derider says:

    Nathan, of course the working week has been shrinking in the long run – it’s just what you expect as our productivity in the paid workplace improves (diminishing marginal utility and all that). But surely that’s a Good Thing? Marx, after all, argued that the reduction of the working week was the key to reducing alienation.

    So that reduction is not a sign of an increasingly ailing labour market – as I noted above, quite the contrary. Far from “admitting” that working hours per worker are falling Saunders should be celebrating it.

    And don’t forget that the proportion of both the working age and total population doing paid work is now at an all time high. Those on both left and right who claim that there is some sort of underemployment (on the left) or welfare dependency (on the right) crisis are too prone to glide over this fact.

    But it’s strange to express all this as “there is less work to do per capita” as you did – forgive me if I misinterpreted what you meant by that phrase.

  19. Patrick says:

    But if you look at the broad patterns of Australian employment since 1984, you’ll see the evidence: employment has fallen in mining, utilities, agriculture, and manufacturing, while increasing in property services, recreation services, personal services, accomodation and retail.

    Otherwise known as the division of labour, and considered a hallmark (and keystone, and bedrock, etc) of civilisation.

    What is your point? People are earning so much money that despite working less than ever they can still afford to ‘outsource’ their gardening, shopping, cleaning, driving, keeping fit, teaching their kids (and themselves) french, etc?

    I smell Clive Hamilton’s vile traces…

  20. Patrick says:

    (obviously) the first paragraph was a quote. I should know by now that [quote] is not a widely recognised HTML attribute.

  21. Tony Healy says:

    Tim and Nathan, the theoretical beauty of a land tax, in the Georgist sense, is that it replaces income and other taxes. It is a mechanism to remove those taxes. It also has the beauty of being far cheaper to administer, and of reducing avoidance.

    Re Nathan’s questions, land owners would obviously try to pass on land taxes to tenants, and the market would decide where the equilibrium points were for this, as occurs currently. Rents are market driven, not cost driven. One impact of land tax is that land-owners would not find it profitable to sit on empty building sites in valuable downtown locations, as presently occurs.

    Surry Hills coffee shops are probably a good case study of the effects of a land tax. I don’t think much would change. Low-income people don’t waste their money on expensive coffees, but in any case, would have greater disposable income for this.

    Low-income people such as Sydney University students would probably benefit from the effects of land tax because the need to pay ongoing land tax would discourage speculative property investment, thus reducing the price of “investment” properties in the inner city. This would have the effect of reducing property prices and rents. (Theoretically. This is just a first pass through this.)

    As to the political dimension, obviously a land tax has little chance of being adopted anytime soon. However who knows what changes might sweep through society this century.

  22. Russell Hamilton says:

    Patrick wrote: “People are earning so much money that despite working less than ever they can still afford to ‘outsource’ their gardening, shopping, cleaning, driving, keeping fit, teaching their kids (and themselves) french, etc?”

    I would guess (as usual) that people doing those things aren’t working less than ever but more than ever – the 12 hour a day lawyers etc. The “working less” thing is only a society wide average, isn’t it? The people with the full-time money making careers are working more hours. I can’t imagine the average part-time shelf stacker for example is outsourcing much.

  23. Nathan Lambert says:

    Re Patrick’s comments…

    My point isn’t an ‘Affluenza’-style one.

    My point is that full employment has been a Holy Grail for political thinkers in this country for a long time. We have taken as our goal a situation in which every able-bodied Australian is productively employed, be it in formal employment, raising children, or study/training for a future workforce.

    But I think we’re kidding ourselves.

    There’s only so long we can continue to pretend that 1.2 million Australians are ‘job-seeking’ or ‘returning to work’ or ‘studying’, when in many cases these are euphemisms for ‘doing nothing productive at all’. The reality is that the economy has evolved to the point where it doesn’t need everyone’s labour. You could send 600,000 Australians to the beach to kick a ball around all day and it wouldn’t matter. As it is, many of them are forced to go through an Orwellian charade of ‘job seeking’ or ‘studying’, and really, that’s a process that’s humiliating, misleading and for the most part unnecessary.

  24. “I can’t imagine the average part-time shelf stacker for example is outsourcing much. ”

    You’d be surprised. Despite all the cooking shows, food production outsourcing occurs across classes, from pre-prepared food eaten at home to fast food. Few people make their own clothes these days; that’s largely outsourced to various low-wage Asian countries.

  25. James says:

    Tony’s right to point out what was the traditional argument put forward by Henry George et al back in the late 19th century – that a land tax should replace income and other inefficient forms of taxes. Interestingly in periods before that land value was sometimes used as a proxy for income in the collection of taxes!

    The strong positive relationship between land prices and income, although noted by Janda in his article, presents additional benefits that a land value tax would have as automatic stabilisers. Where an economy entered into a recession, land-owners would be provided with automatic tax relief as their holdings decreased in value along with their associated tax liability.

    Similarly to the extent that interest rates and land prices share a negative relationship, mortgagees would find an increase in interest rates partially offset by a decline in their associated land tax burden. This would of course make monetary policy less effective for targeting consumer spending but at the same time more effective for targeting business investment.

    Alas, although Janda recognised that the need for an adjustment period, the likely impact of even his phased-in proposal is a dramatic fall in prices upwards of 25% immediately.

    To begin with, once markets expect a land tax of 5%, even if it is not to occur straight away, it will automatically be capitalised into the value of the land. So although a phased-in approach will soften the decrease somewhat, unless the market has a very high discount rate, it won’t be sufficient to ‘avoid a catastrophic crash’.

    If you are wondering how a 5% tax could cause land prices to fall by 25%, let me explain why:

    Although 5% does sound like a very low number, remember that while it is calculated against the capital value of the land it is actually paid on an annual basis. What this means is that it to fully understand its relative size it should be compared to the annual economy or ‘rental’ of the land.

    For an asset of a given value this depends mostly on the discount rate. So if we take the average Sydney land price of $520,000 and a discount rate of say 10%, this would imply an annual rental value of around $47,000.

    Therefore, to figure out where land prices would settle at after the introduction of a 5% tax, we need to calculate the net present value of $47,000 less the 5% tax. Which after some quick summation mathematics comes to about $335,000. This equates to a 35.5% decrease in land prices following the immediate introduction of a 5% tax.

    Calculations for the phased-in approach are a little more complicated but nonetheless manageable with a bit of backwards deduction. And with a 10% discount rate we would see a 24.5% decrease immediately followed by a further, albeit diminishing, decline over the subsequent ten years.

    In that sense a phased-in approach would not only still slap the life out of the property market but could even leave it stagnating for the following decade.

    All that said, the idea has long had sufficient merit to warrant being kept alive and credit to Janda for doing that. As Tony Healy posted we don’t know ‘what changes might sweep through this century’ and should we ever find ourselves in another great depression a significant switch from taxing income to taxing land might help to get the economy mobilised again and on track to a smoother run with fewer property bubbles!

    PS – another ‘disgruntled non-winner’

  26. Nathan Lambert says:

    Further to Russell’s point…

    One of the interesting paradoxes of the ‘leisure crisis’ effect is that the decrease in working hours generally has caused an INCREASE in hours for more sought-after vocations.

    For the first time in history, even junior employees can now afford to take two or three days off a week to pursue higher-status work — be it through completing a law degree or writing freelance journalism.

    I suspect this is the mechanism responsible for the additional pressure on high-status jobs, and the additional hours being worked by incumbents in those positions.

    Media commentators often mention the increase in the number of people working 60+ hours a week, but if you look at the industries those people are working in, you’ll see it’s a very narrow selection.

  27. Patrick says:

    Russell, Andrew Norton is right to emphasise the easily overlooked outsourcing that goes on a daily basis – I probably would have made the point myself if I hadn’t included the french part, which made it easy to think about 12 hour a day lawyers :).

