Flexible working hours – Genius or madness
Posted November 23, 2007on:
The flexible working hours bill aims to increase the degree of ‘flexibility‘ in the labour market for households with a child under the age of 5 or a disabled child under the age of 18. Now I’ve heard all sorts of complaints and complements about this bill, so I’ll try to talk about the way I see it.
This bill could be ‘binding’ (forcing some firms that were inflexible to be flexible, incurring a cost on some firms) or ‘not binding’ (implying that it does nothing, with no cost on firms). In the non-binding case the law is simply a waste of money, so as a result we must focus on the case when it changes firm behaviour.
Now the Greens believe that it would be binding, but would have little significant cost to firms, while National believe that it would provide a regulatory burden to firms, and that these types of arrangements were best sorted out in employer-employee negotiations.
As far as I can tell, if all the benefit from this legislation was private, then National is right. This is because the employee could negotiate a lower wage for more flexible hours, ‘splitting the surplus’ depending on their relative bargaining positions. However, if we believe that their are significant social benefits that are not internalised by the employer or employee, the Greens are right(ish), as the newly flexible hours will benefit other people.
Some examples of the social benefit are, less congestion (given that people are working different hours), the benefit to the child of seeing their parents (if the parents values associated with this is less than the full social value), and some arbitrary benefit to society from providing for families.
However, there are costs associated with this policy. Firstly, there are a number of job types (if not all) where one employee will have a positive impact on the productivity of another employee. If this is the case, having employees work at different times implies that the output they produce is lower. This hurts the firm and society (as there is less production), and may also lead to a lower wage for the employee and their work mates (as wages should be linked to productivity). You might try to counter this by saying that an employee that spends more time with there child will be more productive, but if that was sufficient to counter this first effect, employers would already let them do it!
Also there is the fabled impact on employees without families: “Don’t they have to work harder when the employee with a family isn’t there?” Well they might have to, but even if they didn’t they would get the lower wage described above from a lower level of productivity. The one plus for people without children is that they would now be favoured in the labour market, as employers would know that they might have to give people with children flexible working hours and would discriminate (you might say discrimination is illegal, but it is also difficult to detect).
The main loser will be the person who has a family but wants to work, they will not be offered jobs (unless they hide the fact they have kids), and if they do they will be offered a lower wage. Even worse, people already in work, but with young children will find it difficult to move up in the workforce, as the potential for them to pull out the flexible working hours card makes them a liability in more important positions.
Overall, I believe that the social costs of this policy outweigh the social benefits, and would be more likely to call this madness than genius. Ultimately, I don’t believe this policy will benefit anyone, not even the group it is supposed to help. Hopefully the policy ends up being a non-binding, waste of space.