FULL EMPLOYMENT: WHAT GOVERNMENTS CAN DO
These days it seems most Canadians are either unemployed or overworked. It's a fool's choice which extreme is harder on body and soul. Governments in Canada have pretended to be innocent bystanders in this tragic maldistribution of employment. "It's not our fault; there's nothing we can do," the politicos have claimed, "except to establish a healthy economic climate by controlling deficits and keeping interest rates low." But are our governments really so powerless?
Workplace consultant Bruce OíHara argues that, far from being uninvolved, governments in Canada are the single biggest cause of the overworked/unemployed imbalance, both in what they have done, and in what they haven't done.
In this special report, OíHara, former director of the Work Well Work Options Resource Centre and the author of Working Harder Isnít Working, explores the job-creation potential of five policy directions governments in Canada could pursue if they were serious about reducing unemployment:
Strategy One: Discourage overwork;
Strategy Two: Change the payroll reward structure;
Strategy Three: Convert unemployment to leisure;
Strategy Four: Support family-friendly work; and
Strategy Five: Coordinate the Big Shift.
STRATEGY ONE: DISCOURAGE OVERWORK
Statistics Canada reported in July 1997 that nearly 2 million Canadians are working overtime on a regular basis - an average of nine hours per week - and that the majority of that overtime is unpaid. If we could follow Europe's example and handle overtime with permanent relief staffing instead, we could create 400,000 new jobs - while enabling the overworked to "get a life, eh".
The Canadian Auto Workers union deliberately and consciously negotiated a shorter workday and controls on overtime into a recent contract with Chrysler, thereby forcing Chrysler to put on a third shift, creating a thousand new jobs overnight. Governments in Canada must show a similar commitment to distributing the available work more fairly.
1. Convert Salary to Hourly Wages
Unpaid overtime is the biggest form of employee abuse in Canada today. Every week a million plus Canadians put in the equivalent of a full day of work per week for free. In today's uncertain job market, salaried employees are afraid to say "No" to extra work.
The solution is obvious: convert all salaried positions to hourly pay.
2. Make Overtime Voluntary
There is a legitimate place for emergency overtime: unpredictable peaks in workload, a flu bug confines most staff members to bed, or a temporary skill shortage. That being said, most overtime in Canada is chronic: it happens every week, all year. Most is happening in occupational areas where there is no shortage of skilled replacement staff. The Federal Government's 1994 Advisory Group Report on Working Time and the Distribution of Work (commonly known as the Donner Report) recommended that "employees be given the right to refuse overtime after the legislated standard workweek of 40 hours and that this right be incorporated into employment standards legislation". What are we waiting for?
Another option that would allow for emergency overtime but restrict chronic overtime would be to make overtime in excess of 50 hours per year voluntary. Employers could keep an overtime "buffer" available all year by giving time off in lieu instead of overtime pay so that employees' net work time remains at normally scheduled levels.
3. Make vacations mandatory
Organizations put more energy into cross-training staff if they know they will have to cope without key staff from time to time. We could save quite a few workaholics from going into meltdown, at the same time creating thousands of new jobs, if we made vacations mandatory.
4. Enact Annual Hours / Support Permanent Relief Staffing
Annual hours provisions are arrangements which base overtime penalties on the total number of hours worked annually rather than daily or weekly hours. For example, letter carriers could be scheduled for extra work hours around the Christmas rush, and get extra weeks of vacation every summer. Annual hours make it easier for employers to replace overtime with a permanent, full-time relief staff, and yet still cope with peaks and valleys in work flow.
The evidence from Europe suggests that, in addition to creating new employment, replacing overtime with permanent relief staffing reduces the number of workplace accidents, increases productivity and improves quality control. To encourage similar practices here, and speed up employers' learning curves with these new scheduling technologies, governments in Canada could provide employers with training and information resources on the best practices in Europe.
