Frequently Asked Questions

Q. But I already have plenty of time. All the things I want cost money, and this is all about making less money and doing more work!

Other people do value their time more than what they could buy with more money. See comments on a proposal for a 21-hour work week. If there are people like this at your company, your pay shouldn't really change, but every person who chose to work less would cause a tiny increase in the income and purchasing power of everyone with the same level of education. This would be because of tiny changes to the supply curve for labor and demand curve for high-end goods like iPhones, while making less expensive goods slightly more equal in price by increasing demand.


So you should support this option for everyone who buys the things you want so that they are less willing to pay for those things, driving down the price. If one company does it, it helps people with goals outside of working while just slightly increasing profits for the company. If every company does it, then it helps people who feel like they don't have enough money, who probably outnumber the former type.

This is why you should share this idea with your friends: the most important effects are at the national and global level.

Q. The biggest problem for the company I work at is lack of customers. Hiring more employees won't help, no matter how dedicated they are.

Your company would gain nothing by adopting this work concept. But it could benefit from a federal law that allowed other companies to use this concept, if you sell products or services in the middle range of quality or something that many people are just too busy to benefit from right now. People with more advanced educational degrees have higher income, but they also have the least free time.

Q. If corporate profits go down, how does that create jobs?

Corporate profits would go down because more of the total revenues would go toward wages and salaries. If someone buys from a company which sells a handbag for $34 instead of one that sells them for $3400, it takes roughly the same amount of work to make (which is why fakes are so much cheaper) which means roughly the same number of jobs created (some will also go to marketing, management bonuses, etc.) but much higher corporate profit for the expensive handbag.

This means that whatever your income is, you would need to do $3400 worth of work for your own company to buy the expensive bag, and just $34 worth of work for the cheap one. If you, or someone like you, chose to buy the cheap one that frees up $3366 worth of work for someone else at your company. The person who does that work might still choose to buy the expensive bag, but at least you created jobs at the business making affordable bags and the more people who are able to do the same as you, the greater the percentage of corporate revenues that go to wages instead of profit.

Choosing to work less and make less money doesn't mean you have to buy fewer things.

Q. And I win how by destroying corporate profits? How does that benefit me?

What's important is how it happens. Putting into law mandatory 30-minute rest breaks every hour would also destroy corporate profits and fix unemployment, but this would be a waste both because it forces people to take breaks who don't want to, and those who do want to work less would be vastly constrained in the activities they could do during those short breaks at work.

With the concept described on this site, the benefits would range from "corporations have less money to spend on influencing politics" to "better resource conservation" to "less crimes committed due to being poor" to some other ones which are hard to describe or convincingly argue, like "being honest would be more viable than it is now" and "intelligent people would have less reason to be depressed about the world".

..that second paragraph missed the point, since the first three would also occur in the 30-minute rest break scenario. Which could never become a law since it would be bad for companies that used it, unlike this concept which would be good for companies that use it.

I guess you could say that this way of "destroying corporate profits" is a way, maybe the only way, to do it such that it increases the options for companies and their employees, instead of decreasing options. A difficult point to argue about I guess.

Q. If corporations are less profitable, doesn't this mean that they will stop qualifying for outside investment, less corporations will be created and no innovation will occur?

The decrease in profits would affect all companies selling high-end products equally. Expectations for the possible return on investing in a new company would decrease, so companies would just have a different standard of profitability to qualify for loans. Good products would still exist as well as potential for innovation, although there would be more competition based on price and less on quality due to consumers who made the decision to work less and spend less money.

Q. Making US corporations less profitable means that China wins.

The decrease in profits would occur for all corporations, not just ones in the United States. Although China doesn't really have any famous brands because Chinese businesses tend to try to compete on price (and attempts to establish Chinese brands have generally failed), the rich in China and nearby countries place a high value in brands, especially Western brands.

So as bad as it might sound, the US would continue to buy goods from China at a cheap price, while selling expensive luxury products to China's rich. If people in the US worked less then GDP would go down compared to China, but GDP has never measured the economic value of many types of activities or the utility of free time.

Q. What about jobs that wouldn't work well with this concept, like a security guard?

They would probably remain on the salary system. However, it might be useful to use this system if working less than full time becomes popular enough that jobs that require 40 hours per week don't get enough job applicants. If, for example, security guards at a certain company worked 30 hours per week using this work concept, in an emergency the company could request someone to work 40 hours without being an unreasonable imposition on their lifestyle. It's less likely that someone on a salary for 30 hours per week would be willing to accept more hours without any compensation, and as described in the previous post working any less than the 'reasonable physical limit' of 40 hours per week is just not stable with the normal wage-and-overtime system.

