Working Hours, Health and Absenteeism, and Performance Pay
Abstract
Two distinct workplace phenomena have been documented concerning workers’ productivity, working hours, health and absenteeism, and pay. First, beyond a certain threshold, long working hours are associated with diminished productivity. Second, at the establishment level, performance pay relates positively to absenteeism and to various workplace health problems that dampen its productivity-enhancing effects.The two phenomena are potentially related. The mechanism underlying the deleterious productivity effects of long hours might be absenteeism and more of the workplace health problems that (via the second phenomenon) are associated with diminished productivity. If performance pay encourages workers to toil to the point of illness or absenteeism, long hours might be the mechanism for the dampened productivity-enhancing effects of performance pay. Thus, performance pay might encourage long working hours, eroding productivity via an increased incidence of workplace health problems and absenteeism.
This paper investigates empirically the potential connection between the two phenomena at the establishment level, using the British Workplace Employment Relations Study, a broad, worker-firm matched panel data set from 2004 to 2011. The topic has important implications for social welfare; in the U.S., fatigue-related, health-related, lost productive work time to employers was estimated at $136.4 billion annually (Ricci et al. 2007).
No empirical connection is detectable between long hours and numerous workplace health ailments. A positive relationship between long hours and absenteeism is suggested. These results suggest that long hours induce exhaustion, causing workers to skip work to recuperate. An increased establishment-level incidence of performance pay is associated with a shift towards longer working hours, but only up to 40 weekly hours. The results reveal a shift from the left tail of the hours distribution to the middle region (i.e., towards full-time work) when performance pay is increasingly used. Earlier work that neglects performance pay finds that the establishment-level hours-productivity profile peaks at a level of weekly hours beyond 40 (with the peak occurring even higher for labor productivity than for financial performance). An interpretation is that workers who are paid for performance increase their work intensity (i.e., effort per hour), implying that the point of exhaustion arrives earlier in the week.