5. Tax Overtime / Support Workplace-based Training
Overtime premiums have limited effectiveness in controlling overtime. Employees sometimes push for overtime for the "reward" of overtime pay rates. Employers often use chronic overtime as a way to push up employee incomes and thereby reduce employee pressure for higher wage rates. Taxing overtime is a more effective disincentive to overtime. Given the extent to which both employers and employees in Canada have become dependent on overtime, a tax on overtime may need to be phased in.
The income generated from a tax on overtime could be funnelled into a Labour/Management Fund for workplace-based training. Canada has a fairly well-educated unemployed population and a reasonable selection of stand-alone training programs; what's in shorter supply is support for skills upgrading within the workplace. When organizations bring in new staff, as often as not, the new staff member coming in will be entry level, and one or more existing staff will move up to higher-level jobs to fill vacancies. Employers tend to drag their feet on these internal training tasks - and rely on overtime instead. Matching funds for workplace-based training will encourage employers to train new staff rather than burning out existing employees.
STRATEGY TWO: CHANGE THE PAYROLL REWARD STRUCTURE
What we have essentially in Canada is a payroll reward structure that makes overtime cheap, and shorter workweeks expensive. Benefit costs typically make up between one quarter and one third of payroll costs in Canada. The way Canada now structures benefits, most benefit costs stop at forty hours per week. When those costs do not increase beyond 40 hours, the net costs to employers of overtime - even paying time and a half - is insignificant. On the other hand, because some benefit costs - dental plan premiums, for example - don't decrease when work time is shortened, shorter workweeks increase the net cost-per-hour of staff time, providing a strong disincentive to shorter work times. How could government restructure payroll costs so as to reverse that, so as to penalises overwork and reward shorter work times?
1. Modify EIC, CPP, and Worker's Compensation Contributions
If the Federal Government made Employment Insurance contribution rates zero on the first $7,500 of income per year, and removed ceilings on contributory income at the same time, the EIC program would take in about the same amount of money as it does now, and EIC benefits could remain unchanged. However, structuring EIC in this way would make overtime more expensive and decrease the costs associated with shorter work times. Canada Pension Plan and Workers' Compensation contributions could be restructured in exactly the same way. The changes could be phased in over a period of years to give employers and employees time to adjust.
Philosophically, such changes would recognise that individuals and organisations that raise the tax costs associated with unemployment should shoulder part of that added tax burden. Similarly, individuals who choose to work less are making an in-kind contribution to lowering the costs of unemployment, and deserve to pay less of the tax costs of unemployment. Restructuring payroll deductions in this way would have the added benefit of effectively eliminating payroll taxes for summer students.
2. Fund Medicare Differently.
Most healthcare benefits are fixed costs: costed on a per-hour basis, they rise when employees work less, and fall when employees put in overtime. While most provincial governments do not require employers to pay such benefits, by tradition most employers do pay them, and they are part of the incentive structure that rewards long hours.
If Medicare premiums were funded by a tax not based on payroll or the number of employees (a corporate tax on gross sales in Canada, for example), this misplaced incentive for longer work time would be removed. The payroll 'overhead' associated with each employee would also be reduced, making new hires less expensive. Much of Europe funds its health care system this way. At minimum, those provinces which allocate Medicare costs to employers on a per employee basis should consider instead basing fees on a percentage of total payroll (as Ontario now does) so as to prevent Medicare premiums from acting as an "under-time tax".
3. Fund Dental and Pharmacare Plans Differently
Canada's public Medicare system is about one third cheaper than private health care in the US, even though the US system fails to provide coverage for about 30 million Americans. Our health care program is so much more efficient some Americans have claimed that it's an unfair trade advantage! Why not extend those cost savings - and our competitive advantage - by adding dental and prescription drug coverage to the Medicare system. If this expanded Medicare were funded, as previously suggested, outside of the payroll system, dental and pharmacare plans would no longer be disincentives to working less.
