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July 02, 2009

Creating jobs by cutting hours

There's a proposal to create jobs without spending any more money. The idea is to reduce the work week, say, from 40 hours to 35 hours. Then, the thinking goes, companies will have to hire more workers. Is this a viable suggestion?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, this actually is an idea that has floated over from Europe, and it really depends on how it's implemented. If you say that you're going to cut work hours, and you're also, however, going to cut the pay of workers, then yes, I think it could either create jobs or at least it would cause those existing jobs not to go away. And in some sense, this is the idea that we've been tossing around in North Carolina of unpaid furloughs, where everyone works less. They're paid less, but they get to keep their jobs. On the other hand, if the proposal is to cut work hours but keep everyone's pay the same, then what this simply does is increase labor costs to businesses. And actually businesses would have an incentive to cut back on the number of workers rather than hiring more."

Posted by Dave at July 2, 2009 08:00 AM