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The Response of Wages and Actual Hours Worked to the Reductions of Standard Hours

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  • Jennifer Hunt

Abstract

A transformation of what had become a universal 40 hour standard work week in Germany began in 1985 with reductions negotiated in the metal-working and printing sectors. These reductions have continued through 1995, and were followed by reductions in other sectors. The union campaign aimed to increase employment through work-sharing, and is being emulated in the United States with the launch of a reduced hours campaign by the AFL-CIO. Using data from the German Socio-Economic Panel, I find that increased overtime or reduced short time was little used to offset the reduction in standard hours: a one hour reduction in standard hours appears to have translated into a reduction in actual hours worked of between 0.85 and 1 hour for workers in manufacturing. One might expect this to have resulted in a loss of earnings for workers in affected industries. However, I substantiate the union claim of full wage compensation : reductions in standard hours were accompanied by a relative rise in the hourly straight-time wage of 2-3% for each hour fall in standard hours, enough to keep monthly earnings the same as in unaffected industries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5716.

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Date of creation: Aug 1996
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Publication status: published as Quarterly Journal of Economics, Vol.CXIV, Issue 1 (February 1999),pp. 117-148. "Has Work-sharing Worked in Germany?"
Handle: RePEc:nbr:nberwo:5716

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References

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  1. Calmfors, Lars, 1985. "Work sharing, employment and wages," European Economic Review, Elsevier, Elsevier, vol. 27(3), pages 293-309.
  2. Linda Bell & Richard Freeman, 1994. "Why Do Americans and Germans Work Different Hours?," NBER Working Papers 4808, National Bureau of Economic Research, Inc.
  3. Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 719-40, September.
  4. Booth, Alison & Schiantarelli, Fabio, 1987. "The Employment Effects of a Shorter Working Week," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 54(214), pages 237-48, May.
  5. Hart, R A & Sharot, T, 1978. "The Short-run Demand for Workers and Hours: A Recursive Model," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 45(2), pages 299-309, June.
  6. Wadhwani, Sushil B, 1987. "The Effects of Inflation and Real Wages on Employment," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 54(213), pages 21-40, February.
  7. Nymoen, Ragnar, 1989. " Wages and the Length of the Working Day. An Empirical Test Based on Norwegian Quarterly Manufacturing Data," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 91(3), pages 599-612.
  8. Booth, Alison & Ravallion, Martin, 1993. "Employment and Length of the Working Week in a Unionized Economy in which Hours of Work Influence Productivity," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 69(207), pages 428-36, December.
  9. G Houpis, 1993. "The Effect of Lower Hours of Work on Wages and Employment," CEP Discussion Papers, Centre for Economic Performance, LSE dp0131, Centre for Economic Performance, LSE.
  10. Earle, John S & Pencavel, John, 1990. "Hours of Work and Trade Unionism," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 8(1), pages S150-74, January.
  11. Brunello, Giorgio, 1989. "The Employment Effects of Shorter Working Hours: An Application to Japanese Data," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 56(224), pages 473-86, November.
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Cited by:
  1. Ángel Luis Martin Roman & Alfonso Moral de Blas, 2002. "Efectos de las variaciones en el tiempo de trabajo sobre la ocupación adolescente y juvenil en el sector industrial: un análisis regional," Revista de Estudios Regionales, Universidades Públicas de Andalucía, Universidades Públicas de Andalucía, vol. 1, pages 51-77.
  2. Baek, Ehung Gi & Oh, Wankeun, 2004. "The short-run production effect of the reduction of working hours," Journal of Policy Modeling, Elsevier, Elsevier, vol. 26(1), pages 123-144, January.
  3. Dur, Robert A. J., 2001. "Explaining unemployment trends in the Netherlands," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(2), pages 161-168, February.
  4. Tor Jacobson & Henry Ohlsson, 2000. "Working time, employment, and work sharing: Evidence from Sweden," Empirical Economics, Springer, Springer, vol. 25(1), pages 169-187.

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