When labor laws reduce the hours that people have to be at work, their life satisfaction increases, as indicated by new research from Daniel S. Hamermesh, Daiji Kawaguchi, and Jungmin Lee published in the NBER.
The researchers examined two examples in Japan and Korea where the government sought to shorten the workweek by imposing overtime penalties at a lower threshold of hours. In Japan, the standard workweek was reduced from 48 hours to 40 between the mid-1980s and mid-1990s by imposing a 25 percent overtime penalty after 40 hours of work. Korea also reduced its workweek that way, from 44 hours to 40, between 1999 and 2009 by extending its 50 percent overtime penalty. Both were responses to those countries experiencing some of the longest workweeks around the globe and high levels of overwork-related deaths. The laws had the intended impact of reducing hours across their economies but particularly for those who were putting in the most hours.
While the authors caution that they can’t conclude that life satisfaction was raised only because of the legislative changes, they find significant increases in satisfaction after the laws were imposed, particularly among those who were most likely to have their hours reduced once they were implemented. This held true across two different surveys in Japan and another in Korea.
The researchers also note that there weren’t any other long-term trends in increased life satisfaction before the laws in either country, nor were there other reforms — such as more progressive taxation or higher returns for workers with more education and experience — that can explain their findings. Self-employed workers who weren’t impacted by the laws also didn’t see the same increase as those impacted by it.
“Either the legislation had positive impacts on particular workers’ well-being,” they write, “or something else occurred in each country that differentially benefited particular groups of workers and did so only during the period when the laws were being implemented.” Their analyses all point to the former. And, they note, “At the very least we have found no evidence that those workers most likely to have been affected by the legislation were worse off as a result.”
The results also point to workers in these two countries being stuck in work arrangements they didn’t want before the reforms. They were likely either in a “rat race” atmosphere where they put in unnecessary time and effort to stand out from the pack and/or in one where high unemployment or too much power in employers’ hands let them exploit their employees and lengthen hours. The overtime reforms broke workers out of these cycles.
The authors are also quick to note, “Our results say nothing about whether similar regulations in other labor markets would have the same positive impacts on workers.” But there is evidence that even if shortening hours doesn’t make workers happier, it can make them more productive. The most productive workers across the globe put in fewer hours, with Germans, for example, putting in 1,400 hours a year compared to 2,000 from Greek workers but creating 70 percent more productivity. While there is a bump in productivity at first when someone works more than 60 hours a week, the benefits disappear around week three or four. Other studies have found that more hours create short-term increases that eventually dissipate.
The United States hasn’t caught on to this trend. We’re number 12 among 36 other countries in how many hours we work each year, well behind places like the United Kingdom, Australia, Canada, and Germany and higher than the average. In fact, many of these other other countries have far outpaced us in reducing work hours over the last 40 years. Today, nearly all professional American employees put in 50 hours each week or more and nearly half are at work for 65 hours or more.
That could shift after a recent executive order from President Obama takes effect. In March, he announced changes that would make current overtime rules, which have covered fewer and fewer workers over recent decades, apply to many more people, imposing a penalty over 40 hours a week. As in Japan and Korea, that has the potential to reduce the workweek and therefore raise satisfaction for American workers.