Working Paper: NBER ID: w5724
Authors: Jennifer Hunt
Abstract: Starting in 1985, (West) German unions began to reduce standard hours on an industry by industry basis, in an attempt to lower unemployment. Whether work-sharing works - whether employment rises when hours per worker are reduced - is theoretically ambiguous. I test this using both individual data from the German Socio-Economic Panel and industry data to exploit the cross-section and time-series hours variation. For the 1984-1989 period I find that, in response to a one hour fall in standard hours, employment rose by 0.3-0.7%, but that total hours worked fell 2-3%, implying possible output losses. As a group workers were better off, however, as the wage bill rose. The employment growth implied by the mean standard hours decline, at most 1.1%, was not enough to bring German employment growth close to the U.S. rate. Results for the 1990-94 period were more pessimistic.
Keywords: worksharing; employment; Germany; labor market
JEL Codes: J22; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction in standard hours (J22) | Increase in employment for hourly workers (J29) |
| Reduction in standard hours (J22) | Increase in employment for salaried workers (J39) |
| Reduction in standard hours (J22) | Aggregate employment rise (E24) |
| Reduction in standard hours (J22) | Fall in total hours worked (J22) |
| Reduction in standard hours (J22) | Increase in wage bill for hourly workers (J38) |
| Reduction in standard hours (J22) | Increase in wage bill for salaried workers (J39) |