Technology has both good and bad sides. Withering its downside then is a matter of smart policies and implementation. One aspect where this is relevant is the fate of workers, especially as it relates to those doing manual jobs in the developed world, who could suffer from job cuts.
A reasonable compromise would be work days comprised of six and 12 working hours. It would work out as six regular work hours for employees carried out in two shifts to mean 12 hours a day. This though would require major reforms, specifically to wages.
ADYZ Shoe Factory, an imaginary firm, could serve to better explain the general effects and features of some of the possible strategies that could be used to adjust wages, where the rate of the factory could be a dollar an hour.
The first strategy is to keep the original hourly wage rate unchanged for the new working hour scheme. It enables firms to gain additional four work hours in a day for the same rate. Unfortunately, it will also result in the decrease of the gross wage of workers. Thus, such a strategy, it would seem, will not be acceptable by the employees.
But since the new working hour scheme already enables economies to create a large number of job opportunities, the workers could do part-time or overtime jobs to compensate for their reduced incomes. Concurrently, since it allows the economy to have a tremendous increase in its production capacity, it is highly probable that the general level of prices would gradually decline. This by itself will reduce the cost of living.
This strategy is most likely to be a choice of countries already on the brink of opting for austerity measures or jobs cuts to reduce spending to tackle economic instability. It will give them a much better option of a reduced wage rate than job cuts. For that reason, it protects nations from the terrible consequences of large-scale unemployment and socio-economic crises.
According to this strategy, ADYZ’s hourly wage rate will not be changed with the newly introduced working hour. But, the daily income of its workers will be decreased by the reduced number of hours multiplied by the wage rate. The employers though will benefit by gaining four additional working hours from the newly introduced two-shift work day for the same wage rate, enabling them to increase production capacity by 50pc of the original.
In fact, ADYZ would have doubled its office hours, creating twice as many job opportunities. Thus, the firm will look for additional workers to fill the vacancies. The factory will then be able to provide full-time, overtime, and part-time job opportunities in addition to the existing employees. Its workers could compensate the wage income lost during the working hour reduction.
The second strategy is to adjust the hourly wage rate to a point where employers are compelled to maintain the previous wages, without the two working hour reductions factoring in. This means the hourly wage rate would be increased. Apparently, increased staff salary would be a more significant burden on employers, which could, in turn, trigger a short-term general rise in prices. However, at this point, the increase in the level of prices should not be considered as an issue for it will only mean that the economy is shifting to another natural position.
Since the reform would allow economies to create more job opportunities than before, it will increase both demand and supply. But in this strategy, the increase in demand is expected to be greater in size than that of supply. As a result, firms could produce more and compensate it for the expense they are forced to incur. There would also be stronger competition among businesses to use the increased demand in the market. Such a strategy is most likely to be employed by countries that are more economically stable.
Here, ADYZ has to keep its workers wage unchanged even as the work hour is reduced by two. The firm would thus have to adjust its hourly wage rate from a dollar to 1.33 dollars since its workers should be paid more for the newly introduced shorter working hours. It is evident that the factory in this case is forced to increase the price of its products to counterbalance the rise in the wage expense. But after some time, it would tend to decline as the new scheme enables the firm to boost its production capacity.
The third strategy requires the wage rate adjustment to be made on an average basis: it would be adjusted between the first two strategies. Here the wage rate would increase, but because of the reduced working hour, the workers would be paid a lower gross salary than before. Likewise, employers would incur higher wage expenses.
ADYZ, thus, would merely adjust its wage rate on an average basis, to around 1.166 dollars. This would enable the firm to create massive job opportunities. Simultaneously, it would cause shifts in the aggregate demand and supply curves in their increasing manner.
For countries like Greece, the first thing to consider as a critical point for selecting a strategy is identifying the one that helps the economy return to its regular track as quickly as possible. The choice for Greek workers might be either losing their jobs or staying with reduced wages. Similarly, for its firms, the alternatives are either paying additional salaries or going bankrupt.
When countries adopt the new working hour scheme, their people might face or entertain different socio-economic circumstances such as a new lifestyle. Office hours might start as early as 6am, or even earlier in the morning, and end at around 6pm, or later.
Save the inconveniences, it would create in the short-term though, it is the best possible alternative fit for the challenging times ahead. The political and economic implications of a large unemployed populace are too obvious, as are the negative consequences of shying away from technological advancements. The best alternative is to adjust the economic fundamentals, starting with the eight-hour workday, and implementing the right policies to ensure a smoother transition.
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