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The only thing worse than too much work is not enough of it

How does a 28-hour working week sound to you? More time to look after young children, or elderly parents? Or just more time to relax, to pursue hobbies? Appealing? Then perhaps consider a move to the Federal Republic of Germany before the Brexit drawbridge goes up.

After protracted talks and even a series of strikes, steel workers in Germany last week succeeded in getting their bosses to agree that they will be required to supply no more than 28 hours of labour a week if they don’t want to. “The agreement is a milestone on the way to a modern, self-determined world of work,” proclaimed the union leader Jorg Hoffman.

There is talk of similar arrangements being rolled out to other sectors of the German economy. “The credo of the new age: time is more valuable than money,” was the response of the German business paper Handelsblatt to the deal.

But many people here in the UK don’t seem to feel that way. For them, the new German credo of a shorter working week does not appeal. They want more hours, not fewer of them. Or at least that’s what the data suggests.

The numbers of UK workers saying they wanted more hours than they were getting shot up during the last recession, according to the Office for National Statistics. At its peak, this pent-up demand was equal to around 45 million hours a week. It has since come back down to 38 million hours, but remains well in excess of the roughly 25 million level that consistently prevailed in the years before the 2008-09 recession.

On the surface the British labour market seems pretty tight, with the headline unemployment rate at just 4.3 per cent, lows not seen since 1975. The Chancellor, Philip Hammond, has even spoken of the UK approaching “full employment”. But this particular measure of desired hours suggests there’s still slack in the UK labour market and that many people would work more hours if only they were available.

Yet that’s not the end of the story. In recent years the number of people desiring fewer hours than they are currently working has also risen. Before the recession this was equivalent to around 30 million hours a week in total. Now it’s running at around 35 million, or almost equal to the aggregate extra desired hours figure.

What’s going on? Why do so many people in our economy simultaneously want to work more hours while so many other people desire to work fewer hours? And why are both groups apparently rising? The truth is that that we don’t really know for sure. This is a puzzle, to sit alongside some of the other mysteries of the UK economy such as the fact average wages are still growing incredibly weakly and productivity growth is still so lacklustre.

But labour market experts David Bell and David Blanchflower have been mulling some possible explanations. In a new paper for the National Institute of Economic and Social Research, released last week, the two academics hypothesise that the “monopsony” power of employers could have grown.

Monopsony describes a scenario where firms have a high degree of power over workers because there are no (or few) other local employers in competition for their labour. Bell and Blanchflower suggest that monopsonistic firms might have the ability to vary the hours they offer their workforce based on their own convenience, rather than the preferences of their employees.

They further speculate that the Government’s tightening of the benefit sanctions regime in recent years (where the dole is withheld from people deemed not to be doing enough to find work) might have effectively reduced the ability of some workers to quit and look for another with a different employer. They may have resulted in many people effectively being trapped with lousy bosses.

But what about the fact that so many people also want to work fewer hours? Bell and Blanchflower also wonder whether monopsony power might have something to do with this as well. Employers could be sweating some of their workers, presumably the more productive ones, in the knowledge that those workers also have fewer outside options.

To test some of these hypotheses, Bell and Blanchflower looked in more detail at the characteristics of the workers who want more hours. What they found is that they tend to be younger, unskilled and frequently self-employed. Meanwhile, the workers who want fewer hours are more likely to be older, more skilled and more experienced. The fact that many of those who desire more work, but aren’t getting it, are self employed suggests there could well be an overlap with gig economy and zero-hour contract workers.

This is not conclusive, but it’s consistent with the theory of higher employer power, and that people are often stuck in suboptimal job “matches”.

One of the superficially odd features of the rise of the gig economy is that many (not all) who work for companies such as City Sprint and Deliveroo are manifestly unhappy with their pay and conditions (certainly unhappy enough to demonstrate and lobby for fair treatment) and yet they don’t seem to quit to work for better employers.

This points us to the conclusion that workers, at least, in this section of the labour market, have rather fewer outside options than we would assume by merely looking at the headline jobless rate and that competition for workers among firms is not as intensive as it would be in a genuinely tight labour market.

The Government published its response to the Taylor Review on the gig economy last week. It predictably ducked the major challenges of protecting vulnerable workers in this sector. Instead of legislation to ensure employers are clear about the status of workers it promises merely another consultation. And there was nothing on narrowing the damaging employee-self-employed tax wedge.

Yet the Bell and Blanchflower work suggests the Government’s challenge here may well be even bigger than the one it ducked. It might require dismantling the market power of many employers and finally creating enough demand in the UK economy so more workers can be confident in walking away from those lousy bosses


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