Hours Worked Across the World: Facts and Driving Forces

Transcription

1 : Facts and Driving Forces Goethe University Frankfurt Anglo-German Foundation Annual Lecture April 18, 2018

2 1 Hours worked worldwide

3 1 Hours worked worldwide 2 Hours worked in Europe and the US - Decomposition of differences Europe vs. US * Components: Employment rate, weeks worked, weekly hours * Demographics: Age structure, education, etc.

4 1 Hours worked worldwide 2 Hours worked in Europe and the US - Decomposition of differences Europe vs. US * Components: Employment rate, weeks worked, weekly hours * Demographics: Age structure, education, etc. 3 Which groups show the largest differences? - Theory: Taxation as driving force

5 1. Hours Worked in Poor and Rich Countries Bick, Fuchs-Schündeln, and Lagakos (2018): How Do Hours Worked Vary with Income? Cross-Country Evidence and Implications American Economic Review, 108(1) Micro data as only source of information for poor countries: Challenge of representativeness and comparability Labor force survey collection for 80 countries Results from 49 core countries with best comparability

6 Analyzed Countries Sample Core Non-Core N/A Approx. 40% of world population live in analyzed countries

7 Average Hours Worked per Adult (Age 15+) KHM Hours per Week MWI TZA KENVNM LAO GHA TLS RWAUGA PAK PER ECU MNG COL USA BWA CZE CYP ALB LVA MUS TUR EST PRT SVN CHE NAM ROM ZAF LTU SVK GRC DNK AUT POL HUN ESP FIN DEU SWE GBR NLD IRL BGR ITA FRA BEL IRQ ln(gdp per Capita)

8 Average Hours Worked per Adult (Age 15+) KHM Hours per Week MWI TZA KENVNM LAO GHA TLS RWAUGA PAK PER ECU MNG COL USA BWA CZE CYP ALB LVA MUS TUR EST PRT SVN CHE NAM ROM ZAF LTU SVK GRC DNK AUT POL HUN ESP FIN DEU SWE GBR NLD IRL BGR ITA FRA BEL IRQ ln(gdp per Capita) On average 29 hours in poor countries, 19 hours in rich countries

9 Average Hours Worked per Adult & U.S. Time-Series Hours per Week MWI TLS RWA TZA KEN UGA GHA VNM KHM LAO PAK MNG IRQ ECU NAM PER COL ALB ROM ZAF BGR BWA 1944 LVA MUS TUR EST LTU SVK POL HUN CYP PRT CZE SVN GRC DNK AUT GBR FIN ESP DEU SWE NLD IRL FRA ITA BEL ln(gdp per Capita) USA 2005 CHE Core Countries U.S. Time-Series ( )

10 Implications for Welfare and Labor Productivity Measurement of welfare differences: - Based on only consumption: Rich countries have 12 times higher welfare than poor countries - Based on consumption and hours worked: 19 times higher welfare

11 Implications for Welfare and Labor Productivity Measurement of welfare differences: - Based on only consumption: Rich countries have 12 times higher welfare than poor countries - Based on consumption and hours worked: 19 times higher welfare Measurement of labor productivity differences: - GDP per worker 14 times higher in rich countries - GDP per hour worked 17 times higher in rich countries

12 Relatively Homogeneous Picture Hours worked per adult are higher in poor than in rich countries - for both margins (employment rate and hours per worker) - for men and women - for all education groups - for all age groups - in all sectors (except agriculture)

13 Hours Worked of Men and Women Men Women KHM 45 Hours per Week MWI KEN VNM TLS LAO TZA GHA RWAUGA PAK MNG IRQ ECU PER COL ALB ROM ZAF NAM BGR BWAMUS TUR LVA LTU EST SVK POL HUN USA CZE CHE GRC CYP PRT SVN AUT DNK GBR ESPDEU NLD ITA IRL FRA FIN SWE BEL Hours per Week TZA KHM VNM LAO KEN GHA RWAUGA MWI TLS PER MNG ECU BWA USA COL LVAEST PRT NAMALB ROM LTU SVK CZE SVNCYP BGR ZAF HUN FIN DNK SWE GBR CHE POL GRC AUT MUS ESP FRA DEUIRL BEL NLD TUR ITA PAK 0 0 IRQ ln(gdp per Capita) ln(gdp per Capita) Difference of 9 hours between poor and rich countries for both genders

