Observers have long remarked on the sharp disparity between American and European work habits. Americans not only put in considerably more time on the job, but their yearly tally of work hours has actually risen in recent decades. In contrast, most Europeans work fewer hours and have enjoyed a steady decline in annual work time.
A common view is that this difference reflects cultural factors: Europeans, who tend to regard Americans as workaholics, simply prefer leisure to labor. Surveys indicate, for example, that many Europeans would like to reduce their work time, while many more Americans would like to increase theirs and earn more despite the fact that they already clock a lot more hours.
In a recent National Bureau of Economic Research study, however, economists Linda A. Bell and Richard B. Freeman suggest that the difference is related less to cultural values than to the wider range of wages within U.S. companies and the overall economy. In essence, they argue that America's greater pay disparity creates incentives for employees to work harder.
As evidence, the authors cite data on German and U.S. labor markets and workers' attitudes. In both countries, they note, workers in occupations with greater wage inequality tend to put in longer hours at work. But in America, where such inequality is more pervasive, they report that a much larger percentage of workers believes that their chances for advancement are high and that their work effort will pay off in pay hikes and promotions.
The authors' analysis of German and U.S. workers' histories bears this out. Although they find a strong link between past hours worked and current wages in both countries, the effect is far more substantial in the U.S. They estimate that an American who boosts his working time by 10%, from 2,000 to 2,200 hours a year, tends to raise his future earnings by about 1% for each year that he puts in extra hours.
In sum, workers in both nations appear to log more time on the job when pay scales are unequal, but the impact is much weaker in Germany, where wages are far less variable and where greater job security, high jobless benefits, and a national health system cushion the adverse effects of layoffs. Americans work longer hours mainly because of the lure of big wage gains, the authors suggest, they're also responding to the higher risk of losing income and health coverage if the boss lets them go.
Are German or American workers better off? Pointing to the U.S. economy, many economists argue that wider pay scales lead to greater work effort that produces rising productivity and higher levels of income for all workers. On the other hand, surveys indicate that many Americans are ambivalent about their long work hours. While they are reluctant to give up the chance to enhance their incomes, they would prefer to spend more time with their families.
If the authors are right, European nations will have to give up their preference for relatively low work hours if they want to achieve American-style wage disparity and growth. And Americans who want to reduce their workaholic behavior will find it difficult unless pay inequality also starts to narrow.
By Gene Koretz