DP1526 The Response of Wages and Actual Hours Worked to the Reduction of Standard Hours in Germany

Author(s): Jennifer Hunt
Publication Date: December 1996
Keyword(s): Employment, Hours, Unions, Wages, Work-sharing
JEL(s): J23, J31, J51
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1526

A transformation of what had become a universal 40-hour standard working week in Germany began in 1985 with reductions negotiated in the metal-working and printing sectors. These reductions have continued through 1995, and were followed by reductions in other sectors. The union campaign aimed to increase employment through ?work-sharing?, and is being emulated in the United States with the launch of a reduced hours campaign by the AFL-CIO. Using data from the German Socio-Economic Panel, I find that increased overtime or reduced short time was little used to offset the reduction in standard hours: a one-hour reduction in standard hours appears to have translated into a reduction in actual hours worked of between 0.85 and 1 hour for workers in manufacturing. One might expect this to have resulted in a loss of earnings for workers in affected industries. I substantiate the union?s claim of ?full wage compensation?, however: reductions in standard hours were accompanied by a relative rise in the hourly straight-time wage of 2?3% for each hour fall in standard hours; enough to keep monthly earnings the same as in unaffected industries.