The ‘trade-off’ between work and leisure – update

If you’ve looked at labour markets, you’ll understand the basic theory: workers seek to supply more labour as wage rates rise, and the returns to work mount up. However, at some point, the marginal utility of extra leisure exceeds the marginal utility of extra income.In other words, rich people start working less, because they can afford to. And for most of human history rich people had the most leisure, but that might be changing.

According to the Economist, “in the 19th century you could tell how poor somebody was by how long they worked”. But in today’s advanced economies things are different, according to data from the American Time Use Survey.

Overall working hours have fallen over the past century. But the rich have begun to work longer hours than the poor. In 1965 men with a college degree, who tend to be richer, had a bit more leisure time than men who had only completed high school. But by 2005 the college-educated had eight hours less of it a week than the high-school grads. 2013 figures show that Americans with a bachelor’s degree or above work two hours more each day than those without a high-school diploma. Other research shows that the share of college-educated American men regularly working more than 50 hours a week rose from 24% in 1979 to 28% in 2006, but fell for high-school dropouts.

Why is this? The most obvious point is that higher wages make leisure more expensive in terms of opportunity cost: if people take time off they give up more money. Since the 1980s the salaries of those at the top have risen strongly, while those below the median have stagnated or fallen. Thus rising inequality encourages the rich to work more and the poor to work less.

Then there are cultural factors at work, according to the authors. It’s assumed that as higher wages allow people to satisfy more of their material needs, they forgo extra work and instead choose more leisure. A billionaire who can afford his own island has little incentive to work that extra hour. But is that still true?

Leisure used to be a “badge of honour”, but that might need updating, according to researchers at Oxford University. Work in advanced economies has become more knowledge-intensive and intellectual. There are fewer really dull jobs, like lift-operating, and more glamorous ones, like fashion design. That means more people than ever can enjoy time at the office. Work has come to offer the sort of pleasures that rich people used to seek in their time off. On the flip side, leisure is no longer a sign of social power. Instead it perhaps symbolises uselessness and unemployment, according to the authors.

Fascinating. Should I confess if I’m looking forward to my holidays – or not?!