You’re the Boss?

October 26, 2011
Posted by Jay Livingston

Why do people work?  More specifically, why do some people work more and others less?

N. Gregory Mankiw has an idea, which he shared with us in Sunday’s New York Times.
Here are two facts about the French economy. First, gross domestic product per capita in France is 29 percent less than it is in the United States, in large part because the French work many fewer hours over their lifetimes than Americans do. Second, the French are taxed more than Americans. In 2009, taxes were 24 percent of G.D.P. in the United States but 42 percent in France.

Economists debate whether higher taxation in France and other European nations is the cause of the reduced work effort and incomes there. Perhaps it is something else entirely — a certain joie de vivre that escapes the nose-to-the-grindstone American culture.

The French spend about 15% less time, on average, in paid work each day (251 minutes to our 289).  (OECD summary and spreadsheet here).  Over a lifetime, as Mankiw says, those 38 minutes a day add up to many fewer hours over the course of a lifetime. (I’m not sure why lifetime hours is the appropriate measure when GDP is computed as an annual figure.  Whatever.)

Mankiw is an economist, a very successful economist – best-selling textbook, head of Bush II’s Council of Economic Advisers, currently Mitt Romney’s chief economic adviser.  So he takes the economist’s view of motivation: how much people work depends on how much money they can make.  (Mankiw throws in that bit about culture, but I doubt he puts much stock in it and that what he thinks work is really all about is making money and keeping it, i.e., income and taxes.) 

Mankiw seems to assume that the decision of how much to work rests entirely with the worker.  That’s certainly true for Mankiw himself (see my earlier post on Mankiw’s work decisions here ).  But many of us workers don’t have that kind of autonomy.  So to get another view of sources of input into this decision of how much to work, I turned to the economic observations of Eddie Cochran:
Every time I call my baby, and try to get a date
My boss says, “No dice son, you gotta work late.”
Yes Gregory, there are bosses.  Even in our American “nose-to-the-grindstone” culture, people say, “I have to work late tonight.”  Have you ever heard anyone say, “I’m going to work late tonight because I want to make more money – especially now that my income tax has been reduced by two percentage points”?  No doubt, there are people like that.  But most of the hours in the French and US data are accounted for by people whose hours are determined by external forces.* 

That French employee doesn’t just decide all by himself, “I think I’ll spend an extra hour at lunch today and give up an hour’s wage.”  How much we work is economic and maybe a little cultural.  It’s also a matter of politics.  There are contracts and laws that are the outcome of organized efforts – by unions and political parties – to limit how much employers can demand of employees.   Those laws that affect how much people work may be shaped by culture – shared ideas about work and life.  It’s less clear that they are shaped by taxes.

* In the last two years, many people in the US are working shorter hours than they were before 2008.  Some have reduced their work hours to zero.  I doubt that this reduction  reflects an increased joie de vivre.

It seems incredible to me that a guy as smart as Mankiw can ignore those external constraints on people, assuming instead that workers make these decisions as free and independent individuals, unfettered by institutions, calculating their individual benefits and costs.  But now I’m reminded of Fabio Rojas’s post of nearly five years ago, “What Economists Should Learn From Sociology.”  Number two on Fabio’s list was “Social networks/social structure matters. Simple idea but few economists sit around and model the effects of social structure.”

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