Overtime pay premiums in a unionized oligopoly

Frode Meland ()
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Frode Meland: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway, http://www.uib.no/persons/Frode.Meland

No 22/02, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: 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.

Keywords: Overtime; Bertrand competition; unionization; regulation (search for similar items in EconPapers)
JEL-codes: J21 J51 J88 L13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2002-12-09
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:bergec:2002_022

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