I’ve been reading The Price of Everything by Eduardo Porter, which was recommended to me by, of all things, a copy of Relevant Magazine I got from Cornerstone Festival, and it’s got a lot of interesting information in it. Some of it has to do with how money relates to happiness. We know in general that money can’t buy happiness, but Porter looks at decades’ worth of surveys done across dozens of countries that attempt to measure satisfaction, well-being, and happiness. He concludes that generally people in richer countries are happier than people in poorer countries, but that the happiness gains from income gains seem to level off once you hit a rich enough point, partially because things like time start to matter more than money:
Time is relatively more valuable to the rich, who already have money, than for the poor who don’t… The value of our time also rises with age. That’s because wages increase as we proceed on our careers, gain expertise, and acquire seniority. The number of hours in the day, by contrast, does not. (p. 34)
Porter claims that according to surveys, life satisfaction actually fell in the United States in recent years even though it has increased in most other countries. He says that while Americans are on average more than one-third richer than French or Germans, we report about the same level of happiness, and he has a pretty good theory, related to the value of time, as to why this is the case:
No other workers in the industrial world work as much as Americans. Every country in the OECD except the United States mandates a combination of paid leave and paid public holidays… While the time devoted to work has declined in most industrial countries, in the United States it has remained flat over the past thirty years…
This work has produced a lot of growth… Yet perhaps what went wrong is that all the happiness gained by Americans from the extra income was consumed by the unhappiness of having to work seventy-six more hours a year to get it. Compare this with the situation in France. The French economy has grown a little more slowly. But the French worked 260 fewer hours in 1997 than in 1975… The trade-off changes as we become richer. The value of our scarce free time increases, while the things money can buy become less important the more we have. (p. 75-76)
Well, that’s pretty interesting, isn’t it? The libertarian in me thinks there’s already way too many government requirements for businesses, and the proper response to a desire for mandated paid vacation would be to write it off without a thought. Just because all the other countries do it… yeah, that’s what they said about health care too. The more you require things out of companies, the more they just make up for it by paying employees less or charging more for products; nothing is free and everything has a cost; extra regulations just slow down the economy and make it harder for us to make progress.
But what if we’ve already made enough progress that an extra week or two of free time would make us happier than the extra economic progress from the work? That’s a tantalizing thought. (For perspective, note that it’s estimated that about 75% of American workers already receive some paid vacation, although most of them probably do not get the several weeks offered in some European countries.) I’ve already seen time become more valuable to me as I grow up, and I’m only 22. Even the poor in the modern United States are fairly well-off, as this information from the Heritage Foundation suggests:
We already have plenty of stuff. Even if a mandate for paid vacation slowed economic progress in the United States, maybe we would all be happier. Of course, there are other arguments that we don’t want more vacation in the United States. CNN says, “Only 57% of U.S. workers use up all of the days they’re entitled to, compared with 89% of workers in France, a recent Reuters/Ipsos poll found… Working more makes Americans happier than Europeans, according to a study published recently in the Journal of Happiness Studies.” We get fewer vacation days, but we don’t even use them all – a bunch of us sure aren’t acting like more time off would make us happier.
Ah, but maybe we’re just deceived about how happy the money will make us. Clearly many people do think Americans need more vacation time. Apparently Congress even started to consider it a couple years ago when the Democrats were still riding on the political victories of 2008. I found a forum debate that basically ended in a freedom-ish guy repeating that a paid vacation mandate simply has to result in costs somewhere that are going to further hurt American industries, and a statist-ish guy repeating that countries like Germany have these and other worker benefits but their industries seem to be doing just fine. We already have a bunch of worker rules like minimum wage and safety requirements, so what’s the harm of another one?
Well, one thing that didn’t really come up in either Porter’s book or the StraightDope forum discussion was unemployment rate. Porter’s book does mention unemployment in one historical context:
In the late 1990’s, the French Assembly passed the thirty-five-hour workweek as a strategy to combat unemployment – based on the idea that more people would work if each worker labored fewer hours. While the effort failed to promote job growth, it did give workers more time off. (p. 77)
This makes sense. Apparently businesses decided to pay their workers five hours less wages every week without replacing those lost hours with new laborers, perhaps because that would require more overhead to supply all those new benefits! And, of course, any employer that is forced to give their workers more time off can simply decrease their weekly pay so that it is still annually equivalent to the amount of hours they are actually working. But Porter thinks the evidence suggests that in general we would be happier to give up that marginal pay for the marginal time off.
He may in fact be right – but of course that still assumes that you have a job to begin with. EconLib says that “Most economists believe that minimum wage laws cause unnecessary hardship for the very people they are supposed to help… According to a 1978 article in American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.” If minimum wage laws are supposed to magically make jobs better but manifest their consequences by making those jobs harder to get, surely all those other requirements for worker benefits only add to the mix. Is there a noticeable correlation between mandated benefits and the unemployment rate?
Wolfram Alpha is one of my favorite sources for distilled data. Typing in “unemployment rate germany france United States” gives me a beautiful graph with some interesting dynamics:
Right now with the state of the global economy, and all of the complicated factors surrounding it, the unemployment rate of the three countries is about the same. Although through the 90’s and up to 2008, the United States almost averaged half the unemployment rate of France or Germany. This is verified by a table farther down the page with a slightly different statistic of Long-term unemployment rate, defined as “the number of people with continuous periods of unemployment extending for a year or longer.”
Italy’s and Portugal’s numbers are pretty similar to France and Germany, and Spain’s are through the roof. Of course, I don’t know the details of the mandated worker benefits in each of these countries, or what other plethora of factors may be affecting their unemployment rates. Norway and Switzerland actually look better than the United States.. Still, it seems that in general the United States has had a much lower unemployment rate than the countries of Europe. Would you rather have a job with fewer benefits or a greater chance that you won’t find any job at all? (And if you can’t find a job, every additional required benefit makes it that much harder to create your own business.) Yet at the same time it also looks like there are some European countries with extensive business requirements that do not suffer from chronic high unemployment, and in 2011 may actually have lower unemployment than in the United States!
Ultimately, the whole issue is very complicated – and like many complicated things, there’s enough data for each side to confirm their bias. As a matter of principle, I don’t believe that a government should be mandating that businesses provide benefits like paid vacation time to their workers. In general from what I’ve learned so far I think it seems very likely that a mandated increase in worker benefits can cause a decrease in the number of jobs available to workers, as I would expect from my knowledge of economic theory. At the same time I also cannot conclude that this always leads to unpleasant economic outcomes, and additionally I suspect that we might in general become happier whether the economic outcomes were more unpleasant or not. But I am loathe to take too strong a stance on this in any direction.
However, in the absence of governmental mandates I have some choice in the matter. (Choices may seem more limited right now, especially for the long-term unemployed, but I believe you can always take more steps to better yourself.) My personal takeaway is simply to recognize the value of time relative to the money that I already have, and to keep that in mind as I consider my economic choices and opportunities that may come throughout the rest of my life.
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