More incentives for employees to work longer hours in US than in Europe

Josep Pijoan-Mas, Claudio Michelacci, Mon, 05/28/2007



Since the 1970s, the number of hours worked per employee has fallen substantially in continental Europe, while it has remained roughly constant in the US after reverting a trend of secular decline. Using data from the Panel Study of Income Dynamics in the US and the German Socio-Economic Panel, the authors of CEPR DP6314 show that this divergence in the number of hours worked per employee on the two sides of the Atlantic can be explained by the evolution of the respective labour market conditions over the last three decades.

Through working longer hours, employees can acquire greater skills which in turn help them to get promoted or to find a better job. When the variation in wages that one can earn is higher, the incentive to work longer hours to achieve the maximum wage possible is increased. Greater opportunities to find a better job also encourage employees to work longer hours.

The authors find that the 8 percentage point increase in the fraction of workers working long hours (more than 50 hours per week) in the US over the past three decades is mainly due to increased wage inequality, as employees work harder to achieve better wages. Over the same period, the increasing rate of unemployment in continental Europe led to a sharp rise in the number of workers working less than 30 hours per week, as the low probability of finding a better job discourages employees from working harder to improve their employability.

Finally, the authors predict that the different labour market conditions in the US and Europe will continue to drive employees to work longer hours in the US, and shorter hours in Europe.

DP6314 The Effects of Labor Market Conditions on Working Time: the US-EU Experience

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Topics:  Labour markets

Tags:  unemployment, wage inequality, search, working hours, human capital


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