Sunday, August 01, 2004

Guarding the Right to Leisure

When it comes to the matter of free time, I am unabashedly Eurocentric. Workers in Europe enjoy "the shortest workweeks and longest vacations in the world" (Katrin Bennhold, "Continent Guards Its Right to Leisure," International Herald Tribune, July 19, 2004) -- the gold standard of the proletarian good life to which all wage slaves in the rest of the world ought to aspire. Take a look at the graph below, and you'll see that European workers, unlike American workers, have succeeded in reducing the average hours worked as productivity has gone up:

"Love of Leisure, and Europe's Reasons," New York Times, July 29, 2004
The trends in work hours have diverged between Europe and the United States since 1970:

("OECD Urges Governments to Combine Job Strategies with Other Social Objectives," July 7, 2004)

Per capita hours fell during 1970-2002 for most OECD countries and by over 20% in France; but they rose in several countries, and by fully 20% in the United States (chart). By the end of this period, annual hours per capita were considerably higher in the United States (866), than in the EU-15 area (average of 691 for the 15 countries that were members of the European Union in 2002). However, labour utilisation was moderately higher in several OECD countries, including Australia (871) and Japan (922), than in the United States, and much higher in Korea (1120).

Two factors underlie the divergence between the United States and Europe since 1970 in hours worked per capita. First, hours worked per capita are influenced by the share of the population actually working, and the employment rate has increased more strongly in the United States than in most other OECD countries. Increased participation of women in paid employment has tended to push up employment everywhere. However, the potential impact on the total employment rate has been off-set to a much greater degree outside of the United States by retirement at younger ages, sharper reductions in employment among teens and young adults, and a tendency for unemployment rates to drift upwards.

Secondly, the length of the average work year has not declined as much since 1970 in the United States as it has in most European countries, including France and Germany. In fact, annual hours per employed person have remained more or less unchanged for US workers since 1980. By contrast, reductions in the length of the standard work week have continued in most other high-income countries, as have increases in annual days off for public holidays and vacation. In a number of European countries, the standard full-time work week is now shorter than 40 hours, as is illustrated by the 35-hour week recently introduced in France. The typical worker in Western Europe is also entitled to six or more weeks of holiday and vacation days annually. ("OECD Employment Outlook 2004:
How Does the United States Compare?"
While American workers fret about the lure of cheaper labor in Asia and Latin America -- say, computer programmers in India, assembly line workers in Mexico -- putting downward pressures on wages and benefits here, American workers' inability to reduce work hours is exercising its own downward pressures on European workers. The power elite complain of slower economic growth in Europe, even though productivity growth in Europe "actually outpaced that of the United States over the past 30 years"
As Europeans . . . happily continue to trade in income for a slice of leisure time that would be unthinkable in the United States or Asia, the gloomy headlines about the Continent's economic future have multiplied.

Europe, the standard criticism goes, has failed to match America's economic expansion for the best part of the past decade and has even begun trailing Japan in recent quarters. Its citizens are on average almost 30 percent poorer than their counterparts on the other side of the Atlantic, according to income-per-capita data from the Organization for Economic Cooperation and Development. Potential growth in the next decade risks being stuck at about 2 percent -- one percentage point below that projected for the United States.

. . . But for all the bad press the European economy receives, it is so far not performing that poorly.

The growth in gross domestic product of the 15 members constituting the EU before its May 1 enlargement lagged that of the United States by about one percentage point a year in the past decade. This was largely because the region's population expanded at less than half the pace of that of the United States. The average income per person actually grew at the same clip on both sides of the Atlantic - at about 1.8 percent a year, according to Kevin Daly, an economist at Goldman Sachs in London.

Contrary to conventional wisdom, West European productivity growth actually outpaced that of the United States over the past 30 years: GDP per hour in the EU is currently about 10 percent below the American level; in 1970, that gap was closer to 35 percent, according to the EU's Ameco database. Some countries, including France, now have productivity levels exceeding those in the United States. (Bennhold, "Continent Guards Its Right to Leisure," International Herald Tribune, July 19, 2004)
Then, there is also an increased competition for jobs, which has intensified since the end of socialism in the Eastern bloc nations threw their workers at the mercy of the labor market -- the fact that bosses use, in combination with downward pressures of longer work hours in the United States, to blackmail workers in Europe into giving up free time:
[F]our powerful European companies have demanded their employees work longer hours. The trend is expected to spread as Western European companies strive to boost productivity and as employees try to keep their jobs from moving to Eastern Europe and beyond.

"At some point, workers have got to choose. They can’t have high pay and long holidays," says Richard Jackman, a professor at the London School of Economics.

The tipping point, Jackman says, happened on May 1, when the European Union, a trade and regulatory alliance of 15 Western European counties, added 10 members, including Poland, Hungary and the Czech Republic. New immigration restrictions are designed to prevent a flood of cheap labor, but companies in the West are now threatening to move their production east.

The math is persuasive: Wages in the Czech Republic, for example, are 40 percent less than in France, and employees work five more hours a week and get one and a half fewer weeks of vacation.

That's why workers at a Robert Bosch car parts factory in France voted almost unanimously last week to work an extra hour a week without pay, to stop the car components company from moving the work to the Czech Republic. The French finance minister is also pushing to relax the law, which took effect in 2000, that mandates a 35-hour workweek. The law's intent was to encourage employers to add workers, which in theory would reduce the jobless rate while maintaining productivity.

The trend is even stronger in Germany, which shares borders with the Czech Republic and Poland and has rigid laws about hiring and firing.

Among the converts:
  • 4,000 employees at two Siemens plants ended a bitter dispute in June and agreed to work 40 hours a week, instead of 35, for no extra money. The engineering giant had threatened to move production of its cellular and cordless phones from a plant in northern Germany to Hungary.

  • Employees at Thomas Cook agreed last week to postpone a pay increase and accept a 40-hour workweek, up from 38 and a half, in an effort to put the tourism company back in the black.

  • DaimlerChrysler recently struck a deal that lengthens the workweek for research and development staff from 35 hours to 40 hours; employees at its Sindelfingen, Germany, plant, which makes the Mercedes C-class car, will work 39 hours. The company had threatened to move the production to South Africa. As part of the deal, top managers will take a 10 percent pay cut.
There is little doubt the pact will influence union bargaining for thousands of Volkswagen employees later this year.

"I am certain that after DaimlerChrysler, the negotiations at Volkswagen over cost cuts and job security will lead to a successful agreement," German Chancellor Gerhard Schroeder said in a statement from his vacation villa in Italy.

The changes could not come soon enough for many corporate directors and politicians. Europe's economic recovery, which started at the end of 2003, is again trailing the United States. For the 12 Western European countries that use the euro currency (including Germany, France and Spain), gross domestic product grew at a 0.6 percent annual rate between January and March, compared with an annualized 3.9 percent in the United States. The results for the April-June quarter, which are not available yet, are expected to show a similar gap.

The No. 1 reason Europe’s growth lags that of the United States might be that Europeans spend more time on the beach and less at their desks. (Noelle Knox/USA Today, "W. Europe Workers Lose Short Weeks to Save Jobs: Employers Threatened to Move Work East to New EU Countries," The Detroit News, August 1, 2004)
Can European workers protect their right to leisure?

No comments: