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Is it too obvious to suggest that this would decmiate disposable income, which would spread low demand across sectors of the economy which would otherwise be immune?
I have already answered that before. The supply takes a hit of the same size. So there is no tilt in the balance of supply and demand.

That's why it's bad - with a four day week some workers might at least consider second jobs, small businesses or other sources of income.

Perhaps, but not a large share of them. After all there is the assumption, that this is a temporary thing. One has to resort to other measures, if the workers can't go back to full hours in a couple of months. More over even with high unemployment European countries have managed to stay out of deflationary spirals for the last decades.

With the same hours being worked for less cash, spending drives off a cliff and demand falls even further, while unwanted products continue to pile up, because buyers can't afford them.

That would be a catastrophe. If workers are responsible they will refuse to work for lower hourly wages, even if they get laid off otherwise. If I have understood Starvid correctly (not in the diary, but in the comments below), there is no reduction in hourly wages in Sweden. Workers in highly unionised branches should even demand increases of at least 2.5% in hourly wages. An hourly wage reduction is only a beggar your neighbour policy, and Sweden is already highly competitive.

The UK solution has been to temporarily lay off workers, sometimes with minimal pay, sometimes with nothing at all. That doesn't work any better.

That is at least partially a problem of the gov't. Until the current turmoil is over, it would be useful to increase and prolong unemployment benefits.

But the problem is strategic. It's not that there isn't useful work these people could be doing, and being paid for.

But not currently in the production of cars. So it is not useful to have these workers working in the company and produce for stock piling.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Mar 3rd, 2009 at 01:02:42 PM EST
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