California has long been considered the American bellwether: Whatever happens there often spreads throughout the country.
Thats why a recent proposal to make a four-day workweek the standard for every California workplace employing 500 or more workers deserves careful scrutiny. Though it has been set aside for now, sponsors promise to bring the legislation back. Employers and workersand not just those in Californiashould hope they fail.
Assembly Bill 2932, similar to federal legislation sponsored by U.S. Rep. Mark Takano, California Democrat, would have limited the workweek at big companies to 32 hours, while requiring companies to pay workers what they had been earning for 40 hours of work (or whatever their previous workweek called for).
Anyone working more than 32 hours a week would have to be paid a minimum of time-and-a-half for work exceeding 32 hours. If the legislation had passed, more than 2,600 companies and some 3.6 million workers would have been affected.
If 40 hours of pay for 32 hours of work sounds like a great deal, it would have been: especially for those workers who had been hoping their companies would leave California, as hundreds of other firms have done in recent years. It also would have been a great deal for Arizona, Nevada, Texas, Utah and other states that have gained the fleeing companies.
It shouldnt take an economist to predict the likely consequences of such a mandate. Mandating fewer hours of work for the same pay would significantly increase the cost of labor at a time when employers are struggling to fill the job vacancies they have. Indeed, according to recent statistics from the Bureau of Labor Statistics, there were some 11.5 million job openings nationwide at the end of March.
Clearly, if the legislation had become California law, affected companies would have had a strong incentive to move jobs elsewhere. Small firms, especially growing firms, would have had an incentive to start moving before they reach the 500-employee threshold.
Moving, of course, is a hassleand costly. But companies, which typically have longer-term planning horizons than tomorrow, do it all the time. And numerous companies, including Tesla, Hewlett-Packard and Oracle, already have left California in recent years. Population movements mirror this trend, with interstate in-migration to California falling 38% and out-migration rising 12% since the onset of Californias COVID-19 restrictions in 2020.
California Assemblywoman Cristina Garcia, a co-sponsor of the proposal, apparently learned the wrong lesson from the pandemic, explaining that the bill was prompted in part by the exodus of employees during the COVID-19 pandemic, many of whom were seeking a better quality of life. While people do want a better quality of life, most of those who have been leaving COVID-restricted, high-tax states like California have not been going to other high-tax, locked-down states such as Illinois and New York; theyve been going to lower-tax, less-restrictive states like Texas and Florida. The proposed legislation would have hastened this process.
Economists have long understood how choice and competitionwhat we typically refer to as market forcesregulate tradeoffs between earnings, working conditions and quality of life. All else being equal, people choose jobs with the mix of compensation and working conditions, now including more flexibility than ever (a positive change triggered by COVID), that best suits their preferences.
Ms. Garcia complains, Weve had a five-day workweek since the Industrial Revolution. What she doesnt realize is that the 40-hour workweek already is something of an anachronism, with the average number of hours worked per week in the United States relatively stable at around 34.5 for the last 15 years, down from 39.8 hours in 1980.
Market forces, specifically economic growth and increases in productivity and wages, are the primary reasons for the shortened workweek. Government followed this trend; it didnt lead it.
The appropriate work-life balance is best decided by each individual when they select careers and employers. Assembly Bill 2932 would have imposed a one-size-fits-all mandate on thousands of California employers and millions of California workers. While some might have enjoyed shorter workweeks as a result, others would have seen their jobs disappear.
The proposals sponsors havent given up. Theyll try againperhaps with more success next time. But as my colleagues in Lubbock, Texas, sometimes say: Whats bad for California is often good for Texas. AB 2932, Californias Job Suicide Bill, would have provided another such example.