I agree that the firm will not necessarily simply move from 33 workers @
38 hours to 38 workers @ 33 hours. But the simple point that - ceteris
paribus - the WST, relative to a fixed rate system, makes it more
attractive to hire more workers working fewer hours is undeniable,
whatever economic you are looking at.
Moreover, while it is true that this is a static argument, the dynamics
do not necessarily go the other way. Perhaps this particular firm will
prefer to stick with its current labour structure because of the
transition costs of changing. But a new firm facing the choice of
whether to employ 33 workers @ 38 hours or 38 workers @ 33 hours, might
be impelled to opt for the latter as a consequence of the WST.
> -----Original Message-----
> From: Eero Carroll [SMTP:Eero.Carroll@sofi.su.se]
> Sent: Thursday, May 28, 1998 9:36 AM
> Subject:
>
> To Geoff, and all,
>
> I don't think that one has to be an academic economist to see how the
> arguments for WST indeed do run foul of the "lump of labour" fallacy,
> albeit not in the same way as arguments for an allegedly
> employment-increasing general cutback of working time. To quote David
> Chapman's mail on the WST from May 25th:
>
> >For example, suppose that a firm, instead of employing 33 workers
> each
> >working 38 hours per week, employs 38 workers each working 33 hours
> per
> >week. The firm will thus reduce the tax it has to pay, and hence its
> >labour cost, by 5 x 35 = 175 pounds per week.
>
> Theoretically, this is of course the case. But practically? The
> example
> still assumes at least short-term stability in the amount of available
> work--it's an assumption entirely necessary for the rather static
> argument
> that employers will choose between the two alternatives identified,
> and not
> some third alternative such as rationalizing production in order to
> maintain output but at lower levels of necessary labour time inputs
> (by
> just 15 full-time workers, let us say!). In this day and age, why
> would we
> have to assume that tax incentives of the kind advocated here would be
> more
> powerful in affecting employers' hiring decisions than the benefits of
> rationalizing away even more workers entirely? If the latter option
> can be
> combined even with increased production (by no means necessarily
> demanding
> more workers), the tax incentives can become even less attractive.
>
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