Download A Macro-determination Model of Working Time and Research on Related Problems

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A Macro-determination Model of Working Time and
Research on Related Problems
MENG Xuduo
School of Labor Economics, Capital University of Economics and Business, P.R. China, 100070
[email protected]
Abstract: Working Time is a very important theory and an important practical problem in labor
economics. But from the macro-perspective, the discussion about the relationship between working time
and productivity, unemployment, and economic growth rate is not commonly found. This paper will
establish a macro-determination model of working time from the macro-perspective with related data of
contemporary Britain, so as to find the rule of the change of working time, and the factors causing the
change of working time. The analysis shows that productivity and unemployment rate are the
macro-determination factors of the change of working time in contemporary Britain. At the same time,
some of the popular opinions are not supported by the result of computational analysis. Besides a
Z-shape changing hypothesis of working time is presented in this paper.
Keywords: Working time, Macro-determination model, Overwork
1 Introduction
Working time is also called labor time, which means the time labors spend on payable social labor (Yang
Heqing, 2006). Nowadays the research of working time in labor economic is focused on the
micro-perspective of individual enterprise and labor. Especially the research on individual labor’s
working time supply is fairly mature. On individual labor’s working time supply, the decisive factor of it
is the wage rate (or income), the equilibrium condition of individual labor’s working time is that wage
rate equals to the marginal rate of substitution (W=MRS). Besides the backward-bending labor supply
curve has been proved in both theory and practice.
But on the macro-perspective of working time, the research on the changing rule and decisive factor of
the working time in the labor market of a country or society is poor and even difficult to find. If we put
the individual working time supply theory into the macro-study of the change of whole society’s
working time, we could see that this cannot explain the change of a country’s working time accurately
and explicitly. Since 1970s working time’s change is not very obvious. It is up to different country’s
situation. In some country, the working time fluctuates, but in some country, the working time is
decreasing in general trend (Cahuc & Zylberberg 2007 . This complex phenomenon is difficult to be
explained by the individual labor supply model.
But the macro-change of working time is of great significance to the economic and national
development of a country, and shouldn’t be neglected. A macro-determination model of working time
will be established based on the rule of macro change of working time to study the decisive factor of a
country or society’s working time.
， ）
2 A Macro-determination Model of Working Time
2.1 Changing trend of British working time since 1990s
According to the related data of British National Bureau, the real weekly working time of British labors
has decreased from 33.2 hours of the second quarter of 1992 to 31.6 hours of the first quarter of 2010. In
another words, it has decreased by 1.6 hours or 4.82%. Although the working time hasn’t changed in a
big extent, it presents a gradual decreasing trend. And with such a trend, there is still frequent fluctuation.
The actual working time has reached its maximum 33.5 hours in the fourth quarter of 1994 and has
reached its minimum 31.5 hours in the first, third and fourth quarters (Figure 1).
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Resource: Office for National Statistics (U.K.), http://www.statistics.gov.uk/default.asp
Figure 1 The change of average weekly actual hours worked (Numbers) per laborer
From Figure 1, we could see that real working time presents the rule of smaller fluctuating.
What are the reasons of fluctuating in a smaller trend? And what are the reasons of different changes of
working time in different years? In the following part, the reasons of the change of working time will be
explored by setting up a macro-determination model of working time.
2.2 Proposition of the research
2.2.1 Macro-determination model of working time
In order to study the changing rule of working time and the influencing factor of the change, a
macro-determination model of working time is established as the following.
H = f ( E, L, P, W )
1
In the model H refers to hours worked, and E, L, P, W refer to the four factors determining working time
in macro perspective. E refers to economic cycle, L refers to labor market, P refers to productivity level,
and W refers to wage rates.
2.2.2 The proposition of the relationship between working time and its influencing factors
According to the model, four propositions on the relationship between working time and its influencing
factors are proposed.
Proposition 1: Economic cycle influences working time. During the economic recovery and prosperous
period, the working time increases, and during the economic recession period, working time decreases.
Proposition 2: Labor market influences the working time. When the labor market is stable and
prosperous, working time increases, and when unemployment is serious, working time decreases.
Proposition 3: The productivity level determines working time. With the increase of productivity,
working time decreases.
Proposition 4: With the increase of wage rate, income effect is bigger than substitution effect, and
working time decreases.
The empirical research method will be used to test the model and the propositions.
