Those who work less worry more: the effect of lower workloads on consumption

20 February 2024

Pedro Baptista, Colm Bates, António Dias da Silva, Maarten Dossche and Marco Weissler

When the economy slows down, so does labour productivity. This link is often attributed to the role of labour utilisation. In good times firms have more work to do, and their employees’ workloads increase. In bad times, productivity lags and firms engage in labour hoarding, i.e. they hold on to more workers than they actually need. For a significant share of employees, that comes with a lower workload than usual.

Drawing on the ECB’s Consumer Expectations Survey (CES) we explore how employees’ perceptions of their workloads affect their expectations regarding job security, chances of a pay rise, as well as their future spending and saving decisions. We find that, overall, workers who experience a lower workload tend to fear for their jobs and expect low wage increases. Also, they expect to be careful with spending money. To put it simply, during a downturn those who have less on their plate have more on their mind.

These results show that in an economy with weak growth yet a robust job market, labour hoarding and related low labour utilisation may drag on consumption.

Unequal workloads among workers and across sectors

To understand their economic expectations the ECB interviews consumers in 11 euro area member states on a regular basis (CES). In the survey’s June, July, and October 2024 editions, about 37% of respondents answered that they were working more than usual. On the other hand, 10% of workers reported a lower than usual workload, with 2% saying that their current workload was much lower and 8% saying that it was somewhat lower (Chart 1, left).

At first sight, it is surprising that the group of workers reporting higher workload is dominating, given the economic downturn. However, social bias effects lead to the fact that in such surveys many respondents tend to report that they have a lot of work to do. This is consistent with other CES information data showing a similar share of individuals working more than their contractual hours. In this context, the 10% of workers reporting a lower workload than usual is actually rather high.

Workloads are significantly lower in construction and industry than in other sectors, as illustrated in the second panel of Chart 1, which shows the net percentage of workers facing higher versus lower workloads. This, in turn, is in line with macroeconomic indicators which show weaker growth in these sectors in comparison with services. This suggests that the data effectively capture the cyclical component of workloads experienced by workers.

Chart 1

Workloads of employees in the euro area – by sector

Workload	Workload by sector
(percentage of employed respondents)	(net percentage between “higher” and “lower” reported workloads)

More job worries and less consumption

So, what impact does the lower than usual workload have on employees? First, workers who report lower workloads feel more at risk of losing their jobs within the next three months. Such fear scales alongside the change in workload, with workers who experience only modest workload changes not worrying much about losing their jobs. Yet, those who see big changes worry greatly. That effect applies to both those who see much higher workloads and those who see much lower workloads than usual. However, it is greatest for the second group. Their fear of losing their jobs is 8 percentage points higher than that of workers with no changes in workload (Chart 2). Furthermore, those who express very high and very low workloads are also more likely to express low job satisfaction.

Chart 2

Job loss expectations by workload perceptions

(percentage points)

Second, lower workloads are associated with little hope of pay rises. Workers with higher workloads have higher wage expectations than those whose workloads are unchanged, while those with much lower workloads have lower expectations (Chart 3). In fact, workers reporting higher workloads expect wage increases three times larger than those experiencing much lower workloads. Applying a regression analysis that controls for job loss expectations and other individual characteristics further shows us that workers expect a currently low workload to impact their future earnings, even if their jobs aren’t at risk. Apparently, they are also factoring in lower productivity and weakened bargaining power.

Chart 3

Wage growth expectations by workload perceptions

(percentage points)

Third, changing workloads could influence savings and consumption. And this is especially interesting for monetary policy considerations. Employees with less work than usual report that they expect to spend less and save more. This precautionary effect holds even when we control for job loss expectations and demographics (Chart 4).

Chart 4

Perceived workload and consumption behaviour

Marginal effects of workload perceptions on precautionary savings	Marginal effects of workload perceptions on spending growth expectations
(percentage of household income)	(percentage points)

Conclusion

Our results show that labour hoarding and the related substantial share of workers with low workloads could negatively impact wage growth and spending decisions. Workers with lower workloads are more pessimistic than others and expect to act accordingly. They worry most about losing their job and expect the lowest pay rise. Also, they plan to reduce consumption, and put more money aside. Thus, in a context of low growth and persistent labour underutilisation, weaker demand could have further knock-on effects on wage growth and consumer spending. This would then again weigh on economic growth.

The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

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