Media Briefings

LOTTERY WINNERS CUT THEIR WORKING HOURS BUT DON’T LEAVE EMPLOYMENT: New evidence from the Netherlands

  • Published Date: June 2018

People who win big prizes in the lottery tend to work fewer hours but they don’t withdraw completely from the labour market. These are the central findings of research by Matteo Picchio, Sigrid Suetens and Jan van Ours, published in the June 2018 issue of the Economic Journal.

Their study of the labour market behaviour of winners in the Dutch State Lottery suggests that people who win big prizes typically save a substantial part of their winnings so as to smooth their working hours and reap the benefits over several years. They tend to reduce their time at work only by a few hours per week or alternatively by having more days off and taking longer holidays.

The analysis is based on the labour market history of about 11,000 participants in the Dutch State Lottery over a three-year period, 2005-08, in which there were 55 draws of winning tickets with prizes ranging from €5 to €1 million. Among the findings:

• Winning a substantial lottery prize has a significant effect on labour earnings. A large prize of €500,000 leads to a drop in earnings of about €6,000 in the year of winning as well as after one year.

• The drop in earnings is €8,000 after two years and almost €9,000 after three years. This suggests that some people may need time to react to winning a large prize.

• The negative effects of prizes on earnings are not homogenous. They are strongest for older people: for example, a prize of €100,000 reduces annual earnings of the over-50 age group by about €2,200. With annual earnings of about €40,000, this implies that working time is reduced by about two hours per week or two to three weeks per year.

• The negative effect of winning on earnings is more pronounced for people who do not have children than for those who do.

• Winning a substantial lottery prize has a small negative effect on employment, not significantly different from zero.

In economics, investigating the impact of income on people’s labour supply is not easy. If income goes up because of an increase in wage, the effect is ambiguous. On the one hand, a worker becomes richer, which would lower the preferred hours of work. On the other hand, the opportunity costs of not working increase, which would make work more attractive.

An increase in non-labour income may be a matter of choice because individuals with a weak preference for leisure accumulate more assets. Information on the labour market behaviour of lottery winners is revealing about the magnitude of the income effect because income increases as a result of a random event.

Studying the Dutch labour market is particularly interesting. Whereas in many countries adjusting weekly working hours is not easy, in the Netherlands this is usually no problem.

Part-time employment has increased considerably in recent decades. This increase has been accompanied by changes in collective agreements between unions and employers, and changes in labour laws that have made part-time jobs more attractive. A request by a worker to modify his or her working hours must be granted by the employer, unless it would seriously harm their business.

In the new study, lottery players and winners are tracked over several years and their labour supply responses are studied with a focus on employment and earnings. There is information about yearly lottery prizes, yearly ticket expenditures and yearly salaried earnings, along with other personal characteristics. The lottery tickets cost €15 and prizes range from €5 to €1 million.

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Labour Supply Effects of Winning a Lottery’ by Matteo Picchio, Sigrid Suetens and Jan van Ours is published in the June 2018 issue of the Economic Journal.

Matteo Picchio is at Marche Polytechnic University. Sigrid Suetens and Jan van Ours are at Tilburg University.

For further information: contact Jan van Ours on +31-10-408-1373 (email: vanours@ese.eur.nl); or Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com; Twitter: @econromesh).