Extending working hours as an instrument
The international developments of recent years pose a particular challenge for the Austrian economy. The export-oriented economy in particular, but also the construction industry, have been affected. High energy prices, significantly higher wage settlements due to higher inflation in international comparison, the sharp rise in financing costs, climate-related costs and additional requirements and hurdles due to bureaucratic regulations mean that the business location has lost its attractiveness and competitiveness and continues to do so. There is also a shortage of workers and skilled workers, meaning that jobs remain unfilled. In addition, the average working hours of employees are continuously decreasing.
Over the past twenty years, the decline in working hours has been well compensated by
The decline in working hours has been well compensated by immigration from the EU over the past twenty years, meaning that the total number of hours worked has remained relatively stable overall. The continuing transition of baby boomers into retirement is further reducing the supply of labor. There is also the question of whether net immigration from the other EU/EFTA member states will continue in the future to the extent that the supply of labor can be maintained at this level. This question is not only relevant for companies in Austria, but is also particularly explosive for the financing of public social benefits.
A package of measures is necessary to counteract the supply of labor. For example, the actual retirement age, which is very low by international standards, should be increased. Immigration from third countries can be recruited more intensively. A better work-life balance will increase the supply of labor. Working hours should also be addressed .
This study examines the extent to which an increase in normal working hours by 2.5 hours per week or to a maximum of 41 hours per week can contribute to a strengthening of the labor supply and economic output. Based on the data from the labor force survey, it can be seen that extending the working hours of employed full-time workers (the working hours of part-time workers are kept constant in the analysis) could increase the average number of hours worked by around 2 percent. The measure would target male workers (lower part-time rate) and younger workers (higher proportion of shorter full-time employment) somewhat more strongly.
On this basis, the macro model PuMA was used to analyze the economic effects of the increase in working hours. Several scenarios were simulated to limit the expected effects. It is difficult to predict how the collective bargaining partners would agree on wage developments in particular. Assuming that gross hourly wages remain unchanged ceteris paribus and that gross monthly income increases accordingly with longer working hours, the expansion of working hours would increase the number of hours worked in the economy as a whole by around 1.5 percent according to the model results. The increase in working hours is offset by a reduction in employment of around 0.4 percent. Accordingly, the unemployment rate would also increase slightly. The reform will also increase real investment (around 1.6%) and real private consumption (around 1.2%). Real economic output will increase by just under EUR 6 billion as a result of the reform (based on GDP in 2023).
Assuming that gross monthly income remains unchanged ceteris paribus after the extension of working hours, the overall economic volume of work would increase by around 1.9% as a result of the measure. In this scenario, employment would increase slightly and unemployment would fall by around 0.3 percentage points. Real investment activity would also be stronger at over 3%, while real private consumption would increase by just over 1%, comparable to the above scenario. Real GDP would increase by over EUR 7 billion in this reform.
In both scenarios, it was assumed that individual productivity would fall slightly as a result of longer working hours. Assuming that hourly productivity remains unchanged, the economic results are correspondingly somewhat stronger, although the differences to the previous analyses are moderate.
