Americans: Are They Reluctant Vacationers?

U.S. workers get half the paid time off as Europeans. Several experts link the disparity to cultural and historical differences. A Nobel laureate, in contrast, says it boils down to taxes. And one expert says three days for "recharging" may be all most workers need.

By The Wharton School

 

France largely closes down for the month of August, according to Lonely Planet Publications. In Paris, particularly, shops are shuttered, and even some museums operate only for limited hours.

Locals seem to migrate -- en masse -- to vacation resorts along the Atlantic Coast and the Riviera.

The French and much of the Western European population can afford to check out for a month because they receive an average of nearly two months a year in paid leave, with vacation and government holidays, according to the Organisation for Economic Co-operation and Development.

By contrast, citizens of the United States, 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.

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 United States, 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, Americans even outwork famously industrious Japanese employees.

Curse of the Blackberry

Some Wharton experts credit culture and history for the disparity. A Nobel laureate, in contrast, cites taxes. And Sacerdote, Alesina and Glaeser chalk it up to levels of unionization.

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 cultural 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.

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, [he or she is] most likely to be in constant contact with the office." Call it the curse of the Blackberry. 

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."

Unions' Clout

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.

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.

Once work hours started falling among large numbers of Europeans, a "social multiplier" kicked in; more people wanted more vacation because their family and friends were getting it.

Faced with slow-growing economies and social unrest stemming from youth unemployment, however, 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.

Is more vacation better? asks Nancy Rothbard, a Wharton management professor. 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. "It depends on the tradeoffs," she says. 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.

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. 

 

"Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania."

August 7, 2006

Copyright 2006© LRP Publications