South-Western College Publishing - Economics  
Europeans Discover That You Have to Live to Work so You Work to Live
Subject Europeans are Increasing Their Work Hours to Become More Competitive
Topic Economic Analysis; Government and the Economy, Profit Maximization, Utility and Consumer Choice
Key Words

Labor Force, Hours Worked, Leisure, Wages

News Story

Europeans have always chosen in favor of less work and more leisure. Compared to U.S. workers, European employees work fewer hours in the week and take more time for vacation. The average number of vacation days in the U.S. is 12 days, while in Germany the average is 30 days, and in France it is 25 days. However, EU nations are discovering that fewer hours worked does not translate into more workers working, or into greater competitiveness globally.

Times are changing. European workers are now beginning to work longer hours, with no increases in wages. Siemens, a German manufacturer, just negotiated an increase in the work week with its union from 35 hours to 40 hours, and an end to year-end bonuses. Other firms throughout the EU are using the Siemens contract as a blueprint. Siemens justifies its changes by saying that its labor costs in Germany are simply far too high for it to remain competitive globally, especially with the presence of lower-wage workers in former-Eastern Bloc nations now in the EU. Instead of year-end bonuses, Siemens will now offer performance-based bonuses for those workers whose productivity increases.

In general, European workers had been working about 10% fewer hours than American workers, but with an unemployment rate of 10.3%, more firms have moved production to lower-wage countries--which has had a serious impact on the European economy.

The government is also pushing for an increase in the number of working hours, since tax receipts have not increased lately, and tax authorities blame shorter workweeks for stifling economic growth in a number of European nations.

However, increased work hours are not the only solution. Since productivity tends to fall as the number of hours worked increases, nations in the EU .


(Updated August, 2004)

Questions
1.

Given the increase in the number of Europeans' work hours, what has happened to the budget constraint of an affected worker? Illustrate this with a labor-leisure diagram.

2. Part of the argument in favor of the reduced workweek was an attempt to make workers more productive during their working hours. Why do you think the result did not occur?
3. Does requiring longer workweeks and reducing the number of vacation days have an opportunity cost? If so, what is it?
Source Mark Landler. "Europe Reluctantly Deciding it Has Less Time for Time Off." The Wall Street Journal. 7 July 2004.

Return to the Economic Analysis; Government and the Economy, Profit Maximization, Utility and Consumer Choice Index

©1998-2004  South-Western.  All Rights Reserved   webmaster  |  DISCLAIMER