September 21, 2004

CPB Newsletter: Longer working hours: choosing between income and leisure time

In a European perspective average working hours in the Netherlands are low, mainly as a consequence of the large proportion of part-time workers. Concerns about the country's competitive position, outsourcing towards low-wage countries and the cost of ageing have recently led to a call for longer working hours by both employers and the government.

In that view, people should work longer hours without a corresponding wage increase, preferably.
However, the main cause of the weakened competitive position is not that wage levels are structurally too high, but that wages adjust slowly because of a lack of flexibility in the wage-bargaining process.
Also, instigating longer working hours in order to compete with low-wage countries does not appear to be a very promising strategy. Advanced economies with a highly educated workforce can be recognised by their high wage levels.
Longer working hours will raise the income of workers, at the expense of leisure. Workers are quite capable of making their own decisions on this trade-off. Nevertheless, it is important that the extra money someone earns by working longer hours reflects the gains for society. In other words: extra leisure time should not be too low-priced. Longer working hours will enlarge the tax base and can in this way be helpful in dealing with the cost of ageing.

These are some of the conclusions in the opening column in CPB Newsletter 2004/2, as published today. CPB Newsletter 2004/2is the second issue of this new quarterly magazine of CPB Netherlands Bureau for Economic Policy Analysis. This September issue also contains:

  • An article on experience rating in Disability Insurance (DI) in the Netherlands, i.e. a measure to restrict inflow into DI.
  • An overview of recent CPB publications
  • A table, summarising the short-term economic forecasts. Read as well the accompanying CPB press release for the Macro Economic Outlook, which provides more information on these forecasts.

CPB Newsletter 2004/2 (September) can be downloaded (free of charge) as PDF-file.


Dick Morks
Johan Verbruggen