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The Response of Wages and Actual Hours Worked to the Reduction of Standard Hours in Germany

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  • Hunt, Jennifer

Abstract

A transformation of what had become a universal 40-hour standard working 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. I substantiate the union’s claim of ‘full wage compensation’, however: 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.

Suggested Citation

  • Hunt, Jennifer, 1996. "The Response of Wages and Actual Hours Worked to the Reduction of Standard Hours in Germany," CEPR Discussion Papers 1526, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1526
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    References listed on IDEAS

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    1. Franz, Wolfgang & Konig, Heinz, 1986. "The Nature and Causes of Unemployment in the Federal Republic of Germany since the 1970s: An Empirical Investigation," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages 219-244, Supplemen.
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    6. Lehment, Harmen, 1991. "Lohnzurückhaltung, Arbeitszeitverkürzung und Beschäftigung: eine empirische Untersuchung für die Bundesrepublik Deutschland 1973 - 1990," Open Access Publications from Kiel Institute for the World Economy 1505, Kiel Institute for the World Economy (IfW).
    7. R. A. Hart & T. Sharot, 1978. "The Short-run Demand for Workers and Hours: A Recursive Model," Review of Economic Studies, Oxford University Press, vol. 45(2), pages 299-309.
    8. Earle, John S & Pencavel, John, 1990. "Hours of Work and Trade Unionism," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 150-174, January.
    9. 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 428-436, December.
    10. Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
    11. 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 237-248, May.
    12. Calmfors, Lars, 1985. "Work sharing, employment and wages," European Economic Review, Elsevier, vol. 27(3), pages 293-309.
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    Citations

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    Cited by:

    1. Kapteyn, Arie & Kalwij, Adriaan & Zaidi, Asghar, 2004. "The myth of worksharing," Labour Economics, Elsevier, vol. 11(3), pages 293-313, June.
    2. Daniel S. Hamermesh & Stephen J. Trejo, 2000. "The Demand for Hours of Labor: Direct Evidence from California," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 38-47, February.
    3. repec:aia:aiaswp:wp5 is not listed on IDEAS
    4. Jennifer Hunt, 1999. "Has Work-Sharing Worked in Germany?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 117-148.
    5. Marimon, Ramon & Zilibotti, Fabrizio, 2000. "Employment and distributional effects of restricting working time," European Economic Review, Elsevier, vol. 44(7), pages 1291-1326, June.
    6. Victoria Osuna & Jose-Victor Rios-Rull, 2003. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 179-206, January.
    7. Juha Kilponen & Pekka Sinko, 2005. "Taxation And Centralised Wage Setting: The Case Of Endogenous Labour Supply," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 587-606, September.
    8. Carlos Medina D. & José Escobar R., 2007. "The Effects of Changes in the Legal Work Shift on Wages and Hours Worked in Colombia," COYUNTURA SOCIAL 012866, FEDESARROLLO.
    9. Axel Börsch-Supan, 2002. "Reduction of Working Time: Does it Decrease Unemployment?," MEA discussion paper series 02003, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    10. Baek, Ehung Gi & Oh, Wankeun, 2004. "The short-run production effect of the reduction of working hours," Journal of Policy Modeling, Elsevier, vol. 26(1), pages 123-144, January.

    More about this item

    Keywords

    Employment; Hours; Unions; Wages; Work-sharing;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • 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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