7

Innovation, Job Satisfaction, and Performance in Western European Countries

Gylfi Zoega

ABSTRACT    We study the consequences of low rates of innovation in a sample of 16 European countries. In particular, we study the relationship of these low rates to job satisfaction and the labor market participation of men. Job satisfaction has fallen in the EU over this period, as has the labor force participation of men. We conclude that low levels of innovation may be adversely affecting the levels of job satisfaction and happiness in many European countries.

Introduction

In previous chapters of this volume, we have documented the fall in indigenous innovation throughout the West. Moreover, bad economic performance in general—such as slow growth, low job satisfaction, or low rates of male labor force participation—was shown to be related to values and resulting attitudes such as a lack of trust in society, teaching children to be obedient instead of independent and tolerant, not wanting to achieve on the job, not accepting competition, and not enjoying economic freedom. In this chapter, we will explore the consequences of bad economic performance in a sample of 16 Western European countries. Economic performance is measured by innovation, job satisfaction, and male labor force participation.

1. Job Satisfaction and Labor Force Participation, 1981–2008

The ultimate goal of economic activity must be to make people satisfied at work and happy in the sense of flourishing in their professional and private lives. In earlier chapters, we have measured the rate of indigenous innovation and shown the relationship between institutions and indigenous innovation. These results show a slowdown of innovation in the 1970s and the effect of values on the rate of innovation, both indigenous and transmitted, in a cross section of OECD countries. Here, we investigate which European countries are doing best when it comes to job satisfaction—the fulfillment people get at work—labor force participation, and overall life happiness.

Table 7.1 shows the proportion of responders in the European Values Study who claim to be satisfied at work when asked to rate their satisfaction on a scale from 1 to 10, where 1 means “dissatisfied,” 10 means “satisfied,” and the numbers in between indicate intermediate levels of satisfaction. The first four columns show the proportion who chose 10 (that is, are “satisfied”), and the next four columns show the proportion who chose 8 or above. The last three columns show our estimated rate of innovation, average value from 1991 to 2013, from Chapter 2. These are the rate of indigenous innovation, the rate of transmitted innovation, and actual total factor productivity (TFP) growth.

Several observations can be made about the patterns found in the table. First, job satisfaction has fallen in many of the countries since 1981, as shown in Figure 7.1, which includes the level of job satisfaction from 1981 to 2008. Second, the level of job satisfaction is higher in the Nordic countries, Ireland, Switzerland, and the UK than in many Continental economies, such as Belgium, the Netherlands, and Spain. Third, there appears to be some convergence of job satisfaction between 1981 and 2008; the countries where workers were most satisfied in 1981 are the countries where job satisfaction has decreased the most since then.

When the sum of those who chose 8 or above is used in columns 5–8, the results change so that the same decline in job satisfaction is not observed. It follows that it is mainly in the proportion who claim to be perfectly satisfied (that is, who chose 10) that the differences across countries emerge.

We next turn to labor force participation for men. Figure 7.2 shows the values from 1984 to 2014. Note that the participation rate for men has fallen in all countries except the Netherlands and Germany. We also put the US in the figure for comparison. Note that its performance is no better than that of the European countries.

Table 7.1.  Job satisfaction and innovation
		Job satisfaction, proportion “satisfied” (10)								Job satisfaction, proportion choosing 8–10								Innovation, 1991–2013
		1981		1990		1999		2008		1981		1990		1999		2008		Indigenous		Transmission		Actual TFP
Belgium		15.2		19.3		12.4		9.0		59.7		64.2		53.0		65.5		0.08		0.13		0.08
Denmark		36.5		26.1		20.6		23.0		74.9		75.5		69.5		72.4		0.31		0.23		0.61
Finland		—		12.0		7.1		7.5		—		61.0		57.4		63.0		0.31		0.38		0.86
France		9.5		8.2		7.4		11.0		42.1		40.1		43.0		53.1		0.07		0.05		0.03
Germany		9.4		7.2		12.5		12.5		48.9		46.9		55.5		59.4		0.11		0.05		0.03
Ireland		24.0		25.0		26.5		24.9		68.2		64.2		59.0		70.5		0.23		0.38		0.61
Italy		21.6		14.6		14.1		15.9		55.3		53.0		49.8		52.3		0.01		0.03		0.05
Netherlands		16.9		9.6		4.4		7.1		65.0		68.0		58.9		65.6		0.27		0.24		0.39
Norway		31.6		21.2		—		18.8		75.3		66.5		—		69.5		0.06		0.24		0.17
Spain		16.6		12.7		12.0		9.7		46.2		45.2		48.9		49.5		0.11		0.14		0.08
Sweden		20.7		21.0		7.5		14.4		69.9		71.6		52.2		62.6		0.65		0.31		0.97
Switzerland		—		—		—		16.9		—		—		—		76.2		0.34		0.08		0.20
UK		22.8		18.4		10.3		15.9		63.6		55.9		48.3		59.9		0.32		0.22		0.63
Data source: European Values Study (https://europeanvaluesstudy.eu/).

