The effects of works councils on overtime hours

AuthorRafael Gralla,Kornelius Kraft,Stanislav Volgushev
DOIhttp://doi.org/10.1111/sjpe.12120
Publication Date01 May 2017
THE EFFECTS OF WORKS COUNCILS
ON OVERTIME HOURS
Rafael Gralla*, Kornelius Kraft* and Stanislav Volgushev**
ABSTRACT
This study analyzes the relation between works councils and overtime hours in
Germany. The estimated effects differ considerably in dependence of standard
contracted working time. Furthermore, we find differences across the quantiles of
the overtime hours distribution and these differences between quantiles also vary
between employees of establishment with and without works councils. By consid-
ering contracted working time effects and comparing conditional quantiles we
find in some quantiles that employees of establishments with a works council
have a higher amount of overtime hours if an employee regularly works 35 hours
per week. This effect diminishes with increasing quantiles of the distribution of
overtime hours. If an employee of a codetermined establishment regularly works
40 hours per week, overtime hours are reduced. This reduction becomes larger if
higher quantiles are analyzed.
II
NTRODUCTION
In the last two decades the topic of overtime work has frequently been investi-
gated, with a substantial number of studies analyzing how labor market insti-
tutions affect overtime work. In our approach, we investigate how
codetermination at establishment level influences the extent of overtime hours.
The German system of industrial relations is characterized by two pillars:
unions generally bargain over wages at industry level. Workers are addition-
ally entitled but not obligated to elect a works council as an institution of
employee representation at the establishment level which acts as the workers’
voice in negotiations with the management.
Works councils have explicit codetermination and even veto rights regard-
ing overtime. Workers and management preferences frequently differ widely,
particularly with respect to the extent of overtime, and in such cases a works
council with its legally prescribed codetermination rights might well have an
influence on the number of overtime hours supplied. Although our study is
restricted to the German system of codetermination, our results provide
*TU Dortmund
**Cornell University
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12120, Vol. 64, No. 2, May 2017
©2016 Scottish Economic Society.
143
evidence of general interest in the question of how the amount of overtime
worked is affected by the existence of a body of worker representatives, that
is, a representation of the preferences of the supply side, which possesses bar-
gaining power concerning determination of working time. In this sense it is
strongly related to the general discussion on the effects of unions on overtime
hours.
1
Compared to previous studies, we analyze the determinants of differences in
overtime hours between employees from establishments with and without
works councils in a very detailed way. In our study, we find out that these dif-
ferences in overtime hours are affected by two factors that strongly influence
the employee’s decision whether to work additional overtime or not. The first
factor is the amount of standard working time. Differences in overtime hours
between codetermined and non-codetermined establishments might depend on
the standard working hours if works councils intend to prevent excessively
long working days. The second factor is the extent of overtime hours itself.
The decision of a works council to agree to or to oppose the scheduling of
additional overtime hours might strongly depend on the number of overtime
hours that are done already. Therefore, in addition to analyzing the effects of
works council effects given different levels of standard working hours, we
additionally use censored quantile regression in order to identify differences in
the values of overtime work across the quantiles of its distribution.
With respect to German codetermination rights, only few studies on over-
time work exist and these show conflicting results. K
olling (1997), Gold
(2004) as well as Schank and Schnabel (2004) use the IAB Establishment
Panel, a German panel that contains establishments from all industries, and
find positive effects of works councils on the amount of overtime hours. How-
ever, in the last study, the results are not robust and the likelihood of the inci-
dence of overtime work is actually reduced in codetermined establishments.
Gold (2004) additionally uses the Hannover Panel and finds no effects of
works councils. In contrast to the IAB data, this panel only contains data
from manufacturing establishments. H
ubler and Meyer (1997) also use the
Hannover Panel and find similar results as Gold (2004). Jirjahn (2008) addi-
tionally controls for the attitude of the management towards employee
involvement. Irrespective of the view of the management, he finds no effects
of works councils on the incidence of overtime work. All the mentioned stud-
ies use establishment data. In contrast we use the German Socio-economic
Panel, that is, individual data.
2
The only study that analyzes the effects of
works councils on overtime with individual data is Kraft and Lang (2008).
Using a difference-in-differences approach, they investigate how the
1
Previous studies of this topic mainly focus on the United States and United Kingdom.
While in the United States, union coverage seems to reduce the likelihood and amount of
overtime hours (Trejo, 1993), in the United Kingdom Bell and Hart (1999) find positive
effects of a collective bargaining agreement on the incidence of overtime. Kalwij and Gregory
(2005), however, conclude that unions are of minor importance with respect to overtime.
2
Several studies use this data in order to analyze determinants of overtime work. See, for
example, Hunt (1999), Bell et al. (2000), Bauer and Zimmermann (2000). None of these stud-
ies, however, control for the effects of a works council.
144 R. GRALLA, K. KRAFT AND S. VOLGUSHEV
Scottish Journal of Political Economy
©2016 Scottish Economic Society

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