    Perhaps less intuitively, the point is even more important in relation to Nathan’s original quote about the kinds of job being created:
    employment has fallen in mining, utilities, agriculture, and manufacturing, while increasing in property services, recreation services, personal services, accomodation and retail.
    This reflects not only increased productivity due to capital investment (eg bigger mining trucks) but also increased productivity due to outsourcing (eg of accounting, catering, accomodation, property management, etc).

    ……

    Back on topic, what I really like about comment threads on blogs like Andrew’s is that they are often very productive – so whereas I quite strongly disagreed with Nathan’s early formulation of his thesis, I agree readily with his last comment, subject only to the caveat that I am not sure (literally: this isn’t my area of expertise) whether that 1.2 million includes people raising children and doing housework, which is eminently ‘productive’ to my mind.

    In fact I am not quite sure what that 1.2 million is, aside from being 5% of the total population.

  28. Nathan Lambert says:

    The 1.2 million is my back-of-the-envelope attempt to add up welfare recipients who are not transitionally unemployed, twenty-somethings who are living off their parents’ incomes, students whose courses are not actually preparing them for work, and all the other categories of healthy adults whose labour is not required by the economy. As we know, these are controversial and difficult thing to quantify — “1.2 million” is no doubt at least a degree of precision too many. :)

  29. Russell Hamilton says:

    Patrick, no, AN was just nit-picking …. you wrote: “People are earning so much money that despite working less than ever they can still afford to …” implying that the same people earning more (lots more) were also working less – – yet in the press release for Australian Social Trends 2006 (you don’t expect me to look at the actual data surely) it says:

    “Average weekly hours worked for full-time and part-time workers have increased over the last two decades. Full-time working hours for men increased by 1.9 hours per week to 43.2 hours between 1985 and 2005 and for women by 1.7 hours to 39.3 hours. Part-time hours worked by men increased 0.7 hours to 16.4 hours over the same period and for women by 1.4 hours to 16.9 hours per week.”

    So this “working less” comes from an average of the population and is only less because more people are working part-time, no? You made it sound like we’re all individually working less but at the same time raking in more money.

  30. Nathan Lambert says:

    Yeah, Russell is right: the “working less” is due to the increased proportion of people choosing to work part-time, and the increased proportion out-sourcing their house-work.

  31. I’ve skimmed some of the comments so someone may hv pointed this out, but wasn’t Henry George’s tax on the capital appreciation of unimproved land – which in principle is a non-distorting tax.

    That’s not true of the tax proposed in the Fabian piece. So I’m not sure on what basis it could be regarded as an improvement.

  32. Patrick says:

    My comments are really concerned with two strands of Nathan’s argument.

    The first is the ‘new colony’ effect, which I think is just a wierd name for increasing productivity by deepening the division of labour, and amongst other things employs not only cleaners and waiters but consultants accountants and property managers.

    The second is that this average working week / increased hours thing which I think is a furphy – basically it is the same issue as above, coupled with some comparative advantage. Ie, exhibit A actually cleans her own house better than her cleaner does, but makes enough money advising people on how to decorate their homes that it is worth it for her to do that and pay her cleaner to clean her house. Note the double layer of division of labour there.

    So if I understand correctly, professionals work longer hours, they create work at the same time for lower skilled people, boosting employment and productivity and participation whilst quite possibly lowering ‘average’ working weeks. None of which does any harm, indeed quite the contrary.

    So I don’t mean that we are ‘all’ working less and earning more, but that a) more of us are working, and b) globally earning more, and c) spreading it more broadly than before, more productively than before.

  33. Russell says:

    “So if I understand correctly, professionals work longer hours, they create work at the same time for lower skilled people, boosting employment and productivity and participation whilst quite possibly lowering ‘average’ working weeks. None of which does any harm, indeed quite the contrary.”

    Could be doing quite a lot of harm. A lot of children are now ‘looked after’ in child care centres while their parents work longer and longer hours – some division of labour! I would guess (again) that people sitting at desks, and outsourcing their meals to takeaway, are one of the reasons obesity looms as a huge problem.

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