4. Reward Workers and Employers Who Share the Work
Unemployment costs Canadian taxpayers somewhere between $30 and $90 billion dollars per year between increased EIC, welfare, health care, crime and education costs and lost taxes. Even, using the more realistic figure of three million unemployed instead of the official number of 1.5 million, that works out to somewhere between $10,000 and $30,000 per unemployed person per year. If we pass on to individuals and their employers part of the tax savings that result when new hiring occurs, we can encourage individuals and organisations to create new jobs by reductions in the standard workweek. Canada could establish an incentive program whereby employers who voluntarily move to a 32-hour workweek would receive free Employment Insurance coverage for both employer and employee, so long as certain hiring and wage targets were met. France and Italy are both in the process of making such incentives available. The Government of Quebec plans to offer tax credits to firms that reduce work time and hire new employees.
5. Return to a More Progressive Tax Structure
If weíre really serious about wanting unemployed people to pay their own way, we should not only make more work available, but also increase their incentive to work. On the other hand, most of the top 20% of income earners in Canada are working more than their share: tax penalties at the top end of their earnings give them an appropriate incentive to work less.
By encouraging the unemployed to work more, and the overworked to work less, a relatively modest shift in tax rates could go a long way towards eliminating poverty. We could double the after-tax incomes of the bottom 20% of Canadians with only a 10% cut in after-tax incomes for the top 20%.
(One point of clarification for the literal-minded: Iím not saying that the transfer of work would go directly from the richest group to the poorest. More often it will occur as sequential chains of people each move into more skilled positions, with entry-level positions opening at the end of the chain. Enough Canadians are currently working well below their skill and education levels to make such shifts possible.)
As a starting place, we might increase the basic personal exemption from $6500 to 10,000 dollars, drop the tax rate on the next ten thousand from 17% to 10 percent, and step up the tax rate on each subsequent !0,000 dollars of income thereafter, gearing the rates so as to raise the same amount of total tax revenue. Altering the tax system this way would exact far less tax from Canadians with incomes below the poverty line, and reduce the tax burden for those who choose voluntarily to cut back to a three or four-day workweek, while at the same time discouraging those with good incomes from moonlighting or working overtime.
The job-creation potential of implementing a new reward structure for payroll costs will depend somewhat on the specifics of the incentives and disincentives put in place: as a ballpark figure, these five changes could create a total of between 250,000 and 500,000 new hires.
STRATEGY THREE: CONVERT UNEMPLOYMENT TO LEISURE
Unemployment is hard on people. Research shows, the unemployed more likely to get sick, to commit suicide, to get divorced, to end up in jail or in a mental institution, especially if unemployment is prolonged.
Leisure, on the other hand, is good for people. Increase the amount of leisure and people are less prone to get sick, divorced, kill themselves or go crazy. They're more productive at work too.
How do we explain this paradox? When non-work time is in the form of unemployment, people lack structure and purpose for their lives and must live with a high degree of financial insecurity. When time without work is experienced as leisure, it adds necessary relaxation and recuperation time to lives that already have purpose and structure.
Official unemployment has seldom fallen below 8% in Canada in twenty years; the real rate is rarely less than 15%. Why are we still treating unemployment as a temporary glitch? If there are going to be people without work, why not do what we can to convert unemployment to leisure, to family time, or to schooling?
Whenever we can trade involuntary unemployment for voluntary leisure, society wins. Both changes result in reduced health care and crime costs, healthier individuals and healthier families.
1. Phased Retirement Provisions
When the mortgage on their home has been paid off, and the kids have (hopefully) left home for the last time, most older workers have some financial room to work less. Working less can be a gentle and enjoyable way to prepare for a retirement lifestyle.
Unfortunately, most pension plans in Canada base their pay-out on workers' salaries during their final 5 years of work. Cutting to half time in the five years before retiring cuts a person's pension income in half too. But there's no reason why that needs to be so. A pension plan's letters of patent can easily be changed so as to base contributions and the eventual pension on the salary the worker would have had if they had continued to work full-time.
