VoxEU Column Labour Markets

Americans do work more than Europeans, but please don’t think that Europeans are lazy

Today Americans work much more than Europeans, while this was not the case back in the 1970s. Have Europeans become lazier than Americans? Arguably not: differences in working time across the two sides of the Atlantic simply reflect differences in workers incentives over their working life.

The aggregate amount of hours worked in the US and in Continental Europe has evolved quite differently over the last 35 years. In the 1970s the average number of working hours per capita was slightly larger in European countries such as France, Italy, and Germany than in the US. Today Americans work around 30% more than Europeans. These differences are important and they explain almost all existing US-Europe differences in GDP per capita: GDP per capita is today 30% higher in the US than in France or Germany, while productivity, measured by GDP per hour worked, is roughly equal. This means that Americans are today richer than Europeans not because they are more productive but simply because they work more.

The emerging gap in working time is partly due to the evolution of the participation rate (that has increased more in the US) and the unemployment rate (that has increased just in Europe). But another substantial part has to do with the number of hours worked per worker, the dynamics of which explain between one third and one half of the differences.
The decision on how many hours to work once employed is for many workers voluntary. Of course there are exceptions - in some countries and for some jobs, existing legislations restrict the maximum amount of hours worked, but rules are not always binding or not always enforced. Differences between actual and desired working time are indeed small for European workers and they have even decreased over the last decades. So it has been argued that we should not worry too much about the diverging evolution of hours per worker in the US and Europe. Today Europeans simply devote less time to working time activities because they have started to enjoy leisure more.

But is it really the case that Americans and Europeans have become intrinsically different? It may be. Yet, it is also true that aggregate labour market conditions have evolved quite differently in the US and Europe. During the last thirty years, wage inequality has increased substantially in the US and little in Europe, while the unemployment rate has risen in Europe but not in the US. Today, unemployment risk is smaller in the US than in Europe, obtaining better jobs is easier, there are greater chances to move up the career ladder, and to get employed in highly paid jobs. This implies quite different incentives during the working life of American and European workers.

Our recent research shows that these differences in incentives can account for the observed differences in working time across the two sides of the Atlantic. Getting promoted in the current job, and obtaining better jobs requires hard work, and workers are ready to do it only if the endeavour is worth it. When this return falls, hours worked fall. This is the case of Europe over the last three decades. While the pursuit of the American dream makes Americans work hard, the sluggish economic performance of Europe discourages European workers from working longer hours. So rather than blaming Europeans for devoting too much time to leisure activities, it may be worth liberalising European markets further. Giving more powerful incentives to European workers over their working life would be the most effective way to close the output gap between the US and Europe.

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