Thursday, April 07, 2005

EUrozoners will have to do more for less

It looks as if Eurowreckers are going to have work more hours for less pay. Either that or they're going to end up joining the ranks of the unemployed. Stroppy French and German workers used to the comfortable life under the European "sozialmarktwirtchaft" model are going to have to face reality. Here's how a German Director of the IFO explains the matter.

Trade union opposition to extending working hours is based on the “lump-of-labor” theory. According to this view, there are no economic advantages of such a policy, because the total amount of labor in the economy is fixed. As a result, a 10% increase in working time will merely reduce employment by 10% percent. Despite its seeming plausibility, this view is wrong. Working longer for the same pay is a useful way of making Europe more competitive, and, when compared to reducing wages, it imposes a much lighter burden on workers and employees.

Working longer will boost economic growth, for if people work longer, then so does capital. Except for where all 24 hours of the day are filled with shift work, increasing the daily working time of people extends daily capital utilization. Thus, a 10% increase in working time is the same as if the economy’s stock of productive capital were increased by 10%. There is a jump in wealth and an immediate production boom.

Full text @ Europe is working Longer