Regulation of working hours Source Tito Boeri and
Regulation of working hours Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
What are we talking about? • May 1, 1886 – day of strikes in the US for the introduction of eight-hour working day • May 1 Labor Day • Working hours per week declining • Working weeks per year declining • Part-time labor Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Overlaps with other institutions • Collective bargaining and unions • Family policies • Employment protection legislation Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Outline 1. 2. 3. 4. 5. 6. Measures and cross-country comparison Theory Empirical evidence Policy issues Why does working hours regulation exist? Review questions Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Cross-country comparisons Measures • Intensive margin of labor supply: average working hours per week • Legal restrictions: – Normal working week – Maximum number of overtime hours – Overtime premium • Bargained normal hours • Share of part-time work in total employment Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Cross-country comparisons Cross-country comparison • Many countries normal working week is 40 hours • Wide variation in maximum weekly overtime hours: 2 (Spain) – 16 (Switzerland) • Also wide variation in maximum total working hours • Overtime premiums mostly 25 -50%, sometimes 100% • Normal weekly hours set by collective bargaining often substantially lower than legal maximum Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Europeans have lower incomes per capita because they work less Hourly Labour Productivity Income per capita=hourly labour productivity*work hours per head Source: Groningen Growth & Development Centre, Total Economy Database
Work less hours per worker and not only per head Source: OECD
Are US-Europe asymmetries related to individual decisions about hours of work? Are Europeans lazy? 45 40 35 30 25 Average weekly hours worked per selfemployee employed USA ITALY EU 15 Source: Eurostat, European LFS ; Groningen Growth & Development Centre, Total Economy Database.
Theory • Choice of number of hours on the basis of the hourly wage rate and preferences for leisure and income • Working hours per day, working days per week, workweeks per year, working years over lifetime • Choice of working hours often restricted to a limited set, most commonly full-time, part-time and no-time Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory – regulating working hours • Shorter working hours less unemployment? • Lump of labor fallacy • Iso-hours curve may shift – total hours of work is reduced with the introduction of shorter working hours Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory h h 1 h 2 h 1 L 1 = h 2 L 2 L 1 L 2 Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. L
Theory h h 1 h 2 h 1 L 1 h 2 L 2 L 1 Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. L
Theory – regulating working hours II • If overtime hours pay a higher wage: isowage-cost curve no longer equivalent to isohours curve • Kink in iso-wage-cost curve • If working time is reduced workers often bargain an hourly wage increase to keep the weekly wage constant Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory h h 1 h 2 F D C B E A L Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory – part-time work • If only full-time jobs are available introduction of part-time jobs increases labor supply • Outward shift of labor supply curve lowers wages and reduces full-time employment • Introduction part-time jobs may also shift labor demand curve Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Empirical evidence – hours of work • Substantial decline in hours of work between 1955 and 2005 • Substantial cross-country differences in annual working hours in 2005: 2393 (Korea) – 1360 (Norway) • Anatomy of typical workweek: – Weekly hours: 30. 1 (Netherlands) – 43. 2 (Iceland) – Workweeks per year: 35. 4 (Sweden) – 44. 6 (Greece) Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Empirical evidence Box 5. 1 Mandatory reduction of working hours in France Crépon and Kramarz (2002) Beginning of 1982: workweek 40 to 39 hours Employment losses: 1982 -84 1985 -87 Diff. 40 hours 16. 5 11. 9 4. 6 39 hours 12. 6 12. 1 0. 5 Diff. 3. 9 -0. 2 4. 1 Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Empirical evidence – part-time work • Among men most common in Australia (16%) • Among women: Czech-Slovak Republics, Hungary: <10%, Netherlands >60% • In theory part-time work is negotiated; in practice not always voluntary • Negative relationship between incidence of parttime work and share of women who work parttime involuntarily: – Finland: 8% - 40% – Netherlands: 61% - 5% Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Policy issues Policy issue 1: Should governments regulate working hours? • Efficiency reason: if employers have monopsony power – working time reduction (over a small range) increase in employment • Employment is not a lump-of-labor that can be redistributed at no costs • Difficult to find strong arguments in favor of government intervention Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Policy issues Policy issue 2: Should governments stimulate part-time labor? • Cross-country differences due to differences in institutional arrangements and union resistance • Growth of part-time jobs may stimulate fulltime employment (Netherlands) • Part-time jobs may facilitate combination of work and care Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Policy issues Why does regulation of working hours exist? • Hours of work is rarely the outcome of a market process • Market failures: conflicting preferences of workers and employers, institutional restrictions • Unions only represent interests of their workers • Governments may influence hours of work for social reasons (family life) or because they want to influence composition of unemployment (early retirement schemes). Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Review questions 1. Under what conditions does work sharing lead to an increase in employment and how plausible are these conditions? 2. Why do overtime premiums exist? 3. How does overtime work affect the tradeoff between hours and workers? Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
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