Why high earners work longer hours

July 26, 2006

Free Market Foundation

Many salaried American men work longer hours because of an increase in “marginal incentives” to supply hours beyond the standard 40 per week, say researchers Peter Kuhn and Fernando Lozano.

As evidence, the authors note:

An extra hour beyond 40/week was associated with a 1.2 per cent increase in earnings for male workers overall between 1983 and 1985, and with more than a 2 per cent 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 per cent more than an equivalent worker putting in normal hours.

By the early twenty-first century, that gap had more than doubled, to 24.5 per cent.

Such pay gaps, or “long-hours premiums,” were associated with a markedly wider dispersion of earnings within an occupation between 1983 and 2002.

The authors note that U.S. firms have changed their methods of compensation for skilled, salaried workers over the past quarter century. It could be that longer-than-normal workweeks help firms to produce better products and services in “winner-take-all” type of markets

Source: David R. Francis, Why High Earners Work Longer Hours, NBER Digest, July 2006; based upon: Peter Kuhn and Fernando Lozano, The Expanding Workweek? Understanding Trends in Long Work Hours Among U.S. Men, 1979-2004, National Bureau of Economic Research, Working Paper No. 11895, December 2005.

For text: http://nber.com/digest/jul06/w11895.html

For Working Paper: http://papers.nber.org/papers/w11895

For more on Economy: http://www.ncpa.org/iss/eco/

FMF Policy Bulletin/ 18 July 2006