Wage-hours contracts, overtime working and premium pay
Document Type
Journal article
Source Publication
Labour Economics
Publication Date
1-1-2010
Volume
17
Issue
1
First Page
170
Last Page
179
Keywords
Asymmetric information, Overtime, Premium pay, Specific human capital, Wage-hours contracts
Abstract
This paper offers a contract-based theory to explain the determination of standard hours, overtime hours and overtime premium pay. We expand on the wage contract literature that emphasises the role of firm-specific human capital and that explores problems of contract efficiency in the face of information asymmetries between the firm and the worker. We first explore a simple wage-hours contract without overtime and show that incorporating hours into the contract may itself produce efficiency gains. We then show how the introduction of overtime hours, remunerated at premium rates, can further improve contract efficiency. Our modelling outcomes in respect of the relationship between the overtime premium and the standard wage rate relate closely to earlier developments in hedonic wage theory. Throughout, we emphasise the intuitive reasoning behind the theory and we also supply relevant empirical evidence. Mathematical derivations are provided in an Appendix.
DOI
10.1016/j.labeco.2009.04.002
Print ISSN
09275371
Publisher Statement
Copyright © 2009 Elsevier B.V. All rights reserved. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Hart, R. A., & Ma, Y. (2011). Wage-hours contracts, overtime working and premium pay. Labour Economics, 17(1), 170-179. doi:10.1016/j.labeco.2009.04.002