1. Regulation of working hours Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

2. What are we talking about? May 1, 1886 – day of strikes in the US for the introduction of eight-hour working day May 1  Labor Day Working hours per week declining Working weeks per year declining Part-time labor Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

3. Overlaps with other institutions Collective bargaining and unions Family policies Employment protection legislation Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

4. Outline 1.Measures and cross-country comparison 2.Theory 3.Empirical evidence 4.Policy issues 5.Why does working hours regulation exist? 6.Review questions Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

5. Measures Intensive margin of labor supply: average working hours per week Legal restrictions: –Normal working week –Maximum number of overtime hours –Overtime premium Bargained normal hours Share of part-time work in total employment Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Cross-country comparisons

6. Cross-country comparison Many countries normal working week is 40 hours Wide variation in maximum weekly overtime hours: 2 (Spain) – 16 (Switzerland) Also wide variation in maximum total working hours Overtime premiums mostly 25-50%, sometimes 100% Normal weekly hours set by collective bargaining often substantially lower than legal maximum Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Cross-country comparisons

8. Europeans have lower incomes per capita because they work less Income per capita=hourly labour productivity*work hours per head Hourly Labour Productivity Source: Groningen Growth & Development Centre, Total Economy Database

9. Work less hours per worker and not only per head Source: OECD

10. Are US-Europe asymmetries related to individual decisions about hours of work? Are Europeans lazy? Source: Eurostat, European LFS ; Groningen Growth & Development Centre, Total Economy Database. 25 30 35 40 45 Average weekly hours worked per employee Average weekly hours worked per self- employed USAITALYEU 15

11. Theory Choice of number of hours on the basis of the hourly wage rate and preferences for leisure and income Working hours per day, working days per week, workweeks per year, working years over lifetime Choice of working hours often restricted to a limited set, most commonly full-time, part-time and no-time Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

12. Theory – regulating working hours Shorter working hours  less unemployment? Lump of labor fallacy Iso-hours curve may shift – total hours of work is reduced with the introduction of shorter working hours Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

13. h 1 L 1 = h 2 L 2 L1L1 h1h1 h2h2 h L2L2 L Theory Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

14. h1L1h1L1 L1L1 h1h1 h2h2 h L2L2 L h2L2h2L2 Theory Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

15. Theory – regulating working hours II If overtime hours pay a higher wage: iso- wage-cost curve no longer equivalent to iso- hours curve Kink in iso-wage-cost curve If working time is reduced workers often bargain an hourly wage increase to keep the weekly wage constant Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

16. h L A B C DF E h1h1 h2h2 Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

17. Theory – part-time work If only full-time jobs are available introduction of part-time jobs increases labor supply Outward shift of labor supply curve lowers wages and reduces full-time employment Introduction part-time jobs may also shift labor demand curve Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

18. Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

19. Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

20. Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

21. Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Theory

22. Empirical evidence – hours of work Substantial decline in hours of work between 1955 and 2005 Substantial cross-country differences in annual working hours in 2005: 2393 (Korea) – 1360 (Norway) Anatomy of typical workweek: –Weekly hours: 30.1 (Netherlands) – 43.2 (Iceland) –Workweeks per year: 35.4 (Sweden) – 44.6 (Greece) Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Empirical evidence

24. Box 5.1 Mandatory reduction of working hours in France Crépon and Kramarz (2002) Beginning of 1982: workweek 40 to 39 hours Employment losses: 1982-841985-87Diff. 40 hours16.511.94.6 39 hours12.612.10.5 Diff.3.9-0.24.1 Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Empirical evidence

25. Empirical evidence – part-time work Among men most common in Australia (16%) Among women: Czech-Slovak Republics, Hungary: 60% In theory part-time work is negotiated; in practice not always voluntary Negative relationship between incidence of part- time work and share of women who work part- time involuntarily: –Finland: 8% - 40% –Netherlands: 61% - 5% Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Empirical evidence

27. Policy issue 1: Should governments regulate working hours? Efficiency reason: if employers have monopsony power – working time reduction (over a small range)  increase in employment Employment is not a lump-of-labor that can be redistributed at no costs Difficult to find strong arguments in favor of government intervention Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Policy issues

28. Policy issue 2: Should governments stimulate part-time labor? Cross-country differences due to differences in institutional arrangements and union resistance Growth of part-time jobs may stimulate full- time employment (Netherlands) Part-time jobs may facilitate combination of work and care Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Policy issues

29. Why does regulation of working hours exist? Hours of work is rarely the outcome of a market process Market failures: conflicting preferences of workers and employers, institutional restrictions Unions only represent interests of their workers Governments may influence hours of work for social reasons (family life) or because they want to influence composition of unemployment (early retirement schemes). Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press. Policy issues

30. Review questions 1.Under what conditions does work sharing lead to an increase in employment and how plausible are these conditions? 2.Why do overtime premiums exist? 3.How does overtime work affect the trade- off between hours and workers? Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.