Reluctant Vacationers: Why Americans Work More, Relax Less, than EuropeansPublished: July 26, 2006 in Knowledge@Wharton
Beware, Lonely Planet Publications tells readers of its guide to France: This country largely closes down for the month of August. In Paris, particularly, shops are shuttered, and even some museums operate for only limited hours. Locals seem to migrate -- en masse -- to vacation resorts along the Atlantic Coast and the Riviera.
The French and, for that matter, people in much of the rest of Western Europe, can afford to check out for a month because they receive an average of nearly two months a year in paid leave, a combination of vacation and government holidays, according to the Organisation for Economic Co-operation and Development. That distinguishes them from citizens of the United States, who, despite a similarly productive economy and a comparable standard of living, enjoy about half as much paid time off. The average American receives approximately four weeks a year of paid leave, while the average person in France gets seven and the average German, eight.
Sure, plenty of Americans will take a vacation next month. If you have ever spent an hour in August sweltering in the lines at Disney World or stuck in the traffic on New York's Long Island Expressway, you know that. But Europeans, with their generous allowances of downtime, can afford to loll around for the whole month, not just the one week that's typical in the United States.
Work and vacation habits in the world's most economically advanced regions weren't always this way. As recently as the 1960s, Europeans worked more than people in the U.S., according to a 2005 study by Bruce Sacerdote of Dartmouth University and Alberto Alesina and Ed Glaeser, both of Harvard University. Since then, however, the regions' appetites for leisure have diverged, with Americans grinding away for ever-more hours at the office and Europeans taking time to savor la dolce vita ("the sweet life"). These days, the U.S. even outworks famously industrious Japan.
Curse of the Blackberry
What changed? The explanations vary as much as the potential locales for a summer sojourn. Several experts at Wharton see a role for culture and history. A Nobel laureate, in contrast, says the difference boils down to taxes. And Sacerdote, Alesina and Glaeser chalk it up to levels of unionization.
Cultural explanations enjoy the most currency in the popular press. In the U.S., publications like the Wall Street Journal brag about the productivity and work ethic of big-shouldered America, while European commentators sniff about what fun-hating grinds Americans have become. These are obviously caricatures, but they do appear to hold some truth, scholars at Wharton say. Europeans seem to place a higher value on leisure, while Americans tend to prefer earning and spending. As a result, Americans on average own bigger cars, bigger houses and more vacation homes, says Witold Rybczynski, a Wharton real estate professor.
In contrast, Europeans' self worth is often tied up not with whether they drive a Lexus or a Porsche but with their ability to enjoy a hefty holiday, says Mauro Guillen, Wharton management and sociology professor and a native of Spain. "It is a sign of social status in Europe to take a long vacation away from home. Money is not everything in Europe; status is not only conferred by money. Having fun, or being able to have fun, also is a sign of success and a source of social esteem."
Likewise, Christian Schneider, manager of the multinational research advisory group at the Wharton Center for Human Resources, points out that European managers often use all of their vacation time, even as their U.S. counterparts brag about their workaholism. "There's a tendency to really relax in Europe, to disengage from work," says Schneider, a native of Germany. "When an American finally does take those few days of vacation per year, they are most likely to be in constant contact with the office." Call it the curse of the Blackberry.
This cultural chasm can surprise Europeans who come to work in the United States. Denise Dahlhoff, a director for Wharton Executive Education, remembers seeing her vacation days cut nearly in half when she took a job in the New Jersey office of ACNielsen, a market-research company. The consultancy she had worked for in Bonn, Germany, gave her 25 days a year -- five days more than the minimum required by German law -- while Nielsen initially provided only 10. (The U.S. has no statutory minimum.) She also learned that, unlike many Germans, Americans typically check their emails even when they leave the office for just a couple of days. "It's definitely socially more acceptable to take vacation in Germany," she says. "Taking two or three weeks off without being in touch is fine."
Cultural differences undoubtedly exist, but for Ed Prescott, a Nobel Prize-winning economist at Arizona State University, they don't explain something as basic as work habits. He instead credits taxes. In a 2003 study, Prescott points out that European countries have much higher marginal tax rates than the United States. As a result, he argues, Europeans have much less incentive to work additional hours. Why plug away for 45 hours, instead of 37.5, when the government ends up taking much of your extra income?
Peter Cappelli, a Wharton management professor and director of the school's Center for Human Resources, doesn't buy that argument. Marginal tax rates don't really apply to salaried workers, who are paid a set amount no matter how long they work and are taxed accordingly. And it's these people, not hourly employees, who have lately seen the biggest gains in hours worked, he says.