Q. Someone making $50,000 per year currently is getting $50,000 worth of utility when they spend it. Why should they or anyone else expect prices to go down so they can get more value than what the free market dictates?

The reason why this concept can work is that there is an oversupply of labor due to the assumption that by working as much as possible and increasing the nation's GDP, this will eventually lead to a resolution of economic problems such as unemployment, poverty, and inequality. This distorts the demand for goods to the point where spending money is seen as a goal for its own sake, and the question is just one of how to maximize benefit for a given amount that is spent. This leads not only to goods that are meant to signal one's ability to discern quality and social benefit, such as organic foods and most of Apple Inc.'s product line, but also to the pursuit of experiences that cannot be obtained elsewhere, no matter how ephemeral they may be.

These things (signals that indicate competence, and experiences) do not have a value intrinsically related to their cost, and therefore it's very reasonable to expect that someone could gain the same utility if they chose to work and earn less or if the market price of these things decreased, as would happen if people were less willing to supply the work needed to pay for these things at their current prices.

Q. Why not just make performance relate more to compensation, and take advantage of possible efficiency gains that way without anyone working less?

Because society refuses to support those who, due to avoidable or unavoidable circumstances, are not able to get a job either in normal economic circumstances or unusual ones. While it may be possible for anyone in society to survive given the options available, there are other goals which may seem difficult or impossible to accomplish without a reliable monthly income. When society is unwilling to allow government to make up for a jobs deficit from private commerce, higher worker productivity is a direct cause of unemployment.

This effect on a small scale was why the workers at the Hawthorne Works actually had lower productivity when their pay was linked to their individual performance. While older brother linked a case of this being successful with Federal Express, it was the reward of finishing work earlier that eventually lead to the productivity target being reached, not a monetary bonus.

Q. Businesses can just continue to hire and fire people as demand changes, so a system which avoids the need to do this has no additional value.

The first search result for "average cost to hire" says that to replace a $60,000/year employee, it could take up to $49,000 in direct costs and possibly as much as $100,000 in indirect costs.

According to the second search result, the overall average cost-per-hire for the US is around $4000~4500.

According to the third search result, estimates of the turnover cost for an $8/hour employee range from $3500 up to $25,000 for specific occupations.

Q. Would everyone be expected to switch to this system?

No, only jobs with a potential efficiency increase where a business and its employees agree to change the terms of the work arrangement.

Q. If only 5% of the population decided to work less and unemployment is still above 7%, what is the backup plan?

If there are a significant number of jobs where you can work less and still have job security and a reasonable income, this would remove moral validity from the idea that the unemployed or poor are somehow forcing people to work 60 hours per week. Once people recognize this basic fact, the conversation can further evolve and might include increasing taxes if problems in society still exist.

Q. How does paying workers less for working more convince a business to reduce their hours?

Businesses would be perfectly content with most people continuing to work full time with this concept. Any pressure to reduce hours would come from the employees themselves. Working, and earning, as much as possible is currently seen as one way to identify an employee who is dedicated to a business and to having a successful career that benefits the business as much as it does the individual, so this concept functions by introducing an alternative idea of how to show you can achieve your own goals and anything that a business can require of you without working full time. Instead of providing extra value to a business by working unpaid overtime with a monthly salary, you would provide extra value by completing your responsibilities more quickly and saving the business a small, and symbolic—but important—additional wage cost.

Q. If there are people who want to work less, why aren't they just working part time?

Part time jobs have lower average wages compared to full time for the same occupation. Partly because they are intended to be an economical alternative to hiring another worker, but also because of two other factors:

1) part time jobs, the employee takes the risk from low demand in the short term. With full-time jobs, the business takes the risk up until the point where it has to fire someone.
2) full time jobs simplify management because there's less incentive for workers to be inefficient. People still ARE inefficient but my own explanation would be that they see value in "face time" at work and staying for unpaid overtime.

This second provides a theoretical benefit to the business from full time work; the first provides a theoretical benefit to the employee from full-time work. Together they suggest that "effective" people will want to do full-time work, which biases expectations and in turn reinforces the situation (by theoretically causing wages for part-time work to be lower than for full-time work).

