Holger Görg, Olivier N. Godart, Aoife Hanley, Christiane Krieger-Boden08 July 2014
Many firms are replacing traditional working hours with more flexible arrangements, reflecting new thinking on employee motivation. This column presents evidence from Germany that trust-based working time is associated with increased innovation. However, trust-based working hours also contribute to the blurring of workers’ professional and private lives, and may lead to excessive overtime. Careful design of trust-based working arrangements is required to reap the innovations gains while avoiding the health pitfalls.
The organisation of work has changed dramatically over the last few decades. In particular, the formerly rigidly regulated working time has been replaced by flexible working hour schemes in numerous firms around the world. Taking Germany as an example, in 2010, 36% of employees were entitled to some form of flexible working hours scheme (Figure 1).
Which legal institutions are best equipped to deal with the challenges of new technologies? The authors of CEPR DP8433 find a tradeoff between commitment and flexibility in the evolution of legal systems. Rigid legal systems, they argue, cope best with new technological developments because they help resolve credible commitment problems. At later stages of technological development, flexible systems improve welfare and increase innovation and output growth.