Europe’s Battle to Boost Work Hours Amid Changing Trends

Across Europe, employees are clocking fewer hours at work, creating a conundrum for policymakers. Efforts to encourage part-timers to increase their hours and full-timers to take on overtime are proving difficult amid shifting work habits. Historically, rising prosperity has allowed for fewer working hours, as higher productivity and wages have facilitated more leisure time. Since 2010, average annual working hours in OECD countries have declined by 50 hours. Contributing factors include higher education levels among young people, increased workforce participation by mothers, phased retirements, and a shift from manufacturing to more flexible service jobs.

The post-pandemic period has seen a notable decrease in working hours across Europe, unlike in the US where layoffs were preferred over furloughs during the pandemic. A key reason for reduced hours is “labor hoarding”, where employers keep staff during slow periods to avoid future hiring challenges. Increased sick leave and growth in public sector jobs also contribute. Additionally, workers are now prioritizing work-life balance more than before. IMF research indicates that the reduction in working hours reflects long-term trends driven by worker preferences, particularly among younger individuals and fathers of young children. Economists suggest the pandemic has made people more willing to trade income for better work-life balance and reject poor working conditions.

Germany has the shortest average working hours among advanced economies, influenced by high part-time employment among women and a preference for leisure time. Germany is considering tax breaks and welfare reforms to encourage more work, a “growth plan” that may include tax cuts on overtime beyond 41 hours a week and changes to the unemployment benefits system. However, these proposals face opposition from unions and are still under debate. Germany’s proposed tax breaks on overtime could be structured as a temporary measure to assess its impact on labor supply and demand dynamics. The legality of such tax incentives must align with European Union regulations on state aid and competition, ensuring they do not unfairly advantage certain groups over others.

In the UK, new regulations require benefits claimants earning less than half a full-time minimum wage to undergo an “intensive work search” regime, aimed at increasing their working hours. This policy must be legally justified under existing welfare laws and human rights frameworks, ensuring claimants’ rights to fair treatment and non-discrimination are upheld. Legal scrutiny will likely focus on whether the policy disproportionately impacts vulnerable groups and whether it provides adequate support for those genuinely unable to work longer hours.

The Netherlands is exploring reforms to reduce disincentives for working more hours, such as boosting childcare allowances and improving parental leave, thus making longer hours more financially attractive. These reforms must comply with EU directives on work-life balance and gender equality, by ensuring that these measures do not create indirect discrimination and that they promote equal opportunities for all workers.

European policymakers must navigate these complex dynamics, balancing efforts to boost labor participation and productivity with the evolving preferences of their workforces. Encouraging longer working hours through tax incentives and welfare reforms is part of a broader strategy to address economic underperformance and labor shortages in the region. Legal frameworks must ensure that incentives do not lead to exploitation or undermine existing labor protections. Policymakers must consider the potential for legal challenges based on workers’ rights, tax equity, and social justice.