The proposed concept changes both of these points; the employee would mind low demand less since they would end up with a higher average wage rate, and they would also have less incentive to be inefficient which could mean those positions would be more eligible for responsibility. Especially if it was someone who had previously been working full time and voluntarily chose to use the new system in the same position and with the same responsibilities.

Q. Can't we just wait for productivity to go up and fix everything?

Productivity has been going up, but wages much less so. The rich continue to capture most of the rise in income. See also sections from previous posts which address this: "Alternative 3: wait for it to fix itself" and "The Wageless, Profitable Recovery - NYTimes.com".

Q. Americans are already working as hard as they can. There is no 'latent potential for efficiency increase' at even the most bureaucracy-ridden corporation, that's silly talk!

However, bureaucracy and inefficiency are well recognized to exist in many government organizations, so this concept should be adopted for that reason alone so that incentives exist to eliminate redundant or inefficient government processes and paperwork.

Assuming that people exist who want more free time without having to give up a competitive wage, this concept would also allow businesses to use those people to compensate for changes in demand without the costs associated with hiring and training new part-time or temporary employees.

Q. Either something (like a worker's strike) helps employees, or it helps the business. How can this concept help both at the same time?

It would help a single company: the company that adopts it, which we'll call Company A, and the employees working there. Other companies would see lower profits if Company A starts using this system, unless they sell things that people would tend to buy with a lower income.

Q. Shouldn't business work together to oppose this then, instead of allowing a single business to profit from something that's detrimental to the capitalist class as a whole?

Businesses are allowed to do things that harm other businesses all the time by lowering their prices, it's called "competition" and "free markets".

Q. Is this an example of class warfare by decreasing income going to rich people, also known as the capitalist class?

Jamie Johnson made a documentary about how meaningless life can occasionally feel when you can't identify with the goals or challenges that most of the population has, and how difficult it is to trust people or make new social connections when income disparity is as high as it is.

There is an important distinction between a reduction in income inequality through free market mechanisms (enabled by changes to government regulations to allow it as an additional option), and wealth transfer through welfare supported by taxes or inflation. There is an inherent sense of conflict when the government forces people to accept a situation or risk imprisonment, but voluntary commercial transactions do not carry this connotation or represent class warfare.

Q. How would businesses pay back their loans if they didn't have any profits?

Profits are what is left after paying for all costs associated with the business, including wages, salaries, bonuses to executives, taxes, interest on loans, paying back loans, and investing in new equipment or resources for the business.

Q. What about businesses that hire unskilled workers in temporary positions, where it costs nothing to hire someone new and no time to train them?

The conditions in places like warehouses for online retailers are a result of supply and demand. Many people are unwilling to work at low pay with no job security, but high unemployment means those employers have enough people applying that there is no need to improve the working environment.

While these businesses would have no reason to adopt the work concept described on this site when it's so easy for them to replace a worker and productivity is already high, the use of this work concept by other companies with higher costs of replacing workers and potential productivity gains would lead to a reduction in the supply of labor and cause job applications to this type of business to eventually dry up unless the business improved the attractiveness of the working environment or compensation, which might include using this work concept if doing so becomes profitable.

Q. Why is the concept described on this site an improvement over paying workers the minimum possible and letting them earn more from overtime?

From the business's point of view, the second system is better which is why Amalgamated Product Giant Shipping Worldwide Inc. requires people to work 55 hour weeks with overtime, and more during holidays. This allows them to use a lower average wage (including overtime) than what people would normally accept, because they are getting paid for at least 55 hours of work and can more easily afford basic costs of living.

However, for job occupations that require more learning or are more difficult to reduce to the most efficient sequence of actions, it's more expensive to replace people and those who apply are less likely to agree to work 55-hour weeks. This concept allows businesses in this more restrictive situation to have the same flexibility in response to changes in demand despite hiring workers that have more alternative employment options in case they dislike being forced to work more than 40 hours per week. Someone who normally worked less than 40 hours per week at a higher average wage rate could be required to work up to 40 hours with the understanding that the arrangement allows them to have a higher average wage rate, with more free time and better job security than what they could obtain at another company.

