European Affairs

Fall 2004

 

European Perspectives
Do Europeans Really Have to Work Harder?
By James Arnold

 

A bout of European soul-searching over working hours is attracting little sympathy in the United States. "Bonetired? You need a job in Europe, suggests the Los Angeles Times. "Memo to Germany: get to work thunders Forbes magazine.

A little New World smugness is understandable. For decades, and especially during the 1980s, Europeans achieved a standard of living as good as or better than America's, while apparently working far less hard. Now, this alchemy is going into reverse. Amid slack economic growth and persistently high unemployment, Europe is threatening to fall decisively behind the United States. For policy makers on both sides of the Atlantic, the prescription seems clear: more work and less play.

If only it were that simple. Constraints on working hours have been a European fetish for at least 200 years—ever since the ghastly conditions of early industry attracted the attention of philanthropists. "Eight hours' daily labor is enough for any human being, and sufficient to afford the necessaries and comforts of life, wrote British industrialist- turned-proto-socialist Robert Owen in 1833. "For the remainder of his time, every person is entitled to education, recreation and sleep. Karl Marx held that six hours' daily labor was sufficient to sustain a worker; more than that served only to line the boss's pocket. These days, even Marx's six hours look a bit of a stretch. Since 1970, the workweek in France and Germany has shrunk by about one fifth; in the United States, working hours have expanded by the same amount over the same period. In 2003, Americans worked on average 1,793 hours, some 350 more than the West European average. According to the European Commission, a French employee spends only five hours of the day working; in the United States, the equivalent figure is 7.6 hours. Europe's gentle approach to work is enshrined in law. In 1993, the European Union's Working Time Directive introduced a long list of restrictions to protect workers against "excessively long hours, inadequate rest and disruptive work patterns". In practice, the directive did little more than set a 48-hour maximum working week, and Britain secured a limited exemption. But France and Germany have gone much farther: both have 35-hour weeks—France as the result of a 2001 law, and Germany through collective bargaining with trade unions.

None of this would matter greatly if the economic sums were still running Europe's way. But they are not. For much of the last quarter of the 20th century, European workers were clearly more productive than their American counterparts; in the early 1990s, output per worker was as high across Europe as in the United States, and far higher when measured per hour worked. Now, however, only France, Germany, Belgium and the Netherlands outpace the United States per hour. Per worker, German economic output is less than three-quarters of the U.S. level. And European manufacturing wages have risen by half since 1979, almost double the rate in the United States. In other words, whatever slender productivity advantage Europe may have left is no longer sufficient to buy it a shorter working day.

This competitive crunch is being blamed as a major cause of the lackluster condition of Europe's economy. Since the mid-1990s, EU economic growth has averaged just 2.1 percent a year, compared with 3.3 percent in the United States. Some 19 million West European workers out of a total of 193 million are now out of a job—including 4.4 million in Germany alone. Reform is in the air. In September, Brussels tinkered with the Working Time Directive, extending Britain's opt-out, and granting some similar privileges to other member states. Far more bitter, however, is the struggle over the 35-hour week. In France, supporters of the measure say it could create 350,000 new jobs, mainly by sharing available work more widely.

In fact, however, a French parliamentary committee found in April 2004 that the 35-hour week had had no net effect on employment. Official jobless figures have certainly not fallen. MEDEF, the country's employers' federation, reckons the policy has burdened the French economy with €50bn in additional costs to the private sector, as well as €15bn in government subsidies to companies to ease the introduction of the shorter week. The current centerright government, elected a year after the 35-hour legislation was enacted, has already started to punch holes in it. The government, for example, has accepted the principle - not previously enshrined in the legislation - that the 35-hour limit can be breached if there is a collective workplace agreement. The departure from the government of Finance Minister Nicolas Sarkozy has, however, stalled official moves to scrap the law entirely.

