Nova workboard

a blog from young economists at Nova SBE

More not always means better

When we talk about economic growth we generally associate this with great performance of firms: high productivity and economies of scale, that is, that by doubling inputs the firm more than doubles the production. However, these economies of scale have its limit where more can be worse (diseconomies). One example of this excess of inputs is the excess of working hours.

The idea that infinitely more work does not mean more productivity is not new.  For instance Bertrand Russell (1932) stated that if society was better managed, then a person would only need to work four hours a day. Furthermore, work less might make us more productive because it will guarantee “happiness and joy of life, instead of frayed nerves, weariness, and dyspepsia”. Adam Smith stated “The man who works so moderately as to be able to work constantly, not only preserves his health the longest, but in the course of the year, executes the greatest quantity of works”.

To illustrate this idea I will present a graph that clearly shows a negative relation between productivity and working hours.

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For instance, while the Portuguese are some of the most hardworking in the OECD, Germans are considered to be comparative slackers. However, it is common knowledge that the Germans are much more productive. A counter example would be the case of Spain. Spanish workers work more than the Portuguese but they also have a higher GDP per hour worked. Therefore, in countries with more productivity we will also see more production and then more consumption (virtuous circle).

However, the opposite thought persists. There are managers that consider as being more reliable workers who are committed and dedicated and that were seen at office during business hours and that made extra hours. That means that they valorize the called “face time”. However, this can be seen as a negative feature: workers could have been doing others things instead of working.  This system of measuring hours instead of performance is also not so well regarded by good professionals, who think that to do a good job it is not necessary too much time. A good solution for this problem could be measure the performance of the employee by the success of the results rather than counting the working hours.

So it is normal to appear several arguments in favor of the reduction of the weekly work hours. One of the arguments is that it could help to distribute paid work more evenly across the population, reducing ill-being associated with unemployment, long working hours and too little control over time. However there are several arguments against that we should also keep on mind. Nevertheless can exist some problems in the transaction: risk of increasing poverty by reducing income, too few new jobs (people already in the market have the incentive to catch more than one job).

So, I believe it is a good idea to reduce the working time by giving the employees the right incentives and by assuring a good quality of life to them. By doing this, we will avoid the possibility that they would feel so satisfied with their work, that they refrain from taking on new challenges and by providing the best redistribution of the job positions of the income. Though, it would be very difficult to measure productivity.  One solution could be pass through monitoring, which is typically imperfect and expensive and if the monitor is also an employee, it results in adding one more problem to the firm.

Andreia Parreira 646

 

 

 

 

 

 

 

 

 

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Author: studentnovasbe

Master student in Nova Sbe

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