Overtime Working and Contract Efficiency
32 Pages Posted: 24 May 2013 Last revised: 2 Oct 2019
Date Written: August 1, 2013
We present a wage-hours contract designed to minimize costly turnover given investments in specific training combined with firm and worker information asymmetries. It may be optimal for the parties to work ‘long hours’ remunerated at premium rates for guaranteed overtime hours. Based on British plant and machine operatives, we test three predictions. First, trained workers with longer tenure are more likely to work overtime. Second, hourly overtime pay exceeds the value of marginal product while the basic hourly wage is less than the value of marginal product. Third, the basic hourly wage is negatively related to the overtime premium.
Keywords: Paid overtime, wage-hours contract, plant and machine operatives
JEL Classification: J41, J33
Suggested Citation: Suggested Citation