（）
2.3 Testing of the model with empirical research method
2.3.1 The choosing of data
Four indicators have been chosen to represent the four factors influencing working time—economic
cycle, labor market, productivity and wage rate. The gross Domestic Product growth rate( GDP growth
rate) indicates economic cycle. The unemployment rate indicates labor market conditions. The labor
productive index per hour (productivity) indicates the productivity level. The average income
index( average income) indicates wage rate. The measurement of working time is represented by real
weekly working hour (real working time). All of the data is from British National Bureau, and is
quarterly data. From the first quarter of 1992 to the first quarter of 2010, there is altogether 73 quarterly
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periods’ data.
2.3.2 Regression analysis
The software SPSS 16.0 is used here to make the regression analysis. Although there is only 19 years’
data, all of the data is quarterly data, so there are 73 cases in the database, which has met the
requirement of case number in statistical analysis.
The real working time being dependent variable, GDP growth rate, unemployment rate, productivity and
average income being independent variable, a regression model has been established. The stepwise
regression analysis method has been chosen to analyze. The result is as shown in table 1.
Model
4
4
4
Table 1 Results of regression analysis
Regression coefficient
Adjusted R Square
B
0.890
Regression
Constant
Unemployment rate
Productivity
F
t
Sig.
93.070
-5.642
-19.126
.000
.000
.000
.000
283.809
39.426
-0.102
-0.067
Four models have been established with regression analysis. The final result of the regression model is
shown in table 1. The adjustment R2 is 0.890, which shows the goodness of fit. The variance test F is
283.809. It is significant on 0.000 level, which indicates that there is obvious linear regression
relationship between the independent variance and dependent variance in this model. Besides this model
is proved by test that there is no distinguished value and multicollinearity problem. Through stepwise
regression, the two independent variables which are the GDP growth rate and the average income are
eliminated in the model, which shows that the two are not significant in the regression model. The
regression coefficient of constancy and the two independent variables which are unemployment rate and
productivity is significant on 0.000 level, which indicates that the constancy and the respective
independent variable is meaningful in statistics.
The final macro-determination model of working time is:
H= 39.426 – 0.102L – 0.067P
2
（）
2.4 Result
After the empirical test of proposition model 1, we come to the final model 2. According to model 2, we
can judge the correctness of the four propositions on the relationship between working time and its
influencing factors.
2.4.1 Proposition 1 and 4 are not correct
Since the two variables ----GDP growth rate and average income ---- have been eliminated in the testing
of the model, there is no significant linear relationship between the two and real working time. They
cannot explain working time. In another words, the fluctuation in economic cycle and wage rate have no
significant influence on working time. So propositions 1 and 4 are not correct.
In normal labor economics theory, working time’s change is up to the demand of the market in short run.
It is closely related to economic cycle. During the prosperous period, working time is increased, and
during depression of economy, working time is decreased. Computational analysis shows that there is no
linear relationship between GDP growth rate and real working time, indicating that the influence of
economic cycle on working time is not as significant as what people have believed.
Besides the computational analysis of the macro-determination model of working time has shown that
there is no relationship between wage rate and working time, which has also proved that the individual
labor supply theory can’t be used to interpret the change of working time in macro perspective.
2.4.2 The correctness of propositions 2 and 3
Both of unemployment rate and productivity have significant linear relationship with real working time,
and both of the relationships are the negative. When unemployment rate is high, working time decreases,
and when unemployment rate decreases, working time increases. With the increase of productivity,
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working time gradually decreases.
According to the description of contemporary British real working time, it is found that in the general
trend working time decreases. But in different years, it fluctuated. The macro-determination model of
working time can interpret this: the gradual increase of productivity is the fundamental reason of
continuous decrease of working time. The fluctuation of labor market which means the change on
unemployment rate makes the small increase or reduction of working time in different years.
3 The Z-Shape Changing Hypothesis of Working Time
A model describing the change of working time with the different stages of social development is
established in the paper. It means that with the development of economy and increase of social wealth,
working time first decreases, then increases, and finally decreases again. The change is shown in Figure
2.
