Working Paper: NBER ID: w0815
Authors: Ronald G. Ehrenberg; Paul L. Schumann
Abstract: Our paper presents a methodology that can be used to estimate the extent of noncompliance with the overtime pay provisions of the Fair Labor Standards Act (FLSA). The methodology is applied to data from the May 1978 Current Population Survey and the 1977 Michigan Quality of Employment Survey. These data suggest that the fraction of covered workers working overtime who fail to receive a premium of at least time and a half, as called for by the legislation, is in the range of 25 percent. They also suggest that the extent of noncompliance is greater in those industries in which size class exemptions to the legislation exist (retail trade and selected service industries). Finally, probit analyses of the determinants of noncompliance suggest that decisions about whether to comply with the overtime provisions of the FLSA are at least partially based on the associated benefits and costs.
Keywords: overtime pay; Fair Labor Standards Act; noncompliance; labor economics
JEL Codes: J38; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| noncompliance with FLSA (J79) | perceived net benefits and costs by employers (J32) |
| noncompliance with FLSA (J79) | perceived net benefits and costs by employees (J32) |
| government resources (H59) | compliance rates (H26) |
| increased employee turnover (J63) | costs of noncompliance (H26) |
| risk of penalties (H26) | costs of noncompliance (H26) |
| savings from not paying overtime premiums (J33) | benefits of noncompliance (H26) |
| unionized environments (J51) | noncompliance rates (H26) |
| age (J14) | noncompliance probabilities (C25) |
| sex (J16) | noncompliance probabilities (C25) |
| race (J15) | noncompliance probabilities (C25) |
| industry characteristics (L81) | noncompliance probabilities (C25) |
| higher earnings levels (J31) | noncompliance rates (H26) |
| size class exemptions under FLSA (J89) | noncompliance (H26) |
| increasing overtime premium (J33) | noncompliance (H26) |