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Working Time as an Investment?: The Effects of Unpaid Overtime on Wages, Promotions, and Layoffs

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  • Silke Anger

Abstract

Whereas the number of paid overtime hours declined over the last two decades in Germany, a different trend can be observed for unpaid overtime. We analyze future consequences of unpaid work with respect to a worker's career advancement, such as higher future wages and probabilities of promotion or job retention, which might help to explain why an increasing fraction of employees are working extra hours for free. Data from the SOEP for the years 1993 to 2004 are used to examine whether working a higher number of unpaid extra hours involves a higher probability of promotion and excess earnings growth, and a lower probability of layoff in subsequent years. The pooled, random effects, and fixed effects logit estimates reveal limited evidence for the investment character of unpaid overtime hours with respect to future wage growth and promotions. Moreover, unpaid extra hours do not help to prevent future layoffs, except for East German women. For West German men, unpaid overtime hours are positively associated with the risk of future dismissal.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.43890.de/dp535.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 535.

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Length: 42 p.
Date of creation: 2005
Date of revision:
Handle: RePEc:diw:diwwpp:dp535

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Keywords: Unpaid overtime; Promotion; Wage growth; Layoff; Labor supply;

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References

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  1. Anger, Silke, 2005. "Unpaid Overtime in Germany: Differences between East and West," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 17-27.
  2. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  3. Bauer, Thomas K. & Zimmermann, Klaus F., 1999. "Overtime Work and Overtime Compensation in Germany," IZA Discussion Papers 48, Institute for the Study of Labor (IZA).
  4. Bell, David N F & Hart, Robert A, 1999. "Unpaid Work," Economica, London School of Economics and Political Science, vol. 66(262), pages 271-90, May.
  5. Linda A. Bell & Richard B. Freeman, 2000. "The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany," NBER Working Papers 8051, National Bureau of Economic Research, Inc.
  6. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2003. "A sticky floors model of promotion, pay, and gender," European Economic Review, Elsevier, vol. 47(2), pages 295-322, April.
  7. Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, vol. 74(2), pages 79-83, May.
  8. Landers, Renee M & Rebitzer, James B & Taylor, Lowell J, 1996. "Rat Race Redux: Adverse Selection in the Determination of Work Hours in Law Firms," American Economic Review, American Economic Association, vol. 86(3), pages 329-48, June.
  9. Markus Pannenberg, 2005. "Long-Term Effects Of Unpaid Overtime," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(2), pages 177-193, 05.
  10. Hart, Robert A. & Hübler, Olaf & Bell, David N.F. & Schwerdt, Wolfgang, 2000. "Paid and Unpaid Overtime Working in Germany and the UK," IZA Discussion Papers 133, Institute for the Study of Labor (IZA).
  11. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
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Cited by:
  1. Anger, Silke, 2008. "Overtime Work as a Signaling Device," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 167-189.
  2. Sjögren Lindquist, Gabriella, 2010. "Tournaments and unfair treatment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(6), pages 670-682, December.

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