Q. How does income inequality lead to inefficient distribution of essential goods like housing?

This happens because of the inability to extract maximum profits through targeted pricing. Suppose you have three houses, all of roughly equal quality. You also have three potential buyers of these houses. One person is willing to pay $800,000 (prices compared to income are pretty crazy in some countries, like Singapore and certain cities in China), the other two people are willing to pay $200,000. The houses and land cost the bank that owns them just $100,000.

If the bank sells to the last two people for 200k, then the first person will only pay 200k as well since while they could pay more, they would feel they are being exploited and refuse to out of principle. So the bank sells one house for 800k and leaves the other two empty, maybe pricing them at 500k in case someone else comes along.

With larger numbers of people to make a smooth demand curve as you see in basic economics, the problem is when income becomes so distorted that it's difficult to tell if you would make more money by increasing the price and selling to rich people, or decreasing the price and selling to poor people. While even the concept described on this site would not prevent people from having ridiculous amounts of money, a much larger number of products would have a demand curve such that you could reliably say that you would increase total revenues (the amount before costs of business) by lowering the price of a product by a small amount, due to some number of people switching from other competitors' products to yours that makes up from the loss of gross revenue from existing customers from lower price.

Q. What types of products would not become easier to purchase if this work concept was adopted by society?

Products which require a large amount of work to produce, and are not just expensive because of a monopoly provider of a status good. The large amount of unused labor in both the US and the rest of the world show that rich people don't spend much of their money on products made with unskilled labor—the only example I can think of is Arab countries bringing in construction workers from poorer areas of the world—but it would also apply to purchases by the upper middle class.

So while someone in a low-paying job who buys a typical mix of low-end and high-end products would tend to see an increase in purchasing power if this work concept was adopted by society, someone in a mid-to-high-paying job would tend to see no change or even a decrease in purchasing power even if they continued to work the same amount. Someone in a high-paying job who only buys low-end goods would see the greatest reduction in purchasing power, but high current levels of unemployment throughout the world means that these changes in purchasing power might not necessarily take effect immediately, and depending on which segments of society take advantage of the option to work less the short-term changes in purchasing power might even be the opposite.

In that scenario, people with higher amounts of education would preferentially work less despite the already high demand for their services; this would further raise the wage premium on education and slightly increase the demand for low-end goods, but a significant decrease in unemployment would only occur if businesses start hiring the large number of college graduates working in jobs that don't require a college degree or if the incentives of an even higher wage premium and the option of working less time convinced people to choose college majors with more job openings. But either way, unemployment would go down.

Yes, it's hard to predict what would happen when I don't know who would work less, and it's intended to be hard to predict as well...

Since the premium on some products is based on product attributes specific to a company (having a PhD doesn't mean you are allowed to manufacture iPads and sell them with a 50% profit margin) or other soft 'status-based' characteristics, the general trend of a contraction the price spread between different product qualities would still occur whether it was unskilled workers who decided to work less or those with higher education, even if product types that require higher education move against this trend in the short term.

Q. What if employees of high profitability companies just got more of a share of profit? That would mean income gains go to the top 25% of the population instead of the top 1%, which means 25 times as much consumption.

This would cause them to be less likely to buy low-end goods, meaning that the increase of demand would be for things like $60,000/year in private school and daycare costs. This would lead to further incentives to invest in education, even if just for the sake of having something to put on a job application, and people would spend more of their life in school before being able to do things they want.

Any sudden demand shock, such as from the top 25% making poor investments during a financial bubble and then losing that money and going into debt, would lead to the same situation as now with students stuck with tens of thousands of dollars of student debt in a poor job market, except that it would be hundreds of thousands of dollars in debt.


So in other words, while it would increase 'consumption' including purchases of education, it would not provide the flexibility of the work concept described on this site as a protection against changes in demand. The risk from taking on student debt would also continue to distort college degree attainment rates based on income.

Q. How does creating more poor people lead to employment growth? Economists say that high unemployment is from people not spending enough.

Rich people in the US would still be spending plenty, assuming they are patriotic enough not to move to a country where they can set up their own personal estate with thousands of non-English-speaking servants who will work for $1/hour. Total wealth in the US was $54.2 trillion in 2009, with 34% owned by the top 1% and 85% owned by the top 20%. The top 1% also own 70% of all financial assets.

So I don't think I need to explain more. The flow of money of the rich would simply be diverted so that it actually "trickles down" like it was expected to, meanwhile we buy things from China, those profits are extracted by China's rich and they give it back to us.


Updated 5:44 PM, 31 Mar 2012