Saturday, July 08, 2006

Why High Earners Work Longer Hours :: NBER Digest

Kuhn and Lozano conclude that many salaried men work longer because of an increase in 'marginal incentives' to supply hours beyond the standard 40 per week. These workers don't immediately get overtime pay for the 'extra' hours. But over a longer time period, they get a substantial reward in the possibility of earning a bonus or a raise within their current position, or they may win a promotion to a better job, or simply signal to the labor market that they are productive and ambitious and thus suitable for a better job in another firm. Alternatively, the longer hours may enable them to acquire extra skills or to establish networks and contacts that could be rewarded in their current firm or in another one. In addition, the long hours may enhance their prospect of keeping their current job if the firm decides to lay off workers in the future. Studies suggest that perceived job insecurity has risen substantially among highly educated workers.

As evidence, the authors note that an extra hour beyond 40/week was associated with a 1.2 percent increase in earnings for male workers overall between 1983 and 1985, and with more than a 2 percent increase by 2000-2. For salaried workers, the man putting in 55 hours per week in the early 1980s earned a weekly salary of 10.5 percent more than an equivalent worker putting in normal hours. By the early twenty-first century, that gap had more than doubled, to 24.5 percent. Such pay gaps, or 'long-hours premiums,' were accommodated by a markedly wider dispersion of earnings within an occupation between 1983 and 2002.
Note that these incentives are not family friendly. And, given the choice most families make to place greater childcare responsibilities on the wife than the husband, they also work to the disadvantage of women.


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