Americans work harder than Europeans because of incentives

Observers have long noted that Americans put in longer hours on the job than their European counterparts. Also, the number of hours Americans work has been rising steadily, while Europeans work fewer and fewer hours each year. Looking for a cause, some experts have chalked it up to differences in culture.

But in a National Bureau of Economic Research study, economists Linda A. Bell and Richard B. Freeman suggest that America's greater pay disparity creates incentives for Americans to work harder.

As evidence, the authors cite data on German and U.S. labour markets and workers' attitudes.

In both countries, workers in occupations with greater wage inequality tend to put in longer hours at work.

But in America – where such inequality is more pervasive – a much larger percentage of workers believe that their chances for advancement are high and that their work effort will pay off in pay hikes and promotions.

They estimate that an American who boosts his working time by 10 percent – from 2,000 hours a year to 2,200 – tends to raise his future earnings by about 1 percent for each year that he puts in extra hours.

They found the impact to be 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.

In addition to the prospect of wage gains, Americans are also responding to the higher risk of losing income and health coverage if their jobs are taken from them.

Source: Gene Koretz, Economic Trends: Why Americans Work So Hard, Business Week, June 11, 2001; Linda A. Bell and Richard B. Freeman, The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany, NBER Working Paper No. W8051, December 2000, National Bureau of Economic Research.

For NBER abstract http://papers.nber.org/papers/W8051

For more on Inequality and Income Distribution
http://www.ncpa.org/pd/economy/econ7.html