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O cto b e r 22, 1976 Thank God It's Thursday “ This is most definitely a step to ward the four-day workweek,” UAW President Leonard Woodcock told reporters after he had signed the new Ford-Autoworker labor contract early this month. The rele vant section of the agreement pro vides seven extra paid days off for each worker in the third year of the contract, and thus represents only a modest step toward the union's long-desired goal. But in view of the auto industry's reputation as an innovator in labor practices, this contract development presages new interest in the four-day-week. Actually, the vast majority of the nation's workforce still operates on a five-day, forty-hour schedule. Only 2 percent of all full-time wage and salary workers regularly work less than five days a week—“ Thank God It's Thursday” has replaced the usual end-of-week theme in only a relatively few firms. In fact, long workweeks are much more preva lent, with 16 percent of all full-time workers putting in five and a half, six or even seven days a week. The length of the work week re flects the choices of the nation's population, in allocating the in creases in wealth generated by the productivity of the American econ omy. People may choose to build up their stock of housing and con sumer durables, as they did just after World War II. They may choose to pour resources into the education of a large new crop of workers, as they did in more recent decades. Or they may opt for more time off the job in order to savor the good things of life—or simply to keep up with the servicing and maintenance of their growing stock of material possessions. If the choice is more leisure time, they may divide it up in a number of ways—by reducing the number of hours or days worked, by taking more holidays and vacations, or by cutting the number of years spent in the labor force through later entrance or earlier retirement. Over time, most of the rise in the average worker's living standard— perhaps three-fourths or more— has shown up in increased pur chases of goods and services rather than increased leisure. Still, workers have received an impressive in crease in free time over the past century, amounting to about 800 extra hours annually, or an extra month out of every year. According to estimates of Geoffrey Moore and Janice Hedges (February 1971 Monthly Labor Review), the aver age workweek has dropped from about 53 hours to 40 hours between the 1870's and the 1970's, providing most of the increase (about 675 hours) of free time annually. Postwar: less leisure Surprisingly, though, average work time has not declined appreciably during the past quarter-century. Average weekly hours of nonfarm workers declined from 39.8 in 1950 to 37.1 throughout the 1970-73 peri od, before dipping to 36.1 hours in the 1975 recession year. However, this mostly reflected changes in the (continued on page 2) Digitized for F R A S E R Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco, nor of the Board of Governors of the Federal Reserve System. composition of the workforce, with the growing labor-force participa tion of women and students who work short hours. Nonstudent men workers in nonfarm industries worked 41.0 hours weekly in 1950 and 40.9 hours weekly in 1975, even after adjustment for increased vaca tion and holiday time. Moreover, in the view of John D. Owen (August 1976 Monthly Labor Review), the increased employment of groups with extensive non-market work responsibilities tends to reduce the free time of the workforce as a whole. Housewives and students putting more time in on paid jobs have just that much less time for their regular chores. Most observers would have pre dicted an accelerated reduction in working time after World War II. Real hourly earnings of nonfarm employees rose at a 2.7-percent average annual rate in the postwar period—somewhat faster than in the prewar decades. Thus, if earlier wage-hour relationships had per sisted, the 40-hour week in manu facturing would by now be reduced to about 35 hours, with proportion ately shorter schedules in whitecollar work. It didn't happen, Owen points out, largely because people decided to take their productivity gains in the form of more durable goods and larger families rather than increased leisure. In the early postwar years, workers tried to catch up on pur chases of cars, housing, clothing and appliances—all the things they 2 Digitized for F R A S E R were unable to buy during a decade-and-a-half of depression and war. They tried to catch up by having the children they could not afford earlier, and this was a more important economic decision, since raising a child imposes costs that extend for two decades. Increased costs became doubly apparent in the postwar context because of an additional factor—the education revolution, which added about three years to the time spent in school. Today: more leisure? The situation is different today. There’s little if any pent-up demand for consumer goods; there's no baby boom visible on the horizon; and there's little evidence of fur ther increases in time spent in school. Thus, given a continued long-term increase in real incomes, workers may once again divide their gain in living standards in the traditional way, partly by increased consumption of goods and services and partly by increased free time for the enjoyment of all those