Working Longer Hours Does Not Sustainably Increase Growth

Jeb Bush says people need to work longer hours to get 4 percent growth "as far as the eye can see." So far, responses have focused on how ridiculous it is to demand of people that they work longer hours, especially given that the US has one of the higher levels of hours worked per worker in the developed world. But there is a bigger problem here, which is that getting people to work longer days doesn't actually increase rates of growth except in the very short term.

Increasing Hours Does Not Deliver Sustainable Growth

Imagine a set of 1000 workers that each work 10 hour days and whose per-hour production is $5. In a given work day, they will produce $50,000 of GDP (1000*10*5). Holding all else equal, if you increase their work hours to 11 per day, you will see 10% growth up to $55,000 of GDP. If you increase their hours another 10%, while again holding all else equal, you will again see a 10% rate of growth.

Increasing hours does therefore cause growth rates to increase, but obviously this strategy of growth through extra hours quickly runs out of steam. This is because there are only 24 hours in a day and many people also spend some of those hours sleeping. Any increase in growth rates brought on by having people work longer hours is thus necessarily unsustainable and will not last "as far as the eye can see."

Increasing Labor Force Participation Does Not Deliver Sustainable Growth

The same unsustainability also exists for growth through increasing labor force participation. Going back to our 1000-worker, 10-hour-day, $5-hour example above, imagine that the society had 1500 working-age people in it (and 0% unemployment). This would mean its labor force participation rate was 66% (1000/1500). If you increased its labor force up to 1100, you would bring labor force participation to 73% and, holding all else equal, grow the economy that year by 10%. If you grew the labor force again by a similar amount in the next year, you'd also see similar one-off growth.

But as with hours, there is a hard limit on this growth strategy. Eventually you get to 100% labor force participation (or more realistically significantly below 100%) and you simply cannot increase labor force participation any further. As with hours, this is a short-term growth gimmick, and it does not deliver high growth rates "as far as the eye can see."

All About Productivity Growth

The only mechanism that can deliver sustainable growth in the medium and long term is productivity growth, i.e. increasing per-hour production. Going back to the 1000-worker, 10-hour-day, $5-hour example above, increasing per-hour production from $5 per hour to $5.50 per hour would cause the growth rate to be 10%, holding all else equal. Increasing per-hour production by another 10% the next year would also cause the growth rate to be 10%.

Unlike with increasing hours and labor force participation, there is no inherent limit to growth through increasing per-hour productivity (besides possibly ecological limits). You can go from $5 to $5.50 to $10, to $50, to $100 and so on. Keeping productivity growth high is thus the only way to get high growth "as far as the eye can see."

The trouble with this fact is that it's not at all clear how you increase productivity growth through policy. In a country like the US, productivity growth is primarily driven by innovation. This is why cutting taxes to incentivize more innovation (not squeezing more work out of people) is the more conventional conservative line on how they get growth. Conservatives will cling to this low-tax channel for boosting productivity-enhancing innovation until the bitter end, but there is little reason to think innovation works this way, that people only come up with and implement new ideas when the tax rates are low. After all, the highest tax countries in the world also have very high levels of innovation.

What's the Point of a Higher Growth Path?

Although increasing hours worked and labor force participation doesn't sustainably increase growth rates, it would give us a one-time growth boost that would put us on a higher growth path. Which is to say that, if you could get and sustain more hours worked and higher LFP, the base upon which increases in per-hour productivity growth would apply would be permanently higher, making total output permanently higher.

The cost of doing that, however, is that people have to spend more of their scarce time on this earth toiling instead of in leisure with family and friends. So the real question here is why would you want to do that? What exactly is the pressing problem that calls for increasing output through reducing the free time during which people can actually enjoy the output?

Do we have a dearth of national income owing to lax working habits? No. Our PPP-adjusted, per-capita national income is the second-highest in the world behind Norway.

To be sure, we have some of the highest rates of relative, absolute, and qualitative material deprivation in the developed world. But this is not owing to a lack of national income resulting from low levels of work. Rather, the material deprivation is a consequence of our political choices to distribute the national income extremely and increasingly unequally. It's not a production problem; it's a distribution problem.

Do we have some sort of major public fiscal problems requiring boosts to national income to deal with? Hardly. In addition to having one of the highest levels of GDP per capita, we also currently have one of the lowest tax levels and lowest levels of government revenue as a percent of GDP:

Any current and future demands on the public fisc can be handled relatively trivially by bumping up the US tax level to even just middling levels. One possible exception to this is certain projections about rises in health care spending, but if those projections are true, not even working people like mules can save us, unless it kills them in the process.

So, in addition to the fact that one-off bumps in the growth path don't cause growth rates to go up except in the extremely short term, there simply is no reason why we need any policies oriented towards wringing more work hours out of people. Policies that help people who currently want more work get it (e.g. better monetary and fiscal policy to cut the unemployment rate) are worth pursuing certainly. But, other than soothing unnecessarily high rates of unemployment, what we really should be aiming to do policy-wise is reduce work hours, not increase them.