The Business World: Taxing the brains for those longer holidays

People in Norway and Sweden work very short hours because there is no point in them working longer if the government is going to get most of the money when they do
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OFF ON your hols then? What is it, five weeks a year? Six? Bit of a problem getting it in, isn't it? Or are you an American, in which case it is probably two weeks, maybe just three. And if you are Japanese, you don't even take the two weeks you are allowed in case you are thought to be slacking.

One of the growing differences between Europe and America is the time taken off work for holidays. Back in the 1950s, Europe and the US took roughly the same holidays: two weeks was the norm, with three weeks for long-serving staff. Then Europe changed. In this age of globalisation why have the two largest economic blocs gone indifferent directions?

There are two pat answers. One would be that European worker-protection legislation raced ahead while US legislation languished. It is certainly true this has been the case, with US companies still not required by law to provide holidays and the European Union now requiring employers to give four weeks' paid holiday, as well as the 38-hour week. The other pat answer is that there is a cultural difference. The North American work ethic survives while the Europeans have wider social aspirations. They want to earn more and acquire additional material objects; we, so to speak, want to spend more time with our families.

But why have our cultures diverged? Actually, it has been largely a question of taxation. In countries in which half the national income is absorbed in taxation (as in France, Germany and Italy), workers will want to take additional income in the form of time off, which is not taxed, instead of money, which is. In the US, where taxation is just more than 30 per cent of national income, it is still possible to take the money instead. Britain, where it is 40 per cent of GDP, is, as usual, halfway between.

This surely squares with our personal experience. Those of us who were working back in the 1970s were suddenly struck by the combination of high inflation and an incomes policy. We could not earn any more money - in fact our real wages were depressed. So what did companies do? They gave us company cars, free petrol - and longer holidays. I remember getting a nine-day fortnight, using the extra day off to earn by freelance writing the additional income my employer was unable to pay me.

If the work/leisure choice is a trade-off determined largely by taxation, you would expect hours worked to be longest in the low-tax America, and shortest in the high-tax countries in Europe, like Sweden and Norway. Britain would be in the middle.

Surprise, surprise, with one key exception that is exactly the case. Hours worked in the US are 1,957 a year; the UK, 1,737; and in Sweden 1,551 and in Norway only 1,401. People in Norway or Sweden work very short hours because there is no point in working longer if the government is going to get most of the money when they do.

The exception is Japan. On paper, the Japanese working year is slightly shorter than the US - just under 1,900 hours. In practice, I suspect it is longer, because people do not take the holiday they are allowed and stick around in the office until the boss goes home. Add compulsory socialising and the long commute and the picture is worse. The only way to explain the Japanese pattern is in social terms: group identity (of the workplace) is relatively more important than individual identity (in the home). So the Japanese spend more time doing things associated with work than even Americans.

But this is the past. Taxation differences will persist for at least another generation, but as people become more mobile, is it reasonable for both hours worked and holidays to diverge so massively? If so, will we find our long European holidays squeezed, or will Americans and Japanese ease up?

My guess is that three things will happen. First, holiday patterns and working hours will converge internationally for people doing the same sort of jobs. In other words, an investment banker anywhere in the world will tend to work the same hours as other investment bankers. The hours of car factory workers will similarly converge. The only area where there will be large differences will be among people producing non-tradable goods. I would expect politicians and civil servants to work very different hours in different countries, depending on social ethics, though I would expect politicians everywhere to retain their three-month summer breaks.

Second, I would expect holiday patterns to diverge within countries, depending on ages and occupations. Getting people to work on production lines will be increasingly difficult as more and more people chose "lifestyle" jobs which offer variety. So employers will offer short hours. Professional and managerial jobs will continue to require a fairly high degree of time at work (though work will increasingly not be at a single work-place but in a variety of different locations - on a laptop set in an airline lounge, in a hotel conference room, at the home office computer.

Third, I would expect the present distinction between work, education and leisure to become so blurred that for many people it will cease to exist. Any writer knows that while he or she will have to put in the hours in front of the word processor, the preparation and research usually comes from a mixture of semi-social activities, everything from dinner with friends to walking the dog. As more and more of us become brain workers - the intellectual capital of a company's employees becomes its principal asset - defining what is work, what is education or training, and what is leisure will become impossible. Not for everyone, but it will happen for more and more of us.

And holidays? My guess is that brain workers will find that their grey matter functions more effectively if they take at least five weeks' holiday a year - and that this will apply to Americans as much as Europeans. US universities, after all, give their professorial staff almost as long breaks as ours do. As for politicians - well, let's hope they too will find themselves lifting their game when they come back from their three- month break. Of course, there is such a thing as having too much holiday to function at all.