Ⅱ
Higher social development stage
Ⅰ
Long working time
timetime time
Short working time
Ⅲ
Ⅳ
Lower social development stage
Among it
Late stage of industrialization/ Developing countries of medium-higher income
Post-industrialization period/ Developed countries
Early stage of industrialization/ Developing countries of medium-lower income
Pre-industrialization period/ Least-developed countries
Ⅰ：
Ⅱ：
Ⅲ：
Ⅳ：
：
Figure 2 Z-Shape change of working time
The horizontal axis of Figure 2 refers to the length of working time. When it approaches to the right,
working time becomes longer and longer. When it approaches to the left, working time becomes shorter
and shorter. The vertical axis refers to different stages of social development. When it approaches to the
downward, the social development stage is more backward. And when it approaches to the upward, the
social development stage is more advanced. The four quadrants in Figure 2 can represent the different
development stages of a country, and can also represent the countries of different development stages.
When a country develops from the pre-industrial period, the economic increase depends mainly on the
increase of population and the primitive accumulation of capital. In order to get more profit, the
capitalists would exploit the labors to the extreme scale, and try to decrease the cost of labor. The labors
as the proletarian are in the disadvantaged situation. They have a long working time, and are in poor
working condition. “Employing new workers would lead to new deposited capital. However, the
increasing of the intense level of labors would create extra labor work. So on the base of increasing the
extra products and extra value, the capital accumulates fast without any increase of constant
capital”(Marx, 2007). In this stage the working time of labors has been lengthened by capitalists as
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possible as they can. With economic growth, the country’s economic and social development level has
been upgraded. The whole society would be more concerned about the working condition of labors. At
the same time because of the development of laws on labor, the mature of labor union, and the
strengthening of the laborers’ consciousness of protecting their own rights, the reduction of working
time has been written into law (For example, the strike of Chicago workers in 1886 has led to the
legalization of 8-hour working time). Working time has been reduced little by little, and working
condition has been improved. After that during the development of the country which is approaching to
the higher social stage, the capitalists would strengthen the intensity of work and lengthen the working
time in order to stimulate the economic growth, and to enlarge the profit of capital. On the other hand,
laborers also hope to increase their own income, or even just to retain their jobs and they have to work
overtime and over-intensively. At this stage, the phenomenon of “overwork” (or overlabor) would
appear, which does harm to laborers’ health and influences the growth of economy. If overwork in labor
market is not regulated, the economic development may stop, and even may go backward and get into
the “Moderate Income Trap”. Only when the legal construction on labor has been strengthened and the
labor market has been well supervised, could the laborers’ right be protected and working time be
reduced. At the same time, the extensive economic growth mode of depending on the low cost of labor
would be transformed into the intensive economic development mode of depending on the vitality of
human resource. Finally the country can get into the higher-level social development stage, and becomes
a country with advanced economy and wealthy society.
Now China is developing from the medium-lower income country in the third quadrant to the
medium-high income country in the first quadrant, or is in the stage of moving from the third quadrant
to the first quadrant. The phenomena such as working overtime or working over-intensively have
appeared. Overwork problem has been striking little by little.
4 Conclusion
A macro-determination model of working time has been established in this paper. We have found that
the working time of contemporary developed countries is determined by the change of productivity and
unemployment rate. The old opinion that the fluctuation in economic cycle and the change of wage rate
would influence working time is not supported in the paper. Based on the Z-Shape changing proposition
in the paper, we could see that during the establishment of macro-determination model of working time,
only the data of developed countries have been studied. So the conclusion in the paper can only reflect
the changing rule of developed countries’ working time, which is the rule of evolving from the first
quadrant to the second quadrant. According to the Z-Shape changing proposition, the change of working
time is non-linear one, so we have to make linear regression analysis in divided stages. The model
cannot interpret the changing rule of developing countries’ working time. Developing countries’
working time is still in the increasing stage, which means there are serious problems of overtime
working or overwork. In the future, the changing rule of developing countries’ working time will be
further studied.
Acknowledgements:
This research is one of the research achievements supported financially by the research projects on
scientific and technological innovation of postgraduate of CUEB (Capital University of Economics and
Business).
References
[1]. Yang Heqing (chief editor). Labor Economics (2nd ed). Beijing: Renmin University of China Press,
2006:136 (in Chinese)
[2]. Cahuc, Zylberberg. Labor Economics. Shanghai: Shanghai University of Finance and Economics
Press, 2007:42~43 (in Chinese)
[3]. Marx. The Capital. Haikou: Nanhai Publishing House, 2007:94(in Chinese)
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