During the course of the twentieth century, the average workweek in the United States has gotten shorter and Americans have enjoyed greater amounts of leisure time. How has this development affected potential GDP and labor productivity?

Question

What will be an ideal response?

Answer 1

Decreasing the length of the workweek, other things being equal, should decrease potential GDP. As Americans enjoy longer leisure hours and shorter work hours, the goods and services such work would produce will decrease. The United States could increase the amount of potential GDP that the economy produces if Americans would decide to work longer hours or more days per week. This would not necessarily mean that Americans would be better off since, obviously, the benefits and pleasures of some leisure time would be foregone. The main reason that the amount of final goods and services enjoyed by Americans has not decreased even with shorter work hours is that labor productivity has increased. Since labor productivity measures output per hour worked, it does not automatically decrease as the total number of hours worked decreases. In fact, during the twentieth century, labor productivity in the United States has increased significantly. This has occurred mainly due to technical progress and the increasing education and skill levels of the American worker.