Lottery Winners and Employment Behavior

free essayAccording to the life cycle model of labor supply, people who have experienced a substantial and unanticipated shock in their life tend to work less as compared to those who did not have such a practice. For instance, if a person won the lottery, he/she will be likely to seek for opportunities to work less in the future. It can be explained with the fact that lottery provides additional unexpected profit to a person; therefore, income increases in general.

An article by Furaker and Hedenus (2012) investigates the influence of winning the lottery on work behavior among people in Sweden. The study was conducted based on surveys among Swedes who won lotteries and received unexpected income, and the questions were related to their plans to stop working or to continue making money. Gambling behavior for most people is related to the desire of leisurely life, and they want to receive ‘easy money’ if they win a lottery. A sudden win typically influences all spheres of individual’s life, including leisure and work. At the same time, research shows that lottery winners also want to preserve their social life; consequently, many of them continue working not to face issues concerning lack of money (Furaker & Hedenus, 2012). Thus, the authors’ goal was to study the behaviors of lottery winners via a survey. The research was larger compared to previous studies on the same topic. The data were taken from surveys made in 2005 and 2006 among people who won lotteries in Sweden. Among the people surveyed, there were winners of different lotteries. Some differences in results existed for the lotteries though they were not significant. The job change after winning the lottery had several variants for surveys, namely to completely quit working, to take unpaid full-time leave, and to reduce working hours. The results of the survey showed that about half of the winners were not planning to change their common working schedule. In general, only 11.7% planned to quit working, 23.6% planned to take unpaid full-time leave, and 16.3% intended to reduce their working hours (Furaker & Hedenus, 2012, p. 9). Thus, about 50% of the participants of the survey planned to continue their common work schedule.

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For better understanding, it is necessary to consider the factors that influence work decisions, which the authors investigated in their research. The regression analysis showed that the decision on work change was related strongly to the age of the surveyed winners. The choice to quit working was the most typical for people from 55 to 64 years old because a great number of them was already retired or prepared to be retired as well as had savings for further living. Unpaid full-time leave was the most popular for respondents from 45 to 54 years old, and reduced working hours prevailed for people of the same ages (Furaker and Hedenus, 2012, p. 10). Moreover, the decision to leave or reduce work also depended on the sum of money won. With the growth of the sum, more respondents desired to have all of three outcomes (Furaker and Hedenus, 2012, p. 10). Thus, it can be concluded from the research that the majority of winners does not tend to leave the work completely; they choose only to work less or to take an unpaid leave. It can be explained by the fact that most people seek to stay in the labor market to earn and accumulate attritional resources. Moreover, they may want to continue working because money won is not enough, and the work helps in holding a particular social position and status. They are used to particular way of life, and sudden changes are not acceptable for them. Moreover, leaving the work may result in difficulties in future because it may take many efforts to find the work again. The desire to leave the work is natural only for people who are retired or close to retirement age because they have already stored enough savings, and the money won only increases them.
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The findings of the article can be reconciled with the life cycle labor-leisure model that was explored. According to this model, people tend to change their average income depending on their age, and young and senior people frequently earn less as compared to those of average ages. Moreover, different events and factors can influence people’s behavior and their desire to earn a sum and to work for particular number hours each day. Current actions, future events, and uncertainty are considered to affect the labor cycle behavior. For example, future events influence labor behavior if a person knows he/she receives additional income in the nearest years or controversially, has additional costs. In addition, under high uncertainty and unstable earnings, people tend to earn more to save more because they can lose their income in future (Laing, 2011). Thus, the life cycle model can be compared to the results of the study, and the connection is obvious. Winning a lottery can be considered a current event that influences the future actions. It leads to increased income for a number of years in case money won is spent gradually. According to the theory, such events are likely to decrease the desire to work or reduce the number of hours worked. In fact, the theory was proved by the research as a great number of people who won the lottery decided to leave work or not to work as much as they worked currently.

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One more aspect of the life cycle labor-leisure model is that uncertainty influences the decisions of people to work more or less. If the shock is temporary (for example, income increases for several months due to a rise in the market), people tend to work more to use the opportunity of earning additional money. However, if the shock is permanent (for example, if wages grow constantly), people seek to work fewer hours because they are sure they will receive more money for reduced working day (Laing, 2011). For this part of theory, lottery winning can be considered a permanent shock because most people spend money won gradually during long years. Thus, they show the corresponding tendency to decline their working hours because they are certain of the increased income in future.

Finally, the life cycle labor-leisure model deals with the labor supply in relation to the age. According to the theory, individuals of middle age work more as compared to the young and elderly people (Laing, 2011). For this part, the research does not correspond to the theory because only elders tend to leave work while young and middle-aged people continue working after they won the lottery.

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In general, the study of lottery winners presents some tendencies that correspond to the life cycle labor-leisure model. However, some changes are present because some individuals decline working hours or leave work with increase of income, which is not natural for the youth. Thus, the theory can be modified and consider the influence of income type and social factors on labor decisions because people usually continue working for preserving their social status.