How relative income affects work hour preferences

Over the past century, the length of the average workweek in developed countries has gradually declined. Automatization, among other factors, has allowed people to work fewer hours for the same output. However, despite ever increasing productivity, this decline in working time has stopped since the last quarter of the previous century. Instead of using productivity gains to work fewer hours, most people prefer to work more hours to attain a higher standard of living. This implies that people ascribe little relative value to additional spare time. Yet, people feel increasingly pressed for spare time and time at work inevitably comes at the expense of family, hobbies or household responsibilities. Given these considerations, one could expect that at least some people would prefer to work fewer hours. Research shows that a discrepancy between the hours people actually work and how much hours they would prefer to work is common. This gap, usually referred to as a work hour mismatch, has been found to negatively impact life satisfaction, job satisfaction, psychological wellbeing, physical health and productivity at work. In this paper we examine how income determines work hour preferences by looking at the work hour mismatch. In addition to personal and overall household income, this study analyzes how self-assessed relative income affects work hour preferences. We differentiate between over- and underemployment and theorize that these are determined by very different factors. It is hypothesized that people want to work less when they have a higher income and that they want to work more hours when they have a low income or feel relatively deprived. The data used in this study was collected in 2015 and 2016 in Flanders, the largest of three Belgian regions, as part of the annual LEVO survey. LEVO is a research project in which data about the living circumstances of Flemish citizens and their views on a variety of topics, e.g. work hours, is collected. In this paper, we focus on the working people of the Flemish population and therefore only retain respondents who are currently employed. The final sample consists of 1435 respondents aged between 18 and 65. Work hours were measured by asking respondents: “How many hours, on average, do you work per week?”. In our sample, we find that those who are currently working, do so for 39,82 hours per week on average. The work hour mismatch was estimated with the question: “Indicate how many hours you would like to work more or less per week than you do now, taking into account the impact on your income”. We find that 29,68% of the respondents in our sample experience a mismatch. 9,87% wants to work more hours, while 19,81% indicates that they would prefer to work fewer hours. We perform multinomial logit regressions, in which we look at how those who prefer their current work hours differ from those who want to work more hours and from those who want to work fewer hours. As is expected, those who currently work more/fewer hours are more likely to want to reduce/increase their work hours. Also, those who experience a good work life balance are less likely to want to change their work hours. The role of income in wanting to decrease working hours is dubious. Those with a lower personal income are less likely to prefer to work fewer hours. On the other hand, neither overall household income nor relative income plays a significant role in wanting to decrease work hours. Looking at preferences for more work hours, we find that those with lower household incomes are not necessarily inclined to work more hours. When personal income and relative income are estimated separately, both have a significant negative effect on the desire to work more hours, signaling that those who earn less than others, or think they earn less than others, often prefer to work more hours. The significant effect of personal income, however, disappears when relative income is taken into account. Our results thus suggest that the desire for more work hours is mostly driven by self-perceived relative income, rather than actual income. We found that there are clear differences between those who want to work more hours and those who want to work fewer hours. While the desire to work fewer hours is instigated mostly by a bad work-life balance, those who want to work more hours seem guided more by the perception of their own income, rather than their actual income. Our results illustrate the important role of positional considerations in determining the number of optimal work hours. Economists predicted that the average working time would keep decreasing as productivity increases. Our findings provide an explanation for why the decrease in work hours has stopped.

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