14 Hours Worked over the Life Cycle Hours per Week Age Low-Income Middle-Income High-Income Largest differences at retirement age Caveat: Cannot distinguish age and cohort effects Components

15 2. Europe vs. US Bick, Brüggemann, and Fuchs-Schündeln (2017): Hours Worked in Europe and the US: New Data, New Answers Data: Representative household surveys in US and Europe (Current Population Survey, European Labor Force Survey) Statistical decomposition of differences between Europe and US into components and demographic structure

16 Analyzed European Countries

17 Average Hours Worked per Person (Aged 15-64) ,000 1,250 US SE NO DK CH UK AT DE NL BE FR IE CZ PL HU PT ES GR IT US Scandinavia Western Europe Southern Europe Eastern Europe time series

18 Statistical Decomposition: Results Average hours worked in Europe 14% lower than in US Fewer European weeks worked Lower European education levels 1/3 to 1/2 1/3 to 1/2 Residual Scandinavia & West. Europe: Lower weekly hours, but higher employment rates East. & Southern Europe: Lower employment rates, but higher weekly hours

19 Different Components of Average Hours Worked Weeks worked and employment rates Weeks Worked GR ES IT HU BE PT PL IE FR US UK CZ AT NL DK NO SE DE Employment Rate (in %) CH

20 Different Components of Average Hours Worked Weeks worked and employment rates Weekly hours and employment rates Weeks Worked GR ES IT HU BE PT PL IE FR US UK CZ AT NL DK NO SE DE CH Weekly Hours GR ES IT HU PL PT BE FR IE CZ US AT UK SE DE DK NL NO CH Employment Rate (in %) Employment Rate (in %)

21 3. Europe vs. US: Taxation and Labor Supply of Married Women Bick and Fuchs-Schündeln (2018): Taxation and Labor Supply of Married Couples across Countries: A Macroeconomic Analysis Review of Economic Studies, forthcoming Bick and Fuchs-Schündeln (2017): Quantifying the Disincentive Effects of Joint Taxation on Married Women s Labor Supply American Economic Review Papers and Proceedings, 107(5)

22 Average Hours Worked per Person (Aged 25-54) by Gender and Marital Status Men Women Married Single Married Single Mean Married women work fewest, married men most hours

23 Average Hours Worked per Person (Aged 25-54) by Gender and Marital Status Men Women Married Single Married Single Mean Standard deviation Married women work fewest, married men most hours Married women exhibit largest differences across countries

24 Average Hours Worked per Person (Aged 25-54) by Gender and Marital Status Men Women Married Single Married Single Mean Standard deviation Correlation with Married Men Married women work fewest, married men most hours Married women exhibit largest differences across countries Married women s labor supply uncorrelated with married men s

25 Taxation: The Example of US, Germany, Sweden Hours worked per married person (25-54) relative to US Men Women Germany -14% -34% Sweden -16% -4% US: lower average tax rates Germany and Sweden: higher average tax rates

26 Taxation: The Example of US, Germany, Sweden Hours worked per married person (25-54) relative to US Men Women Germany -14% -34% Sweden -16% -4% US: lower average tax rates Germany and Sweden: higher average tax rates US and Germany: joint taxation of married couples Sweden: separate taxation of married couples Joint taxation lowers marginal tax rate of main earner, and increases marginal tax rate of secondary earner

27 Joint Taxation System in Germany ( Ehegattensplitting ) 1958 Introduction of joint taxation: - Household income divided by two - Tax function applied to each half of household income

28 Joint Taxation System in Germany ( Ehegattensplitting ) 1958 Introduction of joint taxation: - Household income divided by two - Tax function applied to each half of household income Minimizes total tax burden of household

29 Joint Taxation System in Germany ( Ehegattensplitting ) 1958 Introduction of joint taxation: - Household income divided by two - Tax function applied to each half of household income Minimizes total tax burden of household Same marginal tax rate for both spouses Relative to separate taxation * Primary earner: lower marginal tax rate * Secondary earner: higher marginal tax rate