Figure 7.1.  The fall of job satisfaction.  Notes: The figure shows the share of responders in the European Values Study who claimed to be satisfied at work as a function of the proportion satisfied in 1981 and in 2008. The upward-sloping line is the 45° line. The country labels are Belgium (BEL), Denmark (DEN), Finland (FIN), Germany (GER), Italy (ITA), Netherlands (NET), Norway (NOR), Spain (SPA), Sweden (SWE), and the United Kingdom (UK).  Data source: European Values Study.

Figure 7.2.  The fall of male labor force participation rates.  Notes: The upward-sloping line is the 45° line. The country labels are Belgium (BEL), Denmark (DEN), Finland (FIN), France (FRA), Germany (GER), Greece (GRE), Ireland (IRE), Italy (ITA), the Netherlands (NET), Norway (NOR), Portugal (POR), Spain (SPA), Sweden (SWE), the United Kingdom (UK), and the United States (USA).

2. Innovation and Measured Happiness

The rate of innovation may be affecting both job satisfaction and male labor force participation. In Figure 7.3, we show, using data from the World Values Survey, that the share of the population who find themselves to be very happy, measured between 2005 and 2008, is positively related to the rate of indigenous innovation as estimated in Chapter 2. Note that we have added some non-European countries—Australia, Canada, the US, and Japan—to the group of European countries where we have observations on job satisfaction.

Figure 7.3.  Proportion of “very happy” and the rate of indigenous innovation.  Notes: The figure shows the share claiming to be “very happy” in the 2005–2008 wave of the World Values Survey and the average rate of indigenous innovation between 1991 and 2013. The country labels are Australia (AUS), Canada (CAN), Finland (FIN), France (FRA), Germany (GER), Italy (ITA), Japan (JAP), the Netherlands (NET), Norway (NOR), Spain (SPA), Sweden (SWE), Switzerland (SWI), the United Kingdom (UK), and the United States (USA).  Source: World Values Survey.

In Table 7.2, we take the principal components of a 14*4 vector that has measures of the proportion of responders who claim to be “very happy,” indigenous innovation, the transmission of innovations from abroad, and TFP growth.1 The first principal component explains 73 percent of the variation in the matrix, and its eigenvector has a positive weight on each of the four variables. The second principal component explains 18 percent of the variation and has a positive weight on indigenous innovation and happiness but a negative weight on transmitted innovation.

Table 7.2.  Principal components
Number		Value		Difference		Proportion		Cumulative value		Cumulative proportion
1		2.91		2.20		0.73		2.91		0.73
2		0.72		0.39		0.18		3.63		0.91
3		0.33		0.28		0.08		3.96		0.99
4		0.04		—		0.01		4.00		1.00
Eigenvectors (loadings)
Variable		PC 1		PC 2		PC 3		PC 4
Indigenous		0.53		0.05		−0.70		0.47
Transmission		0.50		−0.42		0.63		0.41
TFP		0.56		−0.27		−0.11		−0.78
Very happy		0.38		0.87		0.31		−0.06
Notes: Included observations total 14 after adjustments. Balanced sample (listwise missing value deletion). Computed using ordinary correlations.

Figure 7.4.  Innovation and job satisfaction measured by a principal component.  Note: The country labels are Australia (aus), Canada (can), Finland (fin), France (fra), Germany (ger), Italy (ita), Japan (jap), the Netherlands (net), Norway (nor), Spain (spa), Sweden (swe), Switzerland (swi), the United Kingdom (UK), and the United States (US).

We can take the principal component as a measure of economic performance. A high value indicates high rates of innovation and productivity growth, as well as a large fraction of the population feeling “very happy.” See Figure 7.4.

There is a clear difference between the English-speaking countries (Australia, Canada, the UK, and the US), Finland, Sweden, and the Netherlands, on the one hand, and the rest of the continental European economies, on the other hand, in that the former group outperforms the latter.

3. Conclusions

We have found that low levels of indigenous innovation are accompanied by low and falling levels of job satisfaction, falling male labor force participation, and less measured happiness. In a sample that also includes some non-European countries, we find that performance—measured by the rate of indigenous and transmitted innovation, TFP, and the proportion declaring themselves to be very happy—is lower in the continental European countries than in the United States, the UK, Sweden, the Netherlands, Australia, Canada, and Finland.