Flawed take on push to regulate ‘longer’ working hours

As Australians get back into the swing of work in 2014, they should not be fazed by the misleading idea that we are working ever-longer hours for no greater pay.

According to an Australia Institute report by Richard Denniss and Prue Cameron, more and more Australians are allegedly being overworked and engaging in "unpaid" overtime, a claim based on the results of a survey of the working habits of 1,409 people.

Longer-term trends in hours of work tell a different story.

Data from much larger samples collected by the Australian Bureau of Statistics show that the proportion of Australians working 45 or more hours per week fell from 28.4% in 2000, down to 23.5% in 2012. Of the employees who regularly worked overtime, the proportion that worked unpaid overtime also fell from 33.5% in 2000 to 25.9% in 2012.

While there are a significant number of long hours workers, long hours of work have become less prevalent.

Nevertheless, Dennis, Cameron, and others argue that stronger regulation of working hours is needed. This is a so-called 'solution' in search of a problem.

Many jobs that feature long hours of work and "unpaid" overtime consist of workers who are highly skilled, highly paid, and are rewarded with extensive career progression. This is the case, for example, for many managers and professionals in the finance and mining industries.

Any regulation that attempts to limit hours of work could have adverse outcomes for those who willingly work longer hours for high rates of pay and career progression. It will also fail to assist those employed as managers and sole traders, for whom longer hours are an inherent part of the job.

The Australia Institute report also suggests that regulating working hours will reduce unemployment by redistributing unpaid overtime.

Economists call this the "lump of labour fallacy". This assumes that there is a set amount of work that can be done in the economy, and hours of work and jobs can easily be transferred from long hours workers to the underemployed and jobless.

In reality, the number of employees and hours worked are determined by the complex adaption of business operations to the prices of goods and services produced, and the wage and other costs of hiring, firing, and training labour. Because decision-making by businesses is multifaceted and unique, it is naïve to think that hours of work can be simply handed out across the workforce.

The real solution for unemployment and underemployment is less, not more, regulation. We should make it easier to create jobs and hire new workers by cutting red tape (especially for small businesses), and by overhauling job-destroying unfair dismissal laws and the rigid industrial awards system.

Christian Stojanovski is an intern at The Centre for Independent Studies.