Reductions in Hours of Work as a Source of Productivity Growth

Abstract

ACCORDING to Edward F. Denison's estimates, the three most important sources of the increase in real national income per man-hour from 1929 to 1957 were education, the advance of knowledge, and reductions in hours of work. The contribution of the last is put at more than double that of the increase in physical capital and half that of education. While investigations of education, research, and capital formation have flourished, there has been no significant recent work on the relationship between hours of work and output per manhour. Heavy reliance seems to have been placed on a 1947 BLS study whose conclusions are subject to question. Furthermore, effects of changes in the distribution of hours of work which have accompanied the changes in average hours have not been explicitly considered. Denison estimated that 0.5 per cent per year, or more than one-fifth of the 1929-57 growth of real national income per manhour, resulted from reductions in the length of the work week. He assumed that at the 1929 level of 48.6 hours per week, losses in output from declines in hours were fully offset by increases in output per man-hour. At the 1957 level of 39.8 hours per week, a 1 per cent reduction in hours would result in a loss of output of 0.6 per cent. Linearly interpolating, he estimated that 68 per cent of the losses in output from declines in the length of the work week were recouped through increases in output per man-hour over the 1929-57 period. While Denison provides alternative estimates which show rises in output per man-hour offsetting 53 per cent and nearly 100 per cent of output losses, he believes that the true range of error is smaller. Denison does, however, preface his