Arnold Kling  

Hours Worked In the U.S. vs. Europe

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More on the Productivity Story... The Wisdom of Crowds?...

The OECD looks at total hours worked in its member countries.


The performance of US labour markets also looks quite strong when assessed in terms of hours worked per capita, a more comprehensive measure of “labour utilisation” than the employment rate. Per capita hours fell during 1970-2002 for most OECD countries and by over 20% in France; but they rose in several countries, and by fully 20% in the United States...

Two factors underlie the divergence between the United States and Europe since 1970 in hours worked per capita. First, hours worked per capita are influenced by the share of the population actually working, and the employment rate has increased more strongly in the United States than in most other OECD countries. Increased participation of women in paid employment has tended to push up employment everywhere. However, the potential impact on the total employment rate has been off-set to a much greater degree outside of the United States by retirement at younger ages, sharper reductions in employment among teens and young adults, and a tendency for unemployment rates to drift upwards.

Secondly, the length of the average work year has not declined as much since 1970 in the United States as it has in most European countries, including France and Germany. In fact, annual hours per employed person have remained more or less unchanged for US workers since 1980. By contrast, reductions in the length of the standard work week have continued in most other high-income countries, as have increases in annual days off for public holidays and vacation.


Thanks to Barry Ritholtz for pointing to a Wall Street Journal story on the report.

Edward Prescott attributes this difference to higher taxes in Europe.


In the early 1970s, Americans allocated less time to the market than did the French. In comparisons between Americans and Germans, the story is the same. Why are there such large differences in labor supply across these countries? Why did the relative labor supplies change so much over time?

He argues that high marginal tax rates combined with highly elastic labor supply are what account for the difference. He says that Europeans could reduce the distortion of taxes by changing the way that pensions are financed.

The high labor supply elasticity does mean that as populations age, promises of payments to the current and future old cannot be financed by increasing tax rates. These promises can be honored by reducing the effective marginal tax rate on labor and moving toward retirement systems with the property that benefits on margin increase proportionally to contributions. Requiring people to save for their retirement years is not a tax and does not reduce labor supply.

For Discussion. How could one test to see whether the behavior of Europeans with respect to leisure vs. cash income results from choice or from labor market distortions?



COMMENTS (9 to date)
Walker writes:

The implicit assumption is that because Europeans don't work as much there must be something wrong with their incentive structure.

Western Europeans also have lower obesity rates and higher life expectancies. What distortions are causing these problems?

Bernard Guerrero writes:

"Western Europeans also have lower obesity rates and higher life expectancies. What distortions are causing these problems?"

U.S. inner-cities? :^)

Dick Eagleson writes:

I'd be careful about reading too much into those national average numbers for obesity and life expectancy. Infant mortality is another such statistic that is often cited to show that we in the U.S. are "behind" the Europeans.

What the U.S. statistical averages in these areas both show and disguise is the bimodal distribution of the measured characteristics in the U.S. population. If one eliminates the urban underclass from the statistical universe being measured, the U.S. population is at par with or even ahead of Europe (and Japan, which is also sometimes cited as "superior" to the U.S. in these regards).

Members of the urban underclass are pretty much the outliers in every such statistical exerise. Their average condition is so dysfunctional that, compared to the rest of the U.S. population, their rates of infant mortality, drug addition, obesity, chronic illness, decreased life expectancy and probability of death by violence are "off the charts." Despite their limited numbers, this population subgroup exhibits such concentrated socioeconomic pathology that it skews the U.S. national averages in misleading ways.

One can argue that U.S. society is inferior to European society because the U.S. has a significant urban underclass population, whereas European nations do not, but the argument that the modal American lags his European counterpart in most measures of well-being is not supported by any facts of which I am aware.

Lawrance George Lux writes:

Arnold,
It is first not an intrinsic element of choice, but I would disagree with it being a labor market distortion; unless you consider the labor market distortion to be in the United States. Western Europe is characterized with high unemployment, but few layoffs. Why? Western European businesses must fund labor training at a rate of about 3.2/1 for American business. A huge amount of expenditure comes in Apprenticeships, a practice functionally unutilized in the United States. Western European business personnel understand the loss of competency skill levels with Layoffs. They much perfer shorter Workweeks with all Labor maintaining the Skill levels for peak production periods. lgl

Walker writes:

What the U.S. statistical averages in these areas both show and disguise is the bimodal distribution of the measured characteristics in the U.S. population. If one eliminates the urban underclass from the statistical universe being measured, the U.S. population is at par with or even ahead of Europe (and Japan, which is also sometimes cited as "superior" to the U.S. in these regards).

The Japanese, in particular, have a mean life expectancy 4-5 years higher (depending on sex) than the Americans. I suspect a good chunk of the American population would have to be classified as the "underclass" to close a gap that large.

It would be interesting to see the medians for these various social indicators -- I'm not aware of any good numbers out there. The U.S. would no doubt improve its position somewhat by this measure for the reasons you bring up.

Whether the mean measure is "misleading" is another question. It is a matter of one's perspective I suppose, but that "America's poor are so poor they mess up the stats for the rest of us" is a strange excuse for it's performance in recent decades. The United States was once on or near the top of the world by any measure.

Getting back to hours worked, I find it hard to believe that most Europeans would want any advice on how to decrease their vacation time.

Steven McMullen writes:

I have a hard time remembering which countries are in the OECD and thus in the comparison, but I would expect that the UK and most of Eastern Europe would be exceptions (at least partially) to this work-hours phenomenon.

It seems that in some European countries, political decisions have been made to cut working hours specifically as a way to fight unemployment, the politicians claiming that rationing of the jobs and work hours is necessary to keep everyone employed. Other countries have made a point to extend full benefits to part time workers (I think the Netherlands? probably others as well) which also significantly changes the incentive structure for the labor force.

Whether you would characterized these aspects as "choice" or "labor market distortions" I am not entirely sure, but they play a role in creating the discrepancies we observe.

tayboi writes:

what does OECD stand for????????

Tayboi asks:

What does OECD stand for?

It stands for the Organization of Economic Cooperation and Development, a group of about 30 countries which meets regularly to discuss economic concerns. You can read more about them at their website,
http://www.oecd.org

Johno writes:

Whilst it is easy to make broad generalisations about a equity-efficicy trade off and European v. US economic models this, I fear, is often used in defence of poor policy making.

One E.g. French Working Hours Legislation (RTT).
The French government enforces statutory limits on working time for the most employees. A good modern-socialist party policy, Yes? Well actually no. There is plenty of evidence that it is the unemployed and working poor that have suffered most from the legislation.

I could pick e.gs. from either continent. The point is, however, a general one. bad policy is often presented as being an intrinsic part of a countries economic system. How many times has the RTT been dismissed as quintessentially French? how many times has US healthcare reform been fudged because its an 'un-American policy' platform?

Grateful for responses especially if you have any detail on the political reaction and distributional effects of the RTT in France.

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