The government of Canada need only introduce the requirement that Canadian pension funds must include provisions for phased retirement in order to retain their tax-exempt status.
I would suggest that the Federal government then go one step further - offer to top up pension contributions to the full-time equivalent any time an older worker works less and new hiring results. Government could create new employment at a cost of $2,500 to $5,000 for each new full-time job created: far less than the cost of keeping someone on welfare. It could also allow anyone over age 60 to begin collecting a Canada pension if working half-time or less.
In Sweden, about half of the workforce between age 60 and 65 works part-time and collects a partial pension. In the past two years 100,000 French workers have begun phasing into retirement, creating 35,000 new jobs there. Even in workaholic Japan most workers drop back to part-time at age 60. Why not in Canada?
2. Longer Vacations
In mainland Europe and Australia virtually every working person is guaranteed at least four weeks vacation per year. Why not in Canada? Expanded vacation time could be tied into expanded co-op programs for university and college students. Young people would get more experience in the workplace and be able to complete their schooling, without having to run up crushing student debt.
3. Orlev Canada
At any given time, tens of thousands of Canadians are caught in the downward spiral of burnout. Thousands of others find their confidence slipping after months of unemployment. The Danes have a program called Orlev whereby any working person can trade roles - and incomes - with a person on Unemployment Insurance. What it means is that a lot of working people can avoid burnout, take time to handle a family crisis, have longer to bond with a new baby, or go back to school. For those on Unemployment Insurance who get temporary jobs, it means getting a better income, the confidence that comes from having a job, and often on-the-job training in a new skill area. If we are going to pay half a million people a year not to work, why not spell off the people who need or want some time off, rather than imposing unemployment on people who'd rather be working.
4. Support Educational Leave Programs
Educational leaves create jobs in three ways. New hires result when the positions of those on leave are back-filled. The need for overtime work is reduced as organizations expand their skill base. And better-trained staff make organizations better able to compete and prosper.
In much of Europe, employers are required to provide paid educational leave and/or workplace-based training to all employees. The Donner task force recommended that "a basic entitlement to unpaid education and training be entrenched in provincial and federal labour standards to expand opportunities for learning".
As the Donner Report notes, deferred salary leave plans are already provided for under the Income Tax Act: "By working for 80% of regular pay for four years, an employee may take a year's leave at 80% of regular pay in the fifth year. Under this approach, income deferred by the employee is placed in a segregated account, where it accumulates tax-free until drawn on during the leave period, when it is taxed".
Deferred salary leave plans could be made more attractive to lower-income wage earners if they were able to collect 90% of their regular pay and government matched their savings to make up the difference. And employers would be much more likely to offer educational leave options if they too gained some tax advantage.
5. Expand Worksharing
WorkSharing is a Federal Government program whereby a whole work unit can cut back to a four-day workweek for up to a year and collect EIC for the fifth day, rather than laying off 20% of staff. Currently the WorkSharing program is only available to organizations that can make a case that the reduction in the available work is temporary.
Why not make worksharing available to any organization which reduces work time to avoid layoffs?
Most participants in WorkSharing programs experience four-day workweeks as a good thing, as an expansion of their leisure time. They don't like the modest loss in income that the program entails, but find it to be "manageable". If, on the other hand, 20% of a work unit is laid off completely, people targeted for lay-off experience devastating financial loss.
Evidence from Europe suggests these five interventions to convert unemployment to leisure could create a total of between 250,000 and 500,000 new jobs in Canada.
STRATEGY FOUR: SUPPORT FAMILY LIFE
Dual-earner couples in North America spend an average of twelve minutes a day talking to each other. Is it any wonder that divorce rates are so high? Parents today are spending 40% less time with their children than they did a generation ago. Is it surprising that family breakdown is epidemic?
Raising children is a job all in itself. If we want the next generation to grow up happy and healthy, we need to be willing to give parents the time to parent.
