Tuesday, March 30, 2004


In today's Post, David Ignatius writes about the "jobless recovery", suggesting that things aren't as bad as they seem because unemployment is higher in many other industrialized nations. (I am not sure how the unemployment rate in Germany provides consolation to unemployed Americans, but there you go....) But what really caught my eye about his piece was this:
Americans work harder, too. That's the theme of a new study by economist Edward C. Prescott -- "Why Do Americans Work So Much More Than Europeans?" -- published last month by the National Bureau of Economic Research.

Prescott finds that Americans spend about 50 percent more time working than do the French, with roughly similar comparisons against Germans or Italians. Not only do Americans work more hours, but they produce more per hour than any major country except France, where his statistics show workers are 10 percent more productive than Americans. (Prescott's estimates are based on figures for 1993 to 1996; they only count hours worked in taxed market jobs, so they miss the underground economy.)

Twenty years before, Prescott notes, it was the Europeans who worked more. Data gathered for 1970 to 1974 show that the French and the Germans each worked an average of 5 percent more than did Americans; the British worked 27 percent more. Prescott's explanation for the change is pure "supply side." He argues that Americans work more now because tax rates are lower -- allowing them to keep more of what they earn.
Ignatius presents no analysis of that conclusion, which I think is totally "out to lunch". When I was working a "wage slave" job, I worked overtime hours not because I was impressed by the low tax rate applied to my paltry wages, but because I needed the money. During periods of self-employment, I have at times worked lots of hours to maintain my business - even though there is nobody paying "matching taxes" on my wages and the taxman's bite into my earnings seems particularly large. When I have been otherwise employed, it has been at "white collar" jobs, exempt from overtime, where I worked well above a forty hour week because... that was the expectation, if I wanted to keep the job.

I truly cannot imagine that many Americans are working unpaid overtime in their white collar jobs because they feel so rewarded by America's lower marginal tax rates. I can't imagine many people in $8-$12/hour factory jobs, or even lower-paid service industry jobs, hoping for overtime because of their marginal tax rates. Perhaps when one's income is stratospheric, the idea of keeping one step ahead of the bill collector is alien. But it seems to me that most Americans who work lots of hours do so because their employers don't give them any option, or because they truly need the money.

Is there anybody out there who puts in an extra hard day at work because of this country's tax rates? Please share.


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