How to thrive in a green, low growth economy – take more holiday
Imagine if we could limit human production to levels that managed the world’s resources better and lessened the amount of pollution emitted into the environment over a long period of time. Rationing paid work, by allocating to each inhabitant the right to an equal number of paid hours of work per year, could make this possible.
In practice, this could be done by increasing the number of vacation weeks per year. So that each of us would get more vacation rather than higher pay. Everyone would be treated in the same way, with the same access to paid work. And everyone could start doing those things they do when they have more time than money on their hands: reading books, watching TV, doing maintenance work, slow cooking, providing care and pursuing hobbies.
Over the last century or so the rich world has pursued growth in per capita income as the central goal for societal development. In other words, a continual increase in the annual production of goods and services per inhabitant. Or as it is normally termed: continued growth (in GDP per person).
The end of growth?
Environmentalists and others increasingly argue that the growth measured in GDP will have to stop because the available resources and the capacity of our environment to absorb pollution are too limited to handle the physical consequences; 40 years after its invention, the concept of the physical limits to growth has once again become a relevant argument.
Of course, what needs to be limited is not GDP, but its concomitant ecological footprint. What must fit within the limits of the planet are the annual amount of resources used and the annual output of pollution. Both must be small compared to the global capacity. As long as that is the case, GDP can continue to grow.
But many feel this is not enough, that it will be necessary to limit the total GDP, and if not everywhere, then at least in the rich world in order to give the poor world environmental space to grow their income and consumption towards western levels. In simple terms, they argue for an end in the growth of per capita production and consumption. An end to income growth.
More holidays for all
The simplest way to do this is of course to limit the number of hours worked per person per year. Per capita production is after all equal to productivity (= production per person-year) times hours worked, so assuming constant productivity, production will stabilise if hours worked stabilise. (If productivity grows hours worked must decline at the same percentage rate). In that way – assuming a stable work force – GDP would stabilise. (And if the work force grew at y % per year, the number of hours worked per person would have to fall by y % per year.) The total effect would be a stable GDP year after year. And a stable ecological footprint.
This would be a far cry from how the modern economy works. In the modern world, when growth in GDP slows, some become unemployed while the rest keeps working full time. The burden of slow growth is carried – very inequitably – on the shoulders of a small fraction of the population. A more rational approach would be to have everyone work a little less. To let everyone share the burden of slow growth in an equitable manner. (Ideally the salaries should be cut by the same fraction, but even if we could not agree on such cuts, inflation would quickly reduce the purchasing power of the salaries by the necessary amount.)
If in such an orderly world, it was decided to limit the GDP, one would simply stabilise the number of hours worked per person per year. (Or move it in a controlled manner depending on current growth rates in population and productivity.)
Leisure time raises
In practical terms this could be done through the annual wage negotiations. Instead of negotiating for an x % increase in salary, one would be negotiating for an x% reduction in hours worked next year. It is interesting that a 2% increase in salary – the normal productivity growth per year – leads to the same increase in hourly pay as a 2% reduction in the number of hours worked per year. Which, amazingly, with a 40-hour work-week and five weeks of annual leave, amounts to nearly one week of added vacation for every year where productivity growth is taken out as increase leisure rather than increased salary.
In this orderly world there would be stable GDP, stable per capita consumption, and continuing growth in annual leisure time. The consequences are interesting: What will people do when they are forced to work less for pay? When they have to spend more time away from the office? When they are living in an economy where paid work is rationed, so they can only have a limited number of paid working days per year? I believe they will be doing all those things that they normally dream about doing, more pleasure activity and more hobbies, and when money income gets lower, what they currently pay other people to do: maintenance work and giving care.
If such domestication of tasks begin to generate unemployment, this can be handled by even deeper cuts in the maximum allowable amount of paid work per year. Or in more politic terms: Unemployment for a few will be cured in an orderly society by an increased number of compulsory vacation weeks for all.
I am of course aware of the fact that the French tried this approach a decade ago, with limited success. But on the other hand there is no doubt that Norway is a happier place today than the US since Norway has taken out a significant amount of its productivity increase since 1950 in reduced work hours per year (agreed in central negotiations), while the Americans still toil endless hours in their offices to achieve their higher annual salaries. For compulsory vacation increase to work, it needs to be backed by a democratic majority. Regretfully I don’t think this will ever happen, at least not in my life-time.