In addition, many surveys have shown that Americans are willing to accept less money for more vacation, he notes. Even so, their hours keep creeping higher. "People here are working more than they want to because that's cheaper for employers than hiring new employees," he adds. "In the U.S., there isn't much of a way for employees to rebel against that. Unions only represent a small proportion of people, and they are mostly blue collar."
Sacerdote, Alesina and Glaeser's analysis mirrors Cappelli's. They, too, conclude that different levels of unionization explain why Europeans work so much less than Americans these days. Simply put, burlier European unions bargained for more vacation. About nine out of 10 workers in Germany and France are covered by collective-bargaining agreements, compared with only about two of 10 in the United States, they point out. Because of their heft, European unions have more muscle in politics and board rooms. As a consequence, they succeed at lobbying for policies that benefit their members and employees in general. In contrast, political decisions in the United States tend to favor employers.
Yet that argument still seems to leave room for a greater European liking for leisure; after all, European unions could have fought for higher pay, not more vacation. Sacerdote, Alesina and Glaeser say that expediency, not a cultural predisposition for kicking back, drove their decisions.
In the 1970s, Western Europe's economy endured a series of economic shocks, including the oil crisis, they explain. In response, employers insisted that they needed to lay off workers. Unions, in turn, proposed retaining workers but cutting everyone's hours. The outcome would be the same -- a reduction in total hours and thus costs -- but it would achieve savings without layoffs. These "work-sharing" arrangements were often promoted with slogans like "work less; work all," the professors write.
"Work sharing may make little sense as a national response to a negative economic shock," they add. "But at a single firm, a membership-maximizing union may indeed find work sharing to be an attractive policy."
Once work hours started falling for large numbers of Europeans, a "social multiplier" kicked in; more people wanted more vacation because their family and friends were getting it. People enjoy taking time off together, even if it means inconveniencing themselves to do so. "We put ourselves through a lot of pain to standardize on things like our weekends and our vacations because there are big complementarities," Sacerdote says. Even in America, you can see the hassles that this tendency causes: Home Depot wouldn't be so jammed on Saturday mornings if most people didn't have the same days off each week.
Regardless of who's right in the debate, these differences in work habits may not endure. Faced with slow-growing economies and social unrest stemming from youth unemployment, some European politicians have begun to jawbone for change. And corporate managers there have begun to squeeze more flexible work rules out of unions, including longer hours and fewer restrictions on firing, by threatening to move plants abroad. Just this week, the Wall Street Journal documented how, in response to these sorts of changes, some German firms have stepped up hiring at home. If this trend continues, it might not only jumpstart Western Europe's economies but also begin to increase average work hours and decrease paid holidays.
Sacerdote agrees that labor restrictions play a role in Europe's higher levels of unemployment. Policies that make employment costly -- like lots of paid leave and restrictions on hiring -- can also make employers reluctant to hire. But he also sees a "bedrock issue" that no amount of negotiating will solve. "Labor is so much less mobile in Europe," he points out. "So when Ireland is booming, it's not like people pour out of France into Ireland. Even within Germany, you have high unemployment in East Germany, yet people don't move west. In the U.S., it's labor mobility that helps the labor market. But people don't just pick up and move in Europe."
Undergirding the debate about vacation is the unstated premise that "more is better." Besides the occasional Scrooge-like boss, everybody loves vacation -- or at least says they do -- and attests to its usefulness as a way for workers to recharge.
But count Nancy Rothbard, a Wharton management professor, among the rare skeptics. She cites research that has found that the recharge effect lasts about three days. And for many people, those three days come with a hefty price of their own -- and it's not entirely financial. "Would more vacation be better for us?" she asks. "It depends on the tradeoffs." If it means making less money, some people might pass, preferring to save for their children's college educations, their retirements or even a house at the beach -- even if they rarely have the time to use it.
Studies also show that some people bank weeks and weeks of vacation, she points out. Analysts tend to assume that their bosses discourage them from taking their time or that they fear a rock pile of work when they return. But it's possible that they just don't want to leave work.
Consider parents, she says. Hauling kids on long trips can be more stressful than staying at home. If people can afford to bring along grandparents or babysitters, then they can still rest and relax. If they can't, working may beat refereeing back-seat boxing matches in the minivan. What's more, vacations, especially with gas prices at $3 a gallon and airfares rising, aren't cheap. "It takes a lot of resources to vacation with a family. Not everybody can afford to go to Paris."
Besides, if they go there in August, they might find all the shops closed.