flsaillr - H OURS OF W ORK AND THE F AIR L ABOR S TANDARDS...

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Unformatted text preview: H OURS OF W ORK AND THE F AIR L ABOR S TANDARDS A CT : A S TUDY OF R ETAIL AND W HOLESALE T RADE , 1938-1950 D ORA L. C OSTA Associate Professor of Economics at the Massachusetts Institute of Technology and Faculty Research Fellow at the National Bureau of Economic Research. This paper has benefited from the comments of Matthew Kahn, James Poterba, two anonymous referees, and participants at the 1999 SOLE meetings and workshops at MIT and at the University of Maryland. The author gratefully acknowledges the support of NIH grant AG12658. 1 Hours of Work and