1. Rights for Part-time Workers
More Canadians would choose part-time work if part-time workers were guaranteed the same rate of pay as their full-time counterparts, the same job protections, and a pro-rated share of benefits. Basing seniority on the date of hiring rather than hours worked would also make part-time work more secure. Unions would be far more supportive of part-time work if it were no longer associated with insecurity and exploitation. Temporary and contract workers will need to be given similar protections to prevent employers from converting part-time jobs to temporary or contract status.
Upgrading the rights of part-time workers would result in some initial job losses as employers who have used part-time status as a way to lower wage and benefit costs collapse those positions into a smaller number of full-time jobs. Fairly quickly though, an employee-driven expansion of career-level part-time should result in a substantial net increase in employment. The Netherlands has seen a big expansion in its part-time workforce, and a consequent drop in unemployment, after strengthening the rights of part-time workers there.
2. Right to Work Less Legislation
Frank Reid, co-author of Sharing the Work has suggested that we need to improve parents' access to quality part-time work. In addition to legislating fairer economic treatment of part-time employment, Reid suggests we should be looking at some sort of legal requirement that employers be required to make part-time options available to staff members who are the parents of young children. Germany has such a provision, requiring that employers make a six-hour workday option available to parents on staff. Some sort of appeal process will be needed so as to provide exemptions and mediate alternatives where operational considerations make shorter work days impractical. Some sort of review panel should also be established to provide protection against unfair dismissal for workers who request a reduction in work time, or are unfairly passed over at promotion time.
Reid's research suggests that we could create between 250,000 and 500,000 new jobs in Canada, just by enabling those who want to work less to do so.
3. Expanded Family Leave Provisions
If we're going to pay hundreds of thousands of Canadians Employment Insurance not to work, why don't we make sure to include all the parents of newborn children? We could expand the Employment Insurance maternity leave entitlement to 34 weeks, and add a 17-week paternity leave provision, so that parents have ample opportunity to bond with newborns. The Donner Report recommendation that new parents be entitled to take an unpaid parental leave of 34 weeks, and that all parents be entitled to take up to five days of unpaid family leave per year for the care for sick children. (Both measures are already standard in Quebec.)
4. Financial Support for Parenting Time
The family, not the individual, is the fundamental economic unit on which the economy is based. We need to look at the family employment load to know the real burden of labour a society is carrying. North American families are working about 40% more than their European counterparts. Canadian families even put in about 20% more hours of employment than their Japanese counterparts. (We all know about the long workweeks faced by Japanese men - but it isn't as well-known that most Japanese women become stay-at-home wives and mothers.) Shouldnít we, at minimum, be looking at ways to cut our family employment load DOWN to Japanese levels?
A Parenting Time Family Allowance could work something like this: any parent who had a dependent child under age six and worked less than 25 hours per week would receive an allowance of $300 per month. If both parents worked three days a week or less, each would receive $300 per month, but the allowance would not be transferable between spouses.
By encouraging some parents to work less, and others to become full-time homemakers, a Parenting Time Allowance could be expected to open up new hiring worth roughly twice government's investment in the Allowance program. Reduced expenditures on welfare and Employment Insurance payments would offset much of the program's cost; the remainder could come out of the EI surplus.
Over the years, all of the Scandinavian countries have tried a range of financial aid programs to help increase family time, particular for the parents of young children. While the programs have had success, both as a family health measure and a job-creation strategy, one problem area has been identified: low participation rates for higher-income fathers and mothers. (Given that fathers in general had higher incomes than mothers, this meant that the overall participation rate for fathers was low.) One possible way around this issue might be to class the Parenting Time Family Allowance as non-taxable income, to thereby to increase the value the incentive has for higher-income workers.
