The Impact of a Workweek Reduction on Labor Productivity (Yoonsoo Park, WooRam Park, Fellow)

[Go to related Report] https://goo.gl/J5G7sR 1917 World War I There was a nationwide mobilization of labor to produce the necessary goods for war. And a study was conducted on the relationship between working hours and output in order to maximize production. In 2015 Economist John Pencavel discovered new information using data collected during this period. Output rises by the hour but at a decreasing rate. And, above a certain threshold, it is not sensitive to hourly changes. The Impact of a Workweek Reduction on Labor Productivity According to OECD statistics, countries with shorter working hours tend to have higher labor productivity. In Korea’s case, the hours are long and hence, productivity is low. However, despite the general consensus calling for reform of the long-hours culture prevalent in Korean society, concerns are also being raised over the negative impact a cutback in working hours would have on productivity. Then, how would productivity be affected? KDI analysed the impact of the standard 40-hour workweek, the most recently implemented policy to reduce working hours, on the labor productivity of 11,692 manufacturing establishments with 10 or more employees. The policy reduced the workweek from 44 hours to 40, and was gradually implemented across the country according to industry and size of establishment, from 2004 to 2011. The results show that the reduction in the workweek increased output per worker by 1.5% The observed improvement of labor productivity was mainly found in sectors that previously had long working hours. In addition, the changes in labor productivity was not significant before the reduction in the workweek. but became so immediately upon the initiation of the policy. These results suggest that the reduction “caused” the improvement in labor productivity. [Interview1: WooRam Park] The results suggest that there might have been inefficiency due to the long working hours prior to the implementation of the 40-hour workweek. Under long working hours, a reduction in working hours will induce improvements in labor productivity and therefore, will not negatively affect workers’ total output and may even increase it. [Interview2: Yoonsoo Park] Workers’ compensation should be based on output rather than input to encourage quicker, more efficient work practices. In the process of reducing working hours, unnecessary work and tasks should be eliminated, and labor and resources should be efficiently reallocated to strengthen competitiveness. It is also important to note that when we talk about creating jobs through reducing working hours, it does not mean merely reducing the hours. That is, it must be implemented in a way that strengthens productivity and competitiveness.