> if everyone else also worked three hours a day instead of eight, then the prices of goods would change to reflect that
No, not really. Pricing doesn't work that way. You have to account for the vast price differences that occur globally and the fixed cost of production.
A more concrete example, Samsung makes (I don't know, making up a number here) 5% profit on a new Blueray player. That means the rest of the pricing is fixed. But now instead of 1 person working an 8 hour shift producing x number of Blueray players, they have 3 times the number of people working 1/3 the time. Production doesn't scale linearly with the number of people, and management overhead increases as the need to coordinate more people simply requires more effort. So costs don't scale linearly either. So now Samsung is making fewer Blueray players at greater expense.
Remember, their downward price mobility is only within that 5%.
Do they
a) lose profit to maintain prices?
b) increases sale prices to maintain profit?
The demand signal is still similar. You working 1/3 the amount of time doesn't change the number of people who might buy a blue-ray player, it only decreases the amount of money you have to spend on one. Samsung can't simply drop prices by 2/3s because you have less money. The solution is to cut production to meet the demand signal.
Cutting production means they've let go much of their production staff (which lowers the managerial overhead) and helps keep prices low. But the blue-ray player still costs what it costs to produce. Your ability to pay for it doesn't change the laws of physics.
Now let's make things worse for Samsung. China doesn't have a 3 hour work-day policy, they have an 8 hour work day policy. So, even at exactly the same per-hour wage, Foxconn can outproduce and price undercut (by realizing the greater efficiency of fewer workers) Samsung on the same product.
Fewer workers producing the same amount of stuff as more workers increases productivity and realizes efficiencies that can be used as competitive advantage.
Simply cutting everybody's time to 1/3 isn't the same thing.
> It's similar to the issue of dual income households. How was it that in the 50s and earlier very few families needed two incomes to afford a nice middle class lifestyle?
I think there's a very good argument that the definition of "middle-class" has continued to veer upwards over time. The kinds of homes and lifestyle my parents grew up in are nowhere near the quality level of what I've grown up with. The world my grandparents grew up in would be considered poverty levels today.
Lots of families could go single-income today and realize a lifestyle not too different from that single-income lifestyle of previous generations. But having two incomes means more TVs, more internet, more cars, nicer cars, nicer computers, multiple computers, bigger house, granite countertops, large en suite bathrooms, expensive overseas vacations, more expensive schools, more resource to put into your kids, etc.
Your example of the Blueray player is a good one, and I can't disagree with it.
I will say that I mainly had housing in mind when I made that statement. That was somewhat short-sighted of me, but in my defense housing is quite different from something like a Blueray player or a TV. House prices are much, much more fluid than those of gadgets and are also highly localized. One house can be 3x more expensive than another carbon copy simply because it's closer to an office district that employs a large number of comparatively wealthy people. In other words, housing prices in competitive markets are determined mostly by factors other than the cost of production, which can be nearly negligible in some cases. Housing prices certainly would go down if everybody's income was simultaneously cut by two-thirds; this is exactly what happens when a local job market crashes (e.g., see the Houston oil crash in the 80s).
Regarding your final point, about standard of living simply veering upward over time, I think there's a lot of truth to it. But I also think there's a lot of complexity. I know plenty of folks who still live very modest lives that are barely different from the 50s -- small homes, often homes that were built in the 50s and are still standing and are in bad condition, certainly worse condition than when they were first built; small TVs; old kitchens; no vacations; public schools; many family members living in the same house; etc. These people are often working classic middle-class jobs: nurses, school teachers, etc. Despite not having many of the materialistic advances you list, they also often have pretty bad debt, either student loans or credit card debt.
Yeah, you're right of course. Housing prices would go down towards the cost of production. Those $750k McMansions really only cost $300k to build (making numbers up here). But if new homes drop below the cost of production then we're in trouble.
Any economic model that doesn't assume for the cost of production simply isn't realistic.
Japan has a particularly weird model that might work: homes drop in price like cars over time, so prestige signalling means building a new house and not living in an old one. It also means homes are built cheaply and without intention to last more than a couple decades. It also means that the new home construction industry maintains a fairly flat work schedule and increases certainty.
There's a bunch of other construction economics that occur in Japan. Something like 5% of the people working in Japan work in construction.
Studies of Japanese economics are interesting in terms of how many economic problems the Japanese have tried to solve with construction projects.
It all basically comes down to the question of how much of our spending is due to zero-sum games (or at least things that trend in that direction).
That, I tend to think, depends to a significant degree on where you are. In many areas of the US, housing (for example) is very cheap, and much of the cost is down to the construction of the building and its amenities. On the other hand, in parts of the UK with a decent jobs market, there's a shortage of available land, and housing is very expensive indeed. I spend three times what a friend in Wales spends for his (otherwise similar) house, and three times less than some other friends spend for their one bed flat in central London. That difference in cost has little to do with the difference in intrinsic value of our properties, and lots to do with the fact that the land they sit on has differing value, thanks to the UK's shortage of residential land in places with jobs.
In the south of the UK, I would tend to argue that if everyone cut an hour or two off their daily work, we might be affected a little less than you might normally think - because everyone below a certain class has a lot of their income tied up in an area that approaches a zero sum game.
No, not really. Pricing doesn't work that way. You have to account for the vast price differences that occur globally and the fixed cost of production.
A more concrete example, Samsung makes (I don't know, making up a number here) 5% profit on a new Blueray player. That means the rest of the pricing is fixed. But now instead of 1 person working an 8 hour shift producing x number of Blueray players, they have 3 times the number of people working 1/3 the time. Production doesn't scale linearly with the number of people, and management overhead increases as the need to coordinate more people simply requires more effort. So costs don't scale linearly either. So now Samsung is making fewer Blueray players at greater expense.
Remember, their downward price mobility is only within that 5%.
Do they a) lose profit to maintain prices?
b) increases sale prices to maintain profit?
The demand signal is still similar. You working 1/3 the amount of time doesn't change the number of people who might buy a blue-ray player, it only decreases the amount of money you have to spend on one. Samsung can't simply drop prices by 2/3s because you have less money. The solution is to cut production to meet the demand signal.
Cutting production means they've let go much of their production staff (which lowers the managerial overhead) and helps keep prices low. But the blue-ray player still costs what it costs to produce. Your ability to pay for it doesn't change the laws of physics.
Now let's make things worse for Samsung. China doesn't have a 3 hour work-day policy, they have an 8 hour work day policy. So, even at exactly the same per-hour wage, Foxconn can outproduce and price undercut (by realizing the greater efficiency of fewer workers) Samsung on the same product.
Fewer workers producing the same amount of stuff as more workers increases productivity and realizes efficiencies that can be used as competitive advantage.
Simply cutting everybody's time to 1/3 isn't the same thing.
> It's similar to the issue of dual income households. How was it that in the 50s and earlier very few families needed two incomes to afford a nice middle class lifestyle?
I think there's a very good argument that the definition of "middle-class" has continued to veer upwards over time. The kinds of homes and lifestyle my parents grew up in are nowhere near the quality level of what I've grown up with. The world my grandparents grew up in would be considered poverty levels today.
Lots of families could go single-income today and realize a lifestyle not too different from that single-income lifestyle of previous generations. But having two incomes means more TVs, more internet, more cars, nicer cars, nicer computers, multiple computers, bigger house, granite countertops, large en suite bathrooms, expensive overseas vacations, more expensive schools, more resource to put into your kids, etc.