Economic effects of overtime premium flexibility: Firm- and worker-level evidence from a law reform

Arbeitspapier

In 2012, a new law allowed firms in Portugal to reduce the overtime premium paid by half. Until then, as in other countries, premiums were subject to a minimum level. We analyse matched panel data, including worker-level (base and overtime) hours and pay, to study the effects of the resulting greater flexibility in overtime pay setting. We find that half of the firms using overtime in 2011 did reduce their overtime premiums consistently with the reform, in particular firms making greater use of overtime and paying higher premiums. Using difference-in-differences matching and a long list of covariates, we also find that those firms that cut overtime premiums exhibit significant relative increases in overtime usage, employment and sales following the reform. Our results also highlight the important but not exclusive role of legal restrictions on downward nominal pay rigidity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: GLO Discussion Paper ; No. 102

Classification and Topics

• Classification: Wirtschaft ; Time Allocation and Labor Supply ; Labor Demand ; Wages, Compensation, and Labor Costs: Public Policy
• Subject: Working time ; wage rigidity ; employment resilience ; labour reforms

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Martins, Pedro S.
• Event: Veröffentlichung
• (who): Global Labor Organization (GLO)
• (where): Maastricht
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/167613
• Last update: 10.03.2025, 11:44 AM CET