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

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Author Info
Jennifer Hunt

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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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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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Handle: RePEc:nbr:nberwo:5716

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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  1. Earle, John S & Pencavel, John, 1990. "Hours of Work and Trade Unionism," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S150-74, January. [Downloadable!] (restricted)
  2. Wadhwani, Sushil B, 1987. "The Effects of Inflation and Real Wages on Employment," Economica, London School of Economics and Political Science, vol. 54(213), pages 21-40, February. [Downloadable!] (restricted)
  3. Hart, R A & Sharot, T, 1978. "The Short-run Demand for Workers and Hours: A Recursive Model," Review of Economic Studies, Blackwell Publishing, vol. 45(2), pages 299-309, June. [Downloadable!] (restricted)
  4. Nymoen, Ragnar, 1989. " Wages and the Length of the Working Day. An Empirical Test Based on Norwegian Quarterly Manufacturing Data," Scandinavian Journal of Economics, Blackwell Publishing, vol. 91(3), pages 599-612.
  5. Booth, Alison & Schiantarelli, Fabio, 1987. "The Employment Effects of a Shorter Working Week," Economica, London School of Economics and Political Science, vol. 54(214), pages 237-48, May. [Downloadable!] (restricted)
  6. Linda Bell & Richard Freeman, 1994. "Why Do Americans and Germans Work Different Hours?," NBER Working Papers 4808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. 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, vol. 69(207), pages 428-36, December.
  8. Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, vol. 81(4), pages 719-40, September. [Downloadable!] (restricted)
  9. Brunello, Giorgio, 1989. "The Employment Effects of Shorter Working Hours: An Application to Japanese Data," Economica, London School of Economics and Political Science, vol. 56(224), pages 473-86, November. [Downloadable!] (restricted)
  10. G Houpis, 1993. "The Effect of Lower Hours of Work on Wages and Employment," CEP Discussion Papers dp0131, Centre for Economic Performance, LSE.
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