30 Joint Taxation System in Germany ( Ehegattensplitting ) 1958 Introduction of joint taxation: - Household income divided by two - Tax function applied to each half of household income Minimizes total tax burden of household Same marginal tax rate for both spouses Relative to separate taxation * Primary earner: lower marginal tax rate * Secondary earner: higher marginal tax rate Precondition: Progressive tax system

31 Tax Treatment and Effective Tax Rates Hours Worked Taxation relative to US Men Women System τ ( h US m, 0) τ ( h US m, h US f ) US joint 21% 29% Germany -14% -34% joint 31% 50% Sweden -16% -4% separate 33% 30% τ Average tax rate if wife is not working τ Average marginal tax rate on additional income of wife

32 Macroeconomic Model of Labor Supply Joint utility maximization of couple: - Utility from consumption (financed by income) - Utility from leisure (labor supply reduces leisure) - Fixed utility costs of working for wife - Taxation influences budget constraint

33 Macroeconomic Model of Labor Supply Joint utility maximization of couple: - Utility from consumption (financed by income) - Utility from leisure (labor supply reduces leisure) - Fixed utility costs of working for wife - Taxation influences budget constraint How would married couples adjust hours worked after a move to separate taxation (without changing average tax burden)?

34 Moving from Current System to Separate Taxation Hours Difference BE DE IE US NL IT DK ES FR PL PT CZ NO AT GR HU SE UK Women Men

35 Current Hours Worked of Married Couples Differences in tax systems can explain part of the differences across European countries

36 Employment Rates vs. Hours Worked per Employed Married Woman time series, hours distribution

37 Summary: Hours Worked in International Comparison 1 Substantially higher hours worked in poor than in rich countries 2 Lower hours worked in Europe than in the US - Decomposition of differences Europe vs. US * Components: Weeks worked, employment rate, weekly hours worked * Demographic factors: education 3 Largest differences for married women - Tax system (joint vs. separate taxation) as important driving factor

38 Many thanks!

39 Employment Rate 100 Employment Rate (in %) MWI KHM UGA LAO RWA KENVNM TZA TLS GHA PAK PER ECU CHE MNG DNK NLD USA CYPSWE GBR COL PRT SVN FIN EST CZE AUT IRL LVA LTU ESP FRA DEU ALB ROMBWA MUS SVK NAM GRC BEL POL TUR HUN BGR ITA ZAF IRQ ln(gdp per Capita) Employment rate decreases between low- and middle-income countries

40 Hours Worked per Worker Hours per Week MWI TLS RWA UGA KHM TZA KEN GHA VNM LAO PAK COL BWA TUR ZAF MNG ECU PER NAMALB LVA GRC IRQ ROM POL MUS EST SVK HUN CZE USA BGR LTU PRT SVNCYP ITADEU AUT ESP FRA FINGBR IRL CHE BEL DNK SWE NLD ln(gdp per Capita) Hours worked per worker first increase, then fall between middle- and high-income countries back

41 Time Series of Hours Worked: Anglosaxon Countries Source: Rogerson (2006)

42 Time Series of Hours Worked: Western European Countries Source: Rogerson (2006)

43 Time Series of Hours Worked: UK and Others Source: Rogerson (2006) back

44 Time Series of Employment Rates of Married Women Employment Rate (in %) DE BE FR IT NL PT UK US

45 Time Series of Hours Worked per Employed Married Woman Annual Hours DE BE FR IT NL PT UK US

46 Time Series of Hours Worked per Married Woman Annual Hours Per Person DE BE FR IT NL PT UK US back

47 Full- vs. Part-Time Work of Married Women: Southern Europe and US Southern Europe and US (and Eastern Europe): Full-time work

48 Full- vs. Part-Time Work of Married Women: Scandinavia Scandinavia: Full-time work or part-time work with relatively high hours

49 Full- vs. Part-Time Work of Married Women: Western Europe and Italy Western Europe and Italy: Part-time work ( 50% position ) important

50 Full- vs. Part-Time Work of Married Women: Netherlands and UK Netherlands and UK: Hours spread over full spectrum back