things. Moreover, in a period of continued high unemployment reminiscent in some ways of the 1930's, we might see a revival of the share-the-work movement, with support emerging for a 30-35 hour week as a way of sharing available work opportunities in a more equi table manner. Of course, other de mands on the nation's resources— such as environmental, energy, welfare or military requirements— could preclude major increases in personal consumption or in leisure time. On balance, most observers believe that living standards will continue to rise and provide room for more leisure time. But in what form? More holidays, more vacations, re duced workdays, reduced work weeks, or simply more “ flexitime” ? During the 1960's, an increase in the average workweek was offset by a sharp rise in vacations, with the total workforce expanding its vaca tion time almost 50 percent over the course of the decade. Perhaps soon, according to a plan recently considered by Congress, Federal workers would be able to start and stop work at other times than the traditional working hours, thus per mitting jobholding by many work ing wives who can't fit easily into the rigid 9-to-5 workday. And the Ford-UAW agreement would per mit seven more three-day week ends in the third year of the con tract, in addition to the five long week-ends which Congress made possible in 1971 by shifting five mid week holidays to Mondays. From six to five—to four? The possibilities are many, but the growing likelihood is that the aver age worker will press for more lumps of leisure—say, a four-day week—rather than small bits of lei sure added to each day. A four-day week provides an expanded selec tion of leisure-time activities by increasing the utility of free time. But above all, it offers major econo mies of scale, such as a 20-percent reduction in fuel use and commut ing time from a five-day week. That consideration led energy planners to call for a four-day workweek 3 Digitized for F R A S E R during the fuel shortage of three years ago, and their demands will become even more vocal if the shortage should reappear. Our present experience with the four-day week resembles some what the nation's experience a gen eration ago with the introduction of the five-day week. Considered at first “ a radical and impractical ad ministrative experiment” by many industry leaders, the five-day week was adopted gradually in the cloth ing industry, the building trades, and (a major breakthrough) in Ford motor plants in 1926, but it did not become universal until after World War II. The adoption of a four-day week may be a less radical step for em ployers than was their adoption of a five-day week. Changing from a six to a five-day week for employees generally meant changing to a fiveday week for the firm as well, whereas today, many firms adopt ing a four-day week for employees have been able to use multiple shifts of workers on the shorter weeks to extend the days and hours of the firm. However that may be, the present shift to a four-day week may be as slow and halting—but as inevitable—as the earlier shift to a five-day week. The crucial point, though, is that the real gains which the nation's workers achieve, in either leisure time or consumption goods, will depend on the in creased productivity they achieve while on the job. William Burke uoiSmqseM • MBJfl • uoSaJO • epeASN • oijepi J!E M E |-1 . E jU J O p |E 3 . E U O Z IJ V • E > |S E |V *)!le3 'o aspu ejj UB§ Z£L ON HW»3d aivd aovisod sn nvw s s v i d isau p is m p m f e Q np jm © §© ^ [ BANKING DATA—TWELFTH FEDERAL RESERVE DISTRICT (Dollar amounts in millions) Amount Outstanding 10/06/76 Change from 9/29/76 Change from year ago Dollar Percent Loans (gross, adjusted) and investments* Loans (gross, adjusted)—total Security loans Commercial and industrial Real estate Consumer instalment U.S. Treasury securities Other securities Deposits (less cash items)—total* Demand deposits (adjusted) U.S. Government deposits Time deposits—total* States and political subdivisions Savings deposits Other time deposits^ Large negotiable C D ’s 93,112 71,683 4,574 22,342 20,786 11,519 8,833 12,596 90,971 26,172 492 62,299 5,154 27,828 26,918 11,108 + 3,216 + 3,464 + 3,113 + 257 19 + 12 308 + 60 + 1,512 + 1,187 60 79 139 + 303 179 167 - + 5,209 + 5,807 + 2,321 706 + 1,172 + 1,245 356 242 + 3,561 + 1,729 + 263 + 1,336 678 + 6,649 3,209 - 5,112 Weekly Averages of Daily Figures W eek ended 10/06/76 Selected Assets and Liabilities Large Commercial Banks Member Bank Reserve Position Excess Reserves Borrowings Net free(+)/Net borrowed (-) Federal Funds—Seven Large Banks Interbank Federal fund transactions Net purchases (+)/Net sales (-) Transactions of U.S. security dealers Net loans (+)/Net borrowings (-) + W eek ended 9/29/76 + 5.93 + 8.82 + 103.02 - 3.06 + 5.98 + 12.12 - 3.87 - 1.89 + 4.07 + 7.07 + 114.85 + 2.19 - 11.63 + 31.39 - 10.65 - 31.52 Comparable year-ago period 17 0 17 1 8 7 + 67 0 67 - 290 - 1,570 + 1,383 + 752 + + + 127 - 661 ♦Includes items not shown separately. ^Individuals, partnerships and corporations. Editorial comments may be addressed to the editor (William Burke) or to the author. . . . Information on this and other publications can be obtained by calling or writing the Public Information Section, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120. Phone (415) 544-2184. Digitized for F R A S E R
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