Hours Worked in Europe and the United States: New Data, New Answers*

• Author: Nicola Fuchs‐Schündeln,Alexander Bick,Bettina Brüggemann
• DOI: http://doi.org/10.1111/sjoe.12344
• Published date: 01 October 2019
• Date: 01 October 2019

Scand. J. of Economics 121(4), 1381–1416, 2019

DOI: 10.1111/sjoe.12344

Hours Worked in Europe and the United

States: New Data, New Answers*

Alexander Bick

Arizona State University, TempeAZ 85281, USA

alexander.bick@asu.edu

Bettina Br¨uggemann

McMaster University,Hamilton ON, L8S 4M4, Canada

brueggeb@mcmaster.ca

Nicola Fuchs-Sch¨undeln

Goethe University Frankfurt, DE-60323 Frankfurt am Main, Germany

fuchs@wiwi.uni-frankfurt.de

Abstract

We use national labor force surveys from 1983 to 2015 to construct hours worked per person

on the aggregate level and for different demographic groups for 18 European countries and the

United States. Weapply a harmonization procedure to measure hours worked consistently across

countries and over time. In the recent cross-section, Europeans work14 percent fewer hours than

US Americans. Differences in weeks worked and in the educational composition each account

for one quarter to one half of this gap. In addition, lower hours worked per person than in the

United States are driven by lowerweekly hours worked in Scandinavia and Western Europe, but

by lower employmentrates in Eastern and Southern Europe.

Keywords: Demographic str ucture; employment;Europe–United States hours gap; labor supply

JEL classification:E24; J21; J22

I. Introduction

An active body of recent literature has documented large differences in

the levels and trends of aggregate hours worked per person across OECD

countries, and specifically lower aggregate hours worked per person in

Europe than in the United States. This literature traces these lower hours

in Europe back to labor income taxation (e.g., Prescott, 2004; Rogerson,

*We thank two anonymous referees, Domenico Ferraro, Berthold Herrendorf, Bart Hobijn,

Roozbeh Hosseini, Luigi Pistaferri, Valerie Ramey, B. Ravikumar, Diego Restuccia, Richard

Rogerson, Todd Schoellman, as well as numerous seminar and conference participants, for their

helpful comments and suggestions. Nicola Fuchs-Sch¨undeln g ratefullyacknowledges financial

support from the Cluster of Excellence “Formation of Normative Orders” at Goethe University

and the ERC under Starting Grant no. 262116.

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The editors of The Scandinavian Journal of Economics 2019.

1382 Hours worked in Europe and the United States

2006; Faggio and Nickell, 2007; Olovsson, 2009; McDaniel, 2011; Bick and

Fuchs-Sch¨undeln, 2018, to name a few), institutions (Alesina et al., 2006;

Faggio and Nickell, 2007), and social security systems (Erosa et al., 2012;

Wallenius, 2013; Alonso-Ortiz, 2014), amongst other factors. One basic step

toward understanding the causes of the large differences in labor supply is to

analyze, first, whether these differences exist for all margins of labor supply,

and, second, to what extent they are driven by different characteristics

of the population. Are fewer Europeans working, or do they work fewer

hours per working week, or do they simply enjoy more vacation days? Are

the aggregate differences driven by different sectoral compositions across

countries, different age compositions, or different educational compositions?

Are all Europeans working less than US Americans or is this the case

only in specific sectors, for specific age groups, for specific education

groups, or for men or women? These questions were raised early on

by Rogerson (2006) as an important avenue for advancing the research

agenda on understanding differences in hours worked across countries, but

could only be answered to a limited extent based on existing data readily

available to researchers. For example, while Alesina etal. (2006) and Faggio

and Nickell (2007) provide evidence on the role of employment, weekly

hours, and vacation days in accounting for differences in hours worked per

person across countries, they only do so for the year 2004 – the only year

for which the OECD released data on average weekly hours worked and

weeks worked. Moreover, based on these data they cannot investigate the

effects of demographic composition or heterogeneous behavior by different

demographic groups on the differences in hours worked per person.1With

this paper, we aim to fill this gap.

