Thirty or forty years ago widely expected that as technological advances made labour more productive, working hours would shorten and the biggest problem, at least in develop countries, would be educating people to enjoy leisure instead of working. This has clearly not happened, so what went wrong?

The improvements in productivity have certainly happened, and they show in the GDP numbers. The UK’s GDP per capita has nearly doubled, in real terms, since 1980. What these numbers also show is that the benefits have come in the form of higher income, not more leisure.

To see why consider this question. Could an individual (or a household) work half the hours they would have worked in 1980, and still enjoy the same standard of living? I think it is clear that they could not.

Part of the reason is that inflation is uneven. The cost of most things have risen much more slowly than incomes, but there are important exceptions. For example, the cost of housing tends (in the long term) to rise roughly in line with incomes. In effect we bid against each other, driving up the price of certain things negating the benefit of rising incomes.

Take, as an example, someone who spent half their income in 1980 on rent (roughly right for London). Given the ability to make twice as much per hour now (after adjusting for inflation), and half the working hours, then, if rents have risen in line with incomes, they would only make enough to cover the rent.

The inflation adjusted 1980 income today would go much further in buying electronics, it would probably mean a better car, but it would not go far in paying for a place to put them in.

The option of working shorter hours, and enjoying a 1980 rather than 2007 lifestyle simply does not exist.

Another, more fundamental, problem, is that peoples’ happiness is related to their wealth relative to others.

The result of this is that we become trapped in a cycle. If incomes are rising we need the higher incomes to maintain our relative position. We therefore are unwilling to trade the extra potential income for more leisure.

The most obvious possible solution is to legally limit working hours. This would mean that all employed people would trade higher incomes for more leisure. By doing it in synchronisation, we would maintain our relative positions.

Of course some individuals who are willing to make a conscious decision to do so, can find ways to make the trade off without the rest of society doing so: by limiting their wants at a static level, perhaps moving to a cheap area etc., but I cannot see that as becoming widespread enough to change society. An imposed policy change can.