catallaxy files

catallaxy in technical exile

High earners burning the midnight oil

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Via Mahalanobis, an interesting US study of longer working hours and why they are mostly done by high income earners:

    In 1983, the most poorly paid 20 percent of workers were more likely to put in long work hours than the top paid 20 percent. By 2002, the best-paid 20 percent were twice as likely to work long hours as the bottom 20 percent. In other words, the prosperous are more likely to be at work more than those earning little. This trend has been a puzzle for some economists …

    After testing various possible causes for these trends, 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 …

    It cannot be attributed to rising education levels, an aging workforce, or decreasing unionization … Nor, the authors find, is the change a consequence of increased self-employment. And, it is not related to an increase in multiple jobholding, or to advances in communication technology (such as the Internet) that facilitate additional work from home.

And why have such incentives only come to the fore recently? The authors note that ‘U.S. firms have changed their methods of compensation for skilled, salaried workers over the past quarter century’. My additional speculation is that the incentives to work longer hours because of the better promotion prospects it brings may well be the result of an increasingly meritocratic culture in the private sector or meritocratic culture in the new kinds of businesses that populate the private sector (e.g. consulting and IT firms). Whereas before, under more clubby and less competitive conditions pre-globalisation, promotion may have depended more on going to the right private school or already knowing the right people (so that there was no need to invest in new networking) and frequenting the right clubs, under increasingly competitive conditions this is no longer the case. And therefore there is a larger payoff from, say, recent graduates working in consulting firms ‘investing’ in getting high billable hours to fast track their promotion prospects.

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Written by Admin

July 5, 2006 at 9:11 am

Posted in Uncategorized

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