A new study by the NUS Business School has found that homeowners who have made a windfall in the housing market tend to shirk more in the workplace, which subsequently affects labour productivity and economic growth.

The study was led by Associate Professor and Dean’s Chair Qian Wenlan from the Department of Finance at NUS Business School, together with Gu Quanlin from the Guanghua School of Management, Peking University, and Assistant Professor He Jia from the School of Finance at Nankai University.

Shirking behaviour occurs when employees exert less effort and spend unproductive time on personal activities. However, shirking activities are difficult to detect.

A 2014 survey conducted by salary.com found 90 per cent of American employees wasted time during work hours and close to 70 per cent spent at least one hour unproductively every day. The same survey estimated the cost to employers in the range of several hundred billion dollars annually.

Methodology

Using a unique credit card dataset from a leading Chinese commercial bank, the study measures shirking by tracking employees’ time use at work with 9.3 million confirmed credit card transactions by over 200,000 credit card holders. Specifically, if employees use the credit card for non-work-related transactions during work hours, it is strongly indicative of work-time shirking.

To draw a relationship between shirking and housing prices, the researchers mapped the credit card transactions against sale announcements in the China land auction market.

In China, land auction prices reflect developers’ projection of future house prices. When the land auctions hit a national record high price, it is a bullish signal of the local housing market.  During the research period, there were three such record auctions in Shanghai, Hangzhou and Xiamen, and local house prices in these three cities experienced a monthly increase of five per cent on average following these sale announcements.

Findings

The study found that when house prices increase, homeowners benefit from a large windfall of (housing) wealth, which increases both the appeal of leisure and the opportunity cost of effort.

Overall, the results indicate that for every 10% increase in house prices, employee shirking will increase by 16%. After a rise in housing prices, some 60 per cent of employees experienced an increase in their propensity to use work time to take care of their personal needs.

Specifically, they became more likely to have non-work-related credit card transactions in the early hours (8am–9am) or late hours (5pm–9pm) of the day. Within a working day, non-work-related credit card spending was more concentrated in the early morning (9–10am) and right before lunch (11am–12pm).

Such credit card use patterns suggest that employees show up late for work, take an earlier lunch break, and leave work earlier at the end of the workday. They also shirk more frequently during the latter part of the work week when morale in general slows down.

Indeed, shirking behaviour is more prominent among house owners, and particularly among owners of multiple properties. Moreover, employees with lower work incentives—in this context, workers near retirement and in organisations where there is a weak link between pay and performance—experienced a stronger shirking increase.

“Understanding the relationship between house prices and labour market is an important question worldwide. The research challenge is to measure employee effort precisely and timely. In that sense, the results in the paper provide general implications especially in countries exposed to housing boom and bust cycles,” said Associate Professor Qian.

“The findings provide important input for policy discussion on house price regulation, as a decrease in work effort can potentially result in lower labour productivity with a direct bearing on the aggregate economic growth,” she added.