About Hating Work and Minimal Income

There are many problematic assumptions in conventional economic theory. Some, especially those related to environmental issues, have already been discussed here at some length (e.g., discounting, attitudes towards temperatures or the role of natural capital in production). Of course, without some simplifying assumptions no model can be built. However, some assumptions change the outcome of the model significantly (“Garbage in, garbage out”). Another critical example from modern economic theory is that it assumes that people hate working.

Economists have, just as most scientists (or those who claim to deal with a science), the ability to give eloquently sounding names to trivial things. The assumption that people hate working is a good example: it is called the disutility of labour. In other words: while free time is assumed to be a source of utility (a controversial concept itself, with a variety of competing interpretations), time spent at work is a source of negative utility – people must be compensated with wages sufficiently high to “outweigh” the disutility of labour.

Interestingly, this assumption collides somewhat with another assumption of neoclassical economic theory (of the “garbage” sort as well) – viz., that full employment is only a matter of letting wages float (down). If they is an over-supply of labour, wages, and thus the firms’ production costs, go down and everybody gets work. This is often used as an argument against minimal wages. However, this apparent contradiction is subject for another blog post.

What is the problem with assuming a disutility of labour? Unfortunately, I don’t know of any empirical survey about this, but my intention and common sense suggests that a) free time can have negative utility, for instance if one has too much of it and/or no capability to enjoy it (due to poverty, handicap or social isolation), and b) for similar reasons, labour can have (and often has) significant positive influence on well-being (i.e., utility) – at least up to a particular level of working hours. People like working, especially when they thus can interrelate with others. So, it is thinkable that there is some optimal working time maximizing the utility of labour.

This is not trivial for economic theory. Particularly, the assumption of (unconditional) disutility of labour has a tremendous importance in the discussion about a publicly guaranteed minimal income. The main idea, popular in many European countries, goes as follows: every citizen gets a certain amount of money from the State (a minimal income). As a compensation, most social transfers (unemployment money, pensions etc.) would be cancelled. Yet, such a scheme could be financed and maintained only if a majority of the population would work, pay taxes and produce the necessary goods. Under the assumption of disutility of labour, the prospects are not very good – people would be expected to work in minimal degree, sufficient neither for production nor for financing the minimal income scheme.

On the other hand, if we assume that there is some optimal (utility maximizing) level of working time, minimal income may, at least in principle, work. Of course, there are further concerns (e.g., the question of who is going to work as, say, construction worker or cleaner, if he had a guaranteed minimal income). Nevertheless, it would be interesting to find out whether there is such an optimal level of working hours, and if yes, how high it is. And it would be of much benefit if the assumption of unconditional (i.e., independent of the actual amount of working hours) disutility of labour would be abandoned in economics.



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