5. Promote Family-Friendly Work Schedules
Job sharing, phased retirement, V-Time, and telecommuting are new technologies in the workplace: organizations which get help with their initial experiments in family-friendly work schedules are more likely to have a successful outcome, and in turn are willing to make new work schedules available company-wide. (V-Time is a voluntary time-income trade-off scheme; that most people have never heard of it is evidence of the need for education.)
Much of the expansion of family-friendly work schedules in recent years can be traced to advocacy organizations like the New Ways to Work centres in San Francisco and London. Canada had its own work option resource centre, Work Well, which operated under Federal Government funding from 1984 to 1991. An outside evaluator reviewed Work Well client records and concluded that in addition to helping hundreds of individuals and many organizations to set up flexible and reduced work schedules (creating hundreds of new hires as a result), the Work Well centre probably saved more in reduced unemployment and welfare costs than was spent to fund the centre. There's no reason that a resurrected Work Well couldn't operate at a net savings to government, particularly if the reward structure of payroll taxes were made more friendly to shorter work times.
STRATEGY FIVE: THE BIG SHIFT
I believe the 40-hour workweek is 50-year-old technology, an outdated and inappropriate model for work scheduling in todayís world. It's the equivalent of trying to run an engineering office with slide rules and drafting pencils, or operating an international airline with propeller-driven DC9s. The 40-hour week no longer serves the interests of working people, and isnít good for business either. Consider the following:
1) The 40-hour workweek was designed for a time when very little happened on Sundays, and not much more on Saturdays. Today, most customers want a full range of services every day of the week.
2) The 40-hour workweek was designed for a time when overhead costs for land and equipment were low, relative to the cost of labour. Today such overhead costs are high: about twice the cost of labour in most organizations.
3) The 40-hour workweek was designed for men with stay-at-home wives. When the work day was done, they went home and relaxed. Today's dual-earner workforce goes home from paid employment to the second shift: cooking, cleaning, shopping and childcare. Working double-shifts has left them exhausted. They are cranky and ineffective, at work and at home.
4) When the 40-hour workweek was put in place, in divided the available work so as to create full employment. Dividing the work the same way fifty years later leaves one million Canadians officially unemployed - two million unemployed if the Federal Government were honest about the real numbers.
The Stuck Place
We want the future to be like the past, only more so. Thatís how most change happens: little by little, building on what went before. But, occasionally, change needs to jump outside the old framework, and take a big, all-at-once leap.
Consider the history of computers: until 1980 they were getting bigger and bigger, more and more centralized. The logical expectation for the future was more of the same. The idea that ordinary people would work from their own tiny personal computers seemed absurd. Most of the established players in the computer industry dismissed the PC computer as a toy. Thatís why Microsoft today is bigger than IBM: Microsoft jumped out of the old box and began thinking about computers in a whole new way.
I believe we are at a similar crossroads in work scheduling technology. Until now, weíve built our economy around a one-shift model. We have been able to shorten the workweek a long way within that model, in a series of incremental steps, from nearly 80 hours in the early 1800ís, down to 40 hours by the late 1940ís. Shortening the workweek had great benefits: it converted unemployment to leisure; it improved worker productivity; by keeping unemployment low, it made for a robust and prosperous economy. But shorter work times also carried a price: gradually increasing overhead costs and decreasing hours of service. At 40-hours, weíd pushed that trade-off as far as it could go: reduce the workweek any further and the increase in overhead costs would have been prohibitive. So the workweek has been stuck at 40 hours for a very long time, despite the huge social and economic problems that have accompanied steadily rising unemployment.
The Two-Shift Solution
The way beyond the impasse is to imagine an economy built around not one, but two shifts. I donít know exactly how it should be configured; Iím guessing that as an interim step we might have one half of the workforce working eight hours a day Monday through Thursday, and the other half working 10 hours a day Friday, Saturday and Sunday. Soon, I expect weíll move to a model where both shifts work eight hours a day, three days one week and four days the next.
So what would a two-shift workplace mean for working people?
1) Every weekend is a long weekend: Youíll have time for a life.