Meanwhile, employers are taking the initiative as a string of mainly multinational companies has started negotiating limit-busting arrangements with labor unions. Workers at two Siemens cell phone plants in Germany voted to increase their hours to 40 a week—with no extra pay—to prevent their jobs being exported to Hungary. In France, autoparts maker Robert Bosch guaranteed jobs would not be moved to the Czech Republic in return for workers giving up their 35-hour week. Some of Europe's biggest employers, including German auto makers Volkswagen and Opel, and Britain's government-run National Health Service, are similarly gearing up to challenge working time restrictions. None of this has technically sundered the letter or spirit of Europe's working time rules. The Robert Bosch agreement, for example, was well within the margin of flexibility that French law allows. The question for Europe's worried workers is whether the consensus will rupture further—and, if so, whether the inevitable result will be U.S.-style working hours.

There are sound reasons for expecting that it will not be. For one thing, Europe's labor market is far more complex than it first appears. At least part of the apparent slacking-off since 1970 is the result of a big increase in part-time work, which has become far more common in Europe than in the United States. In the Netherlands, for example, more than one third of the workforce is employed part-time, compared with 13 percent of Americans. One in five of all European workers is on some sort of flextime.

It also turns out that Europe's restrictions on working hours mean far less in practice than they threaten on paper. Only one in five French workers does less than the 35 hours mandated by law - and since 1997, the average European working week has shrunk by less than half an hour, from 40.5 to 40 hours, despite an avalanche of legislation. Employment growth has tended to be higher in service industries where employers like flexible staffing arrangements, while old-style manufacturing, governed by shifts, is on the decline. Another wild card is the likely impact of EU enlargement. At a casual glance, the ten new members of the Union look admirably workaholic: Poles and Czechs work longer hours even than Americans. And the new members have tended to back British demands for optouts from working time rules.

In reality, however, the labor market in Central and Eastern Europe bears little resemblance to that of the United States. Unemployment among the new member states, at about 15 percent, is almost double the rate among the 15 countries that made up the European Union until its expansion in May 2004. In Poland, fewer than half of all working- age adults have a job, against an EU average of two thirds. Labor unions, whose influence has been minimal over the past decade, are on the ascendant. And the region's governments seem predisposed to interventionist labor market policies.

Poland already spends a greater proportion of its national wealth on social security than Germany. "Central Europe isn't an expensive place to employ people yet, but it's getting to be a troublesome one, says the head of one U.S. multinational company's Czech operations. "We're not betting on it getting easier. Second-guessing the swerves of EU labor market policy after enlargement is not easy. But there seems to be some truth to the widely held belief that cultural factors will prevent Europe working harder. Much ink has been spilled in pursuit of the theory that present-day Europeans are not inclined to hard work. Their values, the theory goes, are rooted in hearth and home, in leisurely hours spent in restaurant or garden, at the beach or on mountain top. Americans, by contrast, are said to be close enough to their pioneering roots, and to the Puritan ethic, still to cherish the value of honest toil.

There is a limit to the value of such generalizations. But there is concrete evidence of fundamental differences in working practices. In a paper published the National Bureau of Economic Research in 2000, Linda Bell and Richard Freeman argued that differences in working time arose from variations in income inequality. In the United States, workers who put in more hours get pay raises; on average, a 2,000-hour-per-year worker who puts in an extra 200 hours increases his or her net hourly wage in future years by one percent.

In Germany, the correlation between effort and reward is far less clear-cut, mainly because German employers are less likely to value hard work and reward it accordingly. Working 20 percent harder than your fellow workers will not necessarily make you 20 percent richer. In short, expectations are different: American workers expect their hard work will eventually pay off; Germans doubt it is worth the effort.

If true, this is an obvious reason why American workers are still more willing to put in unpaid overtime than Europeans, despite their much tougher working day. It also makes a stark point for Europe's policy makers. Changing the continent's working habits will require a fundamental shift in employer-employee relations, not just a reform of legislation.

Europe needs a profound change in the internal culture of its companies. An international survey in 1997 found that 49 percent of U.S. workers thought quality of work should determine pay, compared with 38 percent of German workers. The survey also found that 31 percent of American workers believed they had opportunities for advancement, against only 19 percent in Germany.

Differences in economic conditions notwithstanding, it seems clear that the incentive model works less clearly in Europe. If they want Europeans to work more hours, companies must not only pay more but also let workers know that their efforts will be seen and rewarded. There is not much that governments can do about this. Without the offer of greater rewards, any call for more work means just one thing: less play.

James Arnold reports on international business and economics for BBC News Online, after stints as a correspondent in Vienna and Moscow.