Academic journal article Monthly Labor Review

Europe's Shorter Work Years

Academic journal article Monthly Labor Review

Europe's Shorter Work Years

Article excerpt

Workers in France and Germany work fewer hours in a year than do Americans--the equivalent of 6 to 9 regular workweeks fewer, according to International Labor Organization figures cited by Douglas Clement, editor of the Federal Reserve Bank of Minneapolis quarterly, The Region. Writing in the December 2003 issue, Clement outlines the somewhat controversial explanation of this phenomenon offered by Professor Edward C. Prescott of Arizona State University (and a senior monetary advisor to the Minneapolis Fed).

While many analysts look to cultural and legal difference between the United States and Europe (see the August 2003 issue's Precis for an example of the latter), Prescott believes that European workers are simply responding to a different set of economic incentives than are Americans. Clement cites Prescott: "French, Japanese, and U.S. workers all have similar preferences. The French are not better at enjoying leisure. The Japanese are not compulsive savers." The reason the average French worker spends about 6 weeks fewer at work than does the average American instead comes down to the fact that the tax system in France, and many other European countries, drives a much larger wedge between what a worker earns and what that worker gets to keep after taxes.

Prescott's work has highlighted the importance of understanding the relative prices of consumption and leisure, continues Clement. …

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