2) Most workers will be able to work the same days as their spouse works, and the same days their kids go to school, far more so than now. (Schools will be on two shifts too.)
3) Recreation facilities arenít overcrowded because we arenít all trying to use them on the same two days of the week.
4) Commuter traffic jams are half what they used to be because only half the workforce goes to work on any given day.
5) Any service you want, any errand, itís available seven days a week: you donít have to sneak it in on your lunch hour.
6) You feel safer and more secure because a 32-hour workweek has created nearly full employment. Your grown children will get jobs and finally leave home.
7) With unemployment very low, your employer cannot bully you into unpaid overtime or downgrade you to casual status or youíll go down the street and get hired by someone else.
8) And finally, it means your taxes are a whole lot lower because a million or more formerly unemployed Canadians are now working and paying taxes instead of draining the public purse.
And what does it mean for employers?
1) Plant and equipment can be used seven days a week: a move which will eventually cut overhead costs by almost a third.
2) Employers can provide customers with seven-day-a-week service without overtime rates or the hassle of part-time staff.
3) Their workforce is fresher, more productive, less prone to making mistakes or getting sick.
4) And finally, the formerly unemployed can afford to buy things again: the choke-hold on consumer demand is released.
The two-shift workplace will give the first nation that adopts it huge competitive advantages: lower overheads, a more productive workforce, a more robust domestic market, lower taxes. That nation will see a big boost in its ability to compete internationally. I would like Canada to be the Bill Gates of the Big Shift.
WHAT ABOUT MONEY?
Can we afford to drop from a 40-hour workweek to a 32-hour workweek all in one go? I believe so, if these four areas of savings are taken into account:
1) We could celebrate public holidays on our long regular weekends, instead of taking additional days off. That would drop the actual reduction in work time from 20% to 16%.
2) Research has shown that typically about one-third of lost production time due to shorter workweeks is offset by higher productivity: that knocks the financial gap down from 16% to about 11%.
3) A 32-hour workweek would put a million unemployed Canadians back to work, saving the public purse billions of dollars on welfare, unemployment insurance and related social expenditures. According to my calculations, those savings to the public purse work out to about 6% of the total national payroll. An across-the-board payroll tax cut equivalent to 6% of workersí wages would reduce the wage gap from 11% to 5%.
4) And finally, the two-shift workplace will reduce employersí overhead costs. Those savings will be modest at first - perhaps initially saving on average an amount of money equivalent to only two or three percent of payroll costs. Over time, as Canada grows into the available unused capacity, those savings will grow: from perhaps 3% in the first year to 5% in the second year to 8% in the third year. Over the first three years we might therefore expect an average savings on overhead costs equivalent to at least 5% of payroll costs.
If Canadian workers froze their take-home pay at current levels for three years, they could go from a 40 to a 32-hour workweek with no loss in pay, without increasing the cost of doing business in Canada. And the savings on overhead wonít stop growing after three years. After ten years they could reach the equivalent of one third of total payroll costs. With unemployment greatly reduced, Canadaís unions will be in a strong bargaining position to make sure that the lionís share of those additional savings wind up in workersí pockets.
The percentages Iíve given are both approximations and averages. After a more careful and thorough accounting, Canadians might conclude that a shorter or longer wage freeze is warranted, and that special arrangements are required to protect certain workers and certain industries. The details will need to be worked out as we go. But the bottom line is that moving to a four-day workweek with no loss in pay is a viable option so long as it is done on a two-shift model, and includes some period of wage stability.
THE BIG SHIFT
There is one problem with the Big Shift: it needs to be done all at once. No one organization can make the Shift on its own: if it does it and its employees will out of sync with the larger community around them. Theyíll clash with the school system, with the transport system, with the expectations of customers and suppliers. No, the Big Shift needs to happen all at once if it is to work.
