COMPENSATING WAGE DIFFERENTIALS FOR MANDATORY OVERTIME?

Abstract

This paper examines the extent to which individuals who are employed by firms that require mandatory overtime receive a compensating wage differential for this “distasteful” working condition. While the empirical results indicate that the average worker does not receive a positive differential for this working condition, the results do indicate that unionized workers and (perhaps) newly hired workers receive a positive differential. The paper then develops a framework to determine if any observed compensating differential is, in fact, fully compensating. The application of this framework to the mandatory overtime issue reveals that the fully compensating differential would be relatively small. The methodology developed in this paper should prove useful in a variety of other contexts.