Workaholism harms the inflicted individual’s health, job efficiency, and interpersonal relationships with symptoms manifesting over a wide range of severity. The Economics of Workaholism, likens workaholism to addictive vices such as smoking, drinking and gambling and recommends the use of the analogous remedy of a tax to internalize the true cost of overworking. Because workaholism affects many other people besides the workaholic and is positively correlated with salary, education, and work hours, the conclusion for the tax is that it must be highly progressive in order to reflect these spillover costs.
Two types of workaholics exist: the naïve addict who is unaware of a time inconsistency problem and the rational one who is aware of the problem but cannot exercise self-restraint. For the myopic worker, the authors define workaholism as an addiction to work in which one’s later labor supply increases as a result of work early in one’s career. Therefore, workaholism should not be confused with inherent characteristics of work preferences but rather the realization that the disutility of additional work is less than the worker forecasted early in his or her career. This myopia is caused by the fact that workers discount utility in the future more heavily than utility in the present period, but they use a lower discount rate to consumption in the future. The second type of workaholic, in a manner similar to smokers, realizes that he or she is over-working but continues to do so because of a lack of control. Regardless of whether a lack of self-restraint or myopia causes the over-working, the authors recommend using a high marginal tax because it accurately reflect the cost of over-working which will discourage it.
In order to design a tax to reflect accurately the true costs, the authors describe the workaholic. They site numerous studies including a Canadian General Social Survey in which self-reported workaholism is strongly correlated to number of work hours per week and to income. For example, they find that 38% of people with incomes over $100,000 describe themselves as workaholics compared to only 23% of people who made under $10,000 annually. Showing the positive correlation of workalism with income and education, they demonstrate that people who work more than 60 hours are much more likely to consider themselves workaholics. They realize, however, that self-reporting is different from actual workaholism and admit that actual workaholism is difficult to define. Nonetheless, they reason that with the positive correlation of salary and works hours with workaholism, the corrective tax scheme should be highly progressive.
The authors also develop a model by examining when people retire. Data from the Panel Study of Income Dynamics supports the idea that more educated people are less likely to retire when they initially planned, regardless of changes in health. The authors realize though that the data cannot distinguish between those who developed a tolerance for work and those who may have developed addictions to the increased purchase of consumer goods from having a higher salary.
The optimal tax strategy proposed by the authors draws on a general non-welfarist model first described by Mirrlees in 1971. The government chooses an increasing tax schedule based on income and then adds an additional positive marginal tax as a disincentive to the individual worker’s label supply. The implication is that this marginal tax increase needs to be greater than what would generally be recommended in order to internalize the true costs of workaholism. This highly graduated scheme would be effective for the myopic worker by reflecting the working decisions that the individual fails to consider; for the addicted worker by providing a strong disincentive for the lack of self-control over work, and for the worker who finds it difficult to go “cold-turkey” from work (i.e. retire). The actual tax percentages were not determined in this paper because the authors realize that more research is needed to describe types of working in order to discourage workaholism.
I really liked the idea of finding a way to curb workaholism. Workaholism affects an individual and his associates and causes inefficiency and poor work quality. This paper defined overworking well (tolerance for extra work coupled with previous work reinforcing the desire for future work) and the types of workaholics (naïve, myopic ones and rational, low self-control individuals). However, I felt it poorly addressed how to identify the problem and viable solutions to correct it. The main problem is that a more progressive tax structure distributes income well but does not differentiate overworking from working hard. Comparing workaholism to vices like smoking was inappropriate because smoking is easily measured and always unhealthy. Furthermore, although there is a correlation between education and income and overworking, the correlation is not definitive enough to warrant an “internality tax.”
There are plenty of highly educated, high income people who do not overwork, and there are plenty of low paid individuals who do. While it is true that wealthier people generally have more control over their working hours in the sense that they do not have to work more to provide for their families, this is not always the case. Wall Street and medical interns provide perfect examples of well educated people who have to work long hours. Also, a more progressive tax may have an effect opposite the intended one: namely a greater tax burden could cause workers to work even more because they want to maintain their same income in order to purchase the same goods. This paper implies that the substitution effect overcomes the income effect, but I think many individuals would simply work harder to maintain their current level of spending. This paper covers a topic that is relatively unstudied, and I feel that before economic theory can be used to limit workaholism, the basic of assumptions of differentiating types of work must be better delineated