In this paper, we construct “new data” on hours worked per person

for the United States and 18 European countries from national labor force

surveys for the years 1983–2015.2While the use of labor force survey data

1Faggio and Nickell (2007) analyze employment rates by age and gender, but do not have

information on employment rates by education and on heterogeneity in hours worked per

employed person.

2These data are available for download from the Supporting Information section at the end

of the article or from https://sites.google.com/site/brueggemannbettina/data-tax-codes. Ohanian

and Raffo (2012) also add new evidence on hours workedfor OECD countries by constructing a

time series of aggregate hours at a quarterly frequency.Bick et al. (2018) measure hours worked

for 80 countries in the early 2000s, focusing on the differences between low-,middle-, and high-

income countries, as opposed to the differences among high-income countries as we do here.

Burda et al. (2008, 2013), Fang and McDaniel (2017), and Bridgman et al. (2018) construct

cross-country measures of hours worked based on time-use surveys. The advantage of time-use

surveys is that they provide precise measurements of time spent over an entire working day or

weekend day. The disadvantage – particularly in comparison to labor force surveys – is their

much lower frequency and smaller sample size.

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The editors of The Scandinavian Journal of Economics 2019.

A. Bick, B. Br¨uggemann, and N. Fuchs-Sch¨undeln 1383

for cross-country studies of employment and hours worked is not new, our

contribution is to apply the harmonization procedure suggested by Pilat

(2003) and to systematically analyze its importance. This harmonization

procedure addresses the two main challenges for measuring hours worked

consistently across countries and over time from labor force surveys. First, a

key difference between the several different surveys, at a given point in time

across countries or for a given country over time, concerns the sampling of

reference weeks over the year. The reference weeks range from one specific

week only, to a quarter, to the sampling of all 52 weeks of the year. We

document that this is not a major problem for the consistent measurement of

employment rates. Without any further adjustment, however, hours worked

per employed person are not measured consistently, because they exhibit

a fair amount of seasonality, mostly driven by the uneven distribution

of vacation days over the year. Second, we show that even if all 52

weeks of the year are covered, vacation days are severely underestimated

in labor force surveys, partly because not all weeks are sampled with

equal probability (e.g., the Christmas week is typically sampled much less

frequently than other weeks). Therefore, even exploiting continuous year

surveys and computing annual hours worked as the average of the actual

hours over all 52 weeks of the year leads to significant upward bias in

the estimate. Moreover, the size of the bias exhibits a substantial cross-

country variation. We implement a measurement strategy of hours worked

per employed person that is able to deal with both of the above issues by

adjusting for vacation days (i.e., annual leave and public holidays) obtained

from external data sources.

We use the harmonized data to document some basic facts on recent

differences in aggregate hours worked between Europe and the United

States for the years 2013–2015. Hours worked per person are on average 14

percent lower in Europe than in the United States, ranging from 7 percent

lower in Eastern Europe to 25 percent lower in Southern Europe. While

weeks worked are uniformly lower in Europe than in the United States,

in Southern and Eastern Europe lower hours are additionally driven by

lower employment rates, and in Western Europe and Scandinavia by fewer

hours worked per working week. The other component of labor supply

always points in the opposite direction: individuals in Southern and Eastern

Europe tend to work longer weekly hours than US citizens, and individuals

in Scandinavia and to some extent Western Europe are more likely to be

employed than US citizens. Thus, there exists a strong negative cross-

country correlation between weekly hours and employment rates on the

aggregate level among European countries.

The richness of our microdata allows us to move beyond the differences

in aggregate hours worked between Europe and the United States and

to provide “new answers” regarding the origins of these differences.

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The editors of The Scandinavian Journal of Economics 2019.