I would suggest to you that where we stand in relationship to the economy is very similar to our position vis-à-vis the Millennium Bug. If we had dealt with the Year 2000 glitch in DOS-based operating systems ten years ago, we could have fixed the problem for about one percent of the billions of dollars itís costing us to make the fix now.
We put it off because it was "too hard" to think of changing over all those interlinked computer systems all at once. But once it became clear that if we didnít act pretty much immediately, come January 1st, 2000, we might have planes falling out of the sky, and elevators and bank accounts and stock exchanges frozen all around the world, suddenly "too hard" became irrelevant. Weíre managing that difficult, change-the-whole-system-all-at-once transition now because we have to, and because the consequences of not acting are catastrophic.
Thereís a graph I use in public presentations that looks at the average unemployment rate over each decade since World War Two. I call it the Unemployment Staircase because thatís what it looks like: in the late 1940ís unemployment was in the 3% range, rising to 4% in the 50ís, 5% in the 60ís, 7% in the 1970ís, 9% in the 1980ís, and more than 10% in the 1990ís.
As unemployment has moved upwards, the nature of economic growth has changed. In the 1950ís and 60ís, workers produced more each year, earned more and thus were able to buy more. Credit was the shock absorber for the economy: people ran up debts and pulled down savings in recession years, but paid down those debts and rebuilt savings during the good years.
By the 1980ís and 90ís workers were still producing more every year, but high unemployment had put a big downward pressure on wages, causing earnings to fall. A massive and continuous expansion of public and private credit was required to cover the gap between what workers were producing and what they could afford to buy.
That huge expansion of credit pushed the unemployment rate down probably two or three percentage points in the 1980ís and 90ís - but it has left the economy very vulnerable. Canada is rapidly approaching its credit limit, both publicly and privately. If the economy enters a recession now, we donít have the room to borrow our way out of the worst of it. Instead, big interest charges on current debts will be draining the disposable income of consumers and pushing the unemployment rate up instead, probably towards the 16 percent range.
Iím not sure whether the mother of all recessions will come next year, or three years down the line. We could argue about it, if you like, but to my mind thatís a little bit like some of the debate I was hearing last year about how long it was possible to delay acting on the Millennium Bug and still be able to prevent a cybernetic meltdown.
The Big Shift to a two-shift workplace is a huge and very complicated transformation of the economy, not without risks. Thatís why weíve put it off so long. But I would argue that weíve reached the point where doing nothing entails even greater risks, and that a bigger, scarier more complicated and infinitely more painful transformation of the economy is inevitable if we do nothing. If youíre not clear about the price of waiting too long, ask an Indonesian, or a Japanese national.
Making It Happen
Government is the obvious player to initiate and coordinate the Big Shift, using its rule-making powers to ensure that everyone changes course at the same time and in the same direction. Each province has the necessary authority to mandate new school schedules, to set new employment standards, and to broker a deal with the Federal Government for a province-wide reduction in payroll taxes. As a first step, governments in Canada would need to open a national dialogue with business, labour and the general public to seek some kind of consensus about how the Big Shift should be structured.
The Big Shift could be made on a trial basis in one Canadian city, enabling the provinces to gather hard data on job-creation, on the impacts on productivity and absenteeism and overhead costs, and the effects on social expenditures. We would have an opportunity to learn on a manageable scale how to link and coordinate two shifts, and what level of job-training support is required. The media would love it: with a little encouragement they could find a different story hook every day for a month. It would make the Big Shift real, concrete and possible for the rest of the country.
There is one way in which the Big Shift differs from the Millennium Bug. Thereís no up-side to fixing the Millennium Bug: the best outcome we can hope for is that we avoid cybernetic disaster. Implementing the Big Shift will also prevent disaster, but it will give us ever so much more. It will give us the opportunity to create a society where life is richer, fuller, more secure, and less stressful. It will give us a society where our kids have jobs and hope for the future, where we donít face an either/or choice between jobs and the environment. And you wonít have to choose between having a job, and having a life.