Overtime pay premiums in a unionized oligopoly
This paper studies how a high overtime wage rate and a low labor stock may be used as commitment devices by price-setting firms. We show that high overtime pay premiums may both decrease and increase equilibrium employment. If an employment-oriented union or the firm itself sets the overtime wage, then the overtime wage premium will be high enough to ensure that no overtime is used in equilibrium. If the overtime wage is set by a sufficiently wage-oriented union, however, overtime will be used in equilibrium, and employment is substantially lower. Thus the authorities may be able to increase employment if it can make a union act in a less wage-oriented manner. We show that this can be done by setting a minimum overtime pay premium. Minimum wage regulation could have the opposite effect.
|Date of creation:||09 Dec 2002|
|Contact details of provider:|| Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway|
Web page: http://www.uib.no/econ/en
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- Bauer, Thomas & Zimmermann, Klaus F, 1999.
"Overtime Work and Overtime Compensation in Germany,"
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- 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).
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- Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, vol. 81(4), pages 719-740, September.
- King, Stephen P., 1997. "Oligopoly and overtime," Labour Economics, Elsevier, vol. 4(2), pages 149-165, June.
- Ehrenberg, Ronald G, 1970. "Absenteeism and the Overtime Decision," American Economic Review, American Economic Association, vol. 60(3), pages 352-357, June. Full references (including those not matched with items on IDEAS)
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