Why the Germans are happy in their work

AS WE know, Americans work far longer hours than the Germans. Not only that, say Professors Richard Freeman and Linda Bell,(Department of Economics at Harvard and Haverford College. Lecture given at the LSE on Friday 21 October), the imbalance reflects a fundamental insecurity among the Americans, and an equal and opposite security - some would say smugness - among Germans.

The 'differences may partially reflect . . . responses to differences in labor market inequality, and present some suggestive evidence that people in settings with greater earnings inequality work more than those in settings with less inequality'.

The contrast has not passed unnoticed. 'The simple fact is that Germany is .

. . organised like a collective leisure park,' raged Chancellor Kohl last year. And a Berliner, interviewed by the Wall Street Journal in a coffee shop dismissed the Americans as 'crazy workaholics . . . because they haven't a clue how to live'.

The Americans still work fewer hours per year than the Japanese but outrank every other OECD country. Manufacturing workers in the US work 130 hours annually more than the average for European OECD countries, while German workers work for 131 hours less than the average - a difference of five hours a week.

Historically, this is surprising, since the Americans were among the first countries to institute an eight-hour day and five-day week. In the 1950s and 1960s, they worked far fewer hours than the Germans, whose post-war recovery was generally attributed to their long working hours ('Adenauer, Adenauer, Adenauer to every day' ran a musical sketch of the time). It was not until the 1980s that German hours dropped below American ones.

Puzzlingly, self-employed workers in both countries work much the same length of time as each other - and as their counterparts in other countries.

Yet, not only do the hours worked by employees differ, so does the attitude towards work. A 1988 EEC survey found that the Germans preferred to work even shorter working hours, while the number wanting more money from longer hours was roughly the same as those preferring to work shorter hours. The attitude - a complete change since the 1960s when Germans had a greater desire to work than Americans - has been reflected in continuing demands by German trade unions for even shorter hours.

At that time, the average working week varied between 35 and 40 hours, while the Americans not only worked longer hours every week but generally enjoyed only a fortnight's holiday every year, a third of the German norm.

The difference in attitudes also emerges from other surveys, which show that Americans are more likely to report that they work hard 'even if it interferes with the rest of (their) lives' than are Germans and other Europeans. Similarly, Germans are likely to respond that they work 'only as long as they have to'.

The authors observe that 'American workers are more 'into' work than are German and other European workers. In the same vein, Germans seem to be less 'into' work than their European and US counterparts. The puzzle is why large differences in actual hours worked have failed to quell American workaholicism and a German love of leisure.'

The explanation starts with tax: rates for a typical German worker are roughly 30 per cent higher than those for a US production worker, who also enjoys far less in terms of 'social income', such as welfare benefits, than a European counterpart. But these - and other points like the greater reward for overtime working in the US than in Germany - are relatively marginal.

The true explanation, say the authors, lies in the gross inequality of the American economic scene. 'In the decentralised US labor market, which produces relatively high earnings inequality among workers, the rewards to greater effort are large and the penalties to slack, substantial' - a marked contrast to the centralised, relatively egalitarian situation in Germany.

Moreover the situation feeds on itself. 'The harder Americans work and the harder they say they want to work, the more likely will the unequal system reward their good efforts.' Yet not only are the Germans slightly richer per head than the Americans, they maintained their lead during the 1980s.

Nevertheless, in terms of what they can buy ('purchasing power parities') it is the Americans who win. More work, lower taxes, do bring some reward.