Working time arrangements are an area with considerable scope to improve efficiency and to foster well-being. Symmetric agreements can represent a win-win situation for both employers and employees, write Thomas Leoni and Vanessa Koch.
Thomas Leoni and Vanessa Koch are researchers at the Austrian Institute of Economic Research (WIFO).
Faced with strong international cost competition, European firms need higher leverage to adapt working hours to short-run demand fluctuations. At the same time, employees strive for options to adjust working time to personal preferences and lifestyle needs. Firms need labour flexibility.
Adjustments in labour input are necessary to cope with short- and medium-run demand fluctuations, given that physical capital is fixed. One way firms can achieve this flexibility is by adjusting the number of hours worked. The need for flexibility is growing due to rising market volatility and increasing pressure from low cost competitors, particularly from generally less regulated markets, with respect to working time and labour relations.
Firms want extended maximum daily and weekly working hours, as well as other instruments to cushion cyclical fluctuations in labour requirements. During the Great Recession, short-time work arrangements helped to stabilise employment. But short-time work arrangements are costly and might inhibit structural change, which makes them unsuitable as permanent instrument.
Working time accounts are another instrument to increase working time flexibility. They permit employers to use overtime for free as long as working time is cut by an equal amount within a defined window of time. Working time accounts are already wide-spread, particularly in manufacturing and in some countries, such as Germany. Trade unions tend to oppose additional working time flexibility and further extensions to working time accounts, primarily because employees risk foregoing pay supplements for extra time, but also because the call for additional flexibility is often not matched with tangible benefits for workers.
But it is not only firms that strive for more flexibility. Employees struggle to maintain a good work-life balance, to combine work and family commitments, as well as to cope with later retirement and longer careers. Often what they need is a working time that adapts flexibly to the different requirements they have in different phases of their lives.
Against this background, there is scope for working time arrangements that foster both the flexibility sought by firms and the flexibility cherished by workers. We can speak of “symmetric flexibility” in this respect. This concept has some parallels with the notion of flexicurity, where firms gain cost competitiveness through low labour protection regulation and workers are “insured” by extensive social protection and a high probability of being quickly redeployed after dismissal. In principle, symmetrical flexibility and flexicurity can mutually reinforce each other. As we have seen since the outbreak of the crisis, new jobs have often not been created at the necessary rate and of the intended quality.
The concept of symmetric flexibility was identified and explored in the WWWforEurope project, in which 34 European research organisations cooperated to develop a new strategy for Europe. WWWforEurope proposes to strengthen the right of employees to adjust their working time according to individual preferences, in return for increased short-term flexibility for firms. First by boosting contracts with different working hours and forms of working time accounts; second, by strengthening the right of employees to adjust their working time according to personal preferences (such as those generated by the desire to improve work-life balance and the reconciliation of family and work). Symmetry is of the utmost importance in this respect. If firms get the right to adjust daily or weekly working time or demand overtime for some extended periods, employees should have the right to move more flexibly between periods of part-time and full-time work, as well as to adjust their yearly working hours more flexibly to their needs.
Innovative working time arrangements do not only represent a way to increase cost competitiveness, but also to improve the allocation of working hours in the workforce. At present, high levels of unemployment coexist with shares of employees who would be willing to reduce working time. In the EU, unemployment rates of 10% are the norm. At the same time, surveys consistently show that a sizeable share of employees would prefer to work fewer hours than they currently do. On average in the EU and across all categories of workers, the share is about 30%. The share is highest among older workers and high-skilled employees, but it is significant also among less-skilled workers and in younger cohorts. In many instances, these preferences for reduced working hours are related to work-family commitments. If we give workers more leeway to choose their working time throughout their lives, we can expect to see a reduction in average working hours and thus a positive effect on labour demand.
Workers are prepared to accept trade-offs between pay and working hours. A case in point comes from Austria, where in recent years so-called “leisure time” options were introduced in several manufacturing collective agreements. Under these schemes, workers get to choose whether they take the collectively bargained wage rise, or whether they forgo the wage increase (accepting a wage decrease in real terms) and reduce their yearly working time proportionally. Depending on the industry, these schemes can enable workers to reduce their working time by several weeks per year. Acceptance rates for these innovative arrangements are increasing and fairly evenly spread across age groups.
So there is room to intensify the use of existing working time arrangements, but also to design new options for symmetric flexibility.