Transcript Regulation of working hours

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
120
USA=100
100
GER
ITA
80
UKG
60
AUT
FIN
IRL
40
Income per
capita=hourly labour
productivity*work
hours per head
20
W GER
IRL
Source: Groningen Growth & Development Centre, Total Economy Database
ITA
UKG
20
05
20
03
20
01
19
97
19
99
19
95
19
93
19
89
19
91
19
87
19
85
FIN
19
81
19
83
19
77
AUT
19
79
19
73
19
75
19
71
19
69
19
65
19
67
19
63
19
61
19
59
0
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 Average weekly hours worked per selfemployee
employed
USA
ITALY
EU 15
Source: Eurostat, European LFS ; Groningen Growth & Development Centre, Total Economy Database.
Theory
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
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
h1
h2
h1L1 = h2L2
L1
L2
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
L
Theory
h
h1
h2
h1L1
h2L2
L2 L1
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
L
Theory
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
h1
F
D
C
B
h2
E
A
L
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.
Theory
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
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
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.