I’m in the middle of reading Thomas Geoghegan’s Were You Born on the Wrong Continent?: How the European Model Can Help You Get a Life. The book is part travelogue, part prosecutors brief against American-style capitalism and in favor of European-style social democracy. It’s a very enjoyable read. Many of Geoghegan’s arguments are backwards or loopy (his claim, for example, that the reason Americans have plastic surgery is to avoid being laid off gets more points for creativity than for persuasiveness). But Geoghegan is a good writer and comes across as a really likable guy, and many of the point he makes warrant at least further reflection.
# 1 Australia: 1,814 hours
# 2 Japan: 1,801 hours
# 3 United States: 1,792 hours
# 4 Canada: 1,718 hours
# 5 United Kingdom: 1,673 hours
# 6 Italy: 1,591 hours
# 7 Sweden: 1,564 hours
# 8 France: 1,453 hours
# 9 Norway: 1,337 hours
That’s not the whole story, of course.*
Even if you look at GDP per hour worked, America still comes out on top. If France had America’s level of GDP per hour worked, the average Frenchman would be 10% richer, which is nothing to sneeze at. Just working American hours, by contrast, would increase his income by over 30%. So the fact that Europeans work less isn’t the whole story of why they make less, but it’s a big part of it.
For Geoghegan, this increased leisure is a valuable commodity, which is worth the price Europeans pay in lower wages. There’s certainly an element of truth to this. Most people would not be willing to work double their current hours, even for more than double their current pay. On the other hand, most people wouldn’t want to work half their hours for half their pay either. So there’s clearly a trade-off involved here, and whether a given amount of additional (or less) work is worth the additional (or lower) wages is a matter than will differ from person to person.
Why Do Americans Work More?
Given the above, it might be tempting to say that the difference in work habits between the U.S. and Europe are due to cultural differences between the two regions. If you wanted to get moralistic about it you could say that Americans are more materialistic, or than Europeans are lazier. Or you could just say that the people in each country are just making a trade-off between leisure and wealth that is legitimate for them.
Of course, the idea that Europeans just dislike work more than Americans is more plausible for some countries (France) than for others (Germany). What’s more, if you look historically you find that Europeans used to work just as much as Americans. The French, for example, worked more hours than Americans as recently as the 1960s. The divergence between the U.S. and Europe only came when Europe adopted social democracy, i.e. high taxes, and restrictive labor laws.** When Spain cut marginal tax rates in 1998 hours worked increased by about 20% over the next five years. So maybe Europeans really would want to work more in exchange for more money, but the law won’t let them.
If that’s right, then the problem would seem to be not that Americans work too much, but that Europeans aren’t allowed to work more. The fact that unemployment has tended to be higher in Europe than in the U.S. in recent decades is also suggestive of this (right now unemployment is about as high in America as in Europe; I’ve actually heard people argue that the fact unemployment hasn’t gone up as much during the current recession as it has in America is a point in favor of the European system, as if having recession level unemployment all the time was a good thing since when a recession hit at least it doesn’t get much worse).
Geoghegan doesn’t deny that the shorter work hours found in Europe are a result of legal restrictions. Indeed, it’s essential to his case. What he does argue is that having a country decide on the leisure vs. wealth trade-off collectively is better than having them do so individually.
Individualism vs. Collectivism
At first blush, this might not seem very plausible. Who is better equipped to to make the proper leisure/wealth trade-off for me: Me, or me plus millions of other people who know nothing about me? Deciding such questions collectively also requires people to settle on one single answer to the question, whereas the right balance differs greatly from person to person. For example, I make about 2/3rds as much as some people I know in my chosen profession. In exchange, I work fewer hours than they do, and the work is more interesting. I would be unhappy in their jobs even with the extra money, and they would be unhappy in mine, even with the extra leisure. Allowing each person to settle on a work/life balance that best fits them means that more people will be satisfied than under a one size fits all system.
Geoghegan’s counter to this is that in reality individuals aren’t free to pick whatever work/wage balance that they wish. You can’t go into your boss’s office and tell him that you want to work 20% fewer hours for 20% less pay than you can haggle over the price of oranges at Wal-Mart. I mean, you can try; but you probably won’t succeed, and you might even harm your career prospects in the process.
So in a sense, issues of work/wage balance do get decided collectively even when they are left up to the market. But so what? If a majority of people were willing to accept lower wages for less work, then it would be to the advantage of employers to offer this to employees, just as now employers usually offer some amount of paid vacation. Americans may work less than Europeans, but they also work less than Americans of prior eras, so it’s not like employers aren’t responsive to changes in the ideal work/wage trade-off for their employees. If both the market and the state involve collective determinations that’s no reason to prefer the state solution to the market one. And while the market may not provide total flexibility in terms of allowing people to choose whatever work/wage balance they wish, it should do a better job of it than legal mandates, as it does allow different individuals to make different trade-offs.
The Race to the Bottom
For Geoghegan’s advocacy of social democracy to work, he needs a reason to suppose that allowing individuals to choose their own work/wage balance will do a worse job of meeting individual wants than will collective decisionmaking. For example, a worker might prefer to work less even if that meant less money, but he also doesn’t want to be fired, laid off, etc. So while he wants to work less, he also wants to work just a little bit more than his co-workers, so that if necessary he won’t be the one who gets the ax. The problem is that one’s co-workers also want to work a bit more than you so their job isn’t in danger. So you get into a bit of a mini arms race until everyone is working 14 hour days.
There may be some truth to this story. On the other hand, the fact that hours worked has been falling in the U.S. over time suggests that there can’t be *that* much to the story. Still, even if Geoghegan’s argument were correct it wouldn’t mean that American’s were working too much. After all, Geoghegan’s argument is that decisions about work/wage balance ought to be made collectively through the instruments of democratic government. In Europe, this has led to laws restricting work. In America, by contrast, our collective decision has been to allow people to work more, and to place fewer restrictions on their ability to do so. At best, then, Geoghegan’s preference for collective decisionmaking only gets us back to where we were at the beginning: Europe’s decision to work less is right for Europe and America’s decision to work more is right for America.
The Problem with Democracy
Of course, Geoghegan is an *American* leftist, so he isn’t likely to find the idea that America’s model is best for America very congenial. Instead, I suspect that if he heard the above argument, he would do what left-wingers typically do when confronted with the fact that the democratic process doesn’t deliver the results they want. He would point out all the ways in which American democracy falls short of the ideal. He would say that America voters don’t really know what is best for them, that they are ignorant and manipulated by special interests, and so forth.
Do you see the irony? The whole argument has been that having issues of work/wage balance decided through the political system is best because this represents the authentic judgment of people, whereas allowing individual decisionmaking does not. Yet when the political system goes against them, the left says that this only proves the system is flawed. Or, to paraphrase Bertolt Brecht, it becomes necessary for the government to dissolve the people and elect another.
It’s true that America’s democracy is far from ideal. Is Europe’s? Are European voters not ignorant? (How then you do explain Le Pen?) Isn’t it possible that voters in Europe who vote for work restrictions don’t realize that this will mean lower incomes? Even if only a minority make this mistake, it will still bias the outcome in favor of work restrictions. Is it really plausible that Europeans vote for higher taxes on the rich because they thing the incentive effects will result in them working less hours? And are there no special interests in Europe? Really?
I don’t want to give Geoghegan too hard a time though. It’s still a good book, even if its underlying premise is flawed, and it provides a perspective that you don’t see out there that much these days.
* Another wrinkle is that while Europeans do less paid work, they don’t necessarily do less work altogether. This is because Europeans tend to have fewer labor saving devices (e.g. washing machines) and less money to pay others to do household related work, and so spend a larger amount of time doing unpaid work in the form of cooking, cleaning, etc. Even an extra hour a day spent on such tasks would completely eliminate the work gap between the United States and France. Geoghegan mentions this fact in passing, but like a good lawyer he only discusses one side of it (i.e. he says that Americans have to spend some of the extra income to hire maids but ignores the fact that Europeans have to spend some of their extra leisure cleaning the bathroom).
** You might wonder whether it is high tax rates or labor unions that have the most effect here. Unfortunately the countries with strong unions tend also to have high tax rates, so it is not always easy to isolate causation. As far as I know, the only country to break this pattern is Australia. About 80% of the workforce is subject to collective bargaining agreements, yet total taxes and spending as a percentage of GDP are more in line with the U.S. than with Europe. As you may recall, Aussies actually work more hours on average than Americans. Score one for taxes.