More money = more free time? Find a moment to think about it.
Updated: Aug 25, 2022
If you ever thought, I’ll work hard today and rest tomorrow – you may be right with respect to retirement, but as a society, it certainly doesn’t appear to work that way. Understanding this fallacy begins with an understanding how economic growth works.
Most people who consider themselves middle class -- at least those who I know -- lack time, money, or both. This lack of time and money creates a dilemma – as we work more, we can consume more but then we are left with less free time. The solution is a compromise, such that there is somewhat of a shortage in both time and money, and a great deal of hope that tomorrow may be a little bit brighter. The promise of economic growth is thus expected to be the solution, but is it the right one?”
Some of us believe that automation will lead us toward experiencing remarkable levels of leisure time. It goes something like this: In the years to come, significant technological advancements in production and transportation are expected which will allow us, our children, and our grandchildren to produce much more and work much less. We will still want to work to be able to express ourselves, but the current issue of lacking time and money will be no longer, as the standard work week will be reduced to something like 15 hours. Sounds good, doesn’t it? The only problem is that this argument was made by one of the most prominent macroeconomists of all time, John Maynard Keynes, nearly a century ago, .
Instead of looking far back or to the future, let us take a concrete look at the Israeli economy in recent decades (pre-COVID-19). Between 1995 and 2017, the GDP per hour worked rose by 31%, meaning that economic growth was significant and that additional resources that could be allocated for consumption and leisure were produced. But how were the outcomes of this growth divided between leisure and growth? During these years, the percentage of Jewish men (non-ultra-Orthodox) who worked 45 hours a week or more remained stable (61% in 1995 and 62% in 2017). For Jewish women (non-ultra-Orthodox), there was an increase in both the rate of employment (from 64% to 82%) and the percentage of those working 45 hours or more (from 28% to 35%).
The data therefore indicate that there was no increase in leisure time for neither men nor women. However, during that same period, private per capita consumption rose by a hefty 55%. Thus, it appears that all the surplus that was generated by economic growth brought forth an increase in consumption but not an increase in leisure time. Further, at the household level, there was actually a decrease in leisure time due to the increase in the rate and hours of employment among women. In other words, Keynes was greatly mistaken.
If you thought that you’d work hard today and rest tomorrow, you may have been right with respect to retirement, but as a society, it certainly doesn’t appear to work that way. Keynes’ misjudgment stems from the fact that economic growth is accompanied by a significant and desired increase in income. When we consider leisure and money today, we imagine that future economic growth will lead to an increase across both aspects. However, when we’ll want to increase our leisure time in the future, we will also understand that since wages have increased, each additional hour of work will afford us the ability to acquire more products than it does today. In other words, if today we will stay late at work for 60 shekels an hour, in a few years we will do so for 70 shekels an hour. It is a never-ending cycle, and therefore economic growth simply does not fulfill its promise of both more consumption and more leisure time.
Don’t get me wrong, I’m not arguing that we need to dramatically reduce the number of work hours in the coming decades. Even a small shift in leisure time can be significant. And it’s worth mentioning that there are also people who are satisfied with the current balance between time and money, as well as people who, for all sorts of reasons, truly enjoy working long hours. My contention is that, unlike other important economic issues such as the cost of living, the discourse surrounding consumption/leisure is almost non-existent in our lives. In Israel specifically, discourse about the daily life of the individual is always pushed aside in favor of the “big issues.”
While you’re running around between work, home, and family, I suggest you take a moment to think about how much the economy actually serves your well-being or whether, perhaps, we are the ones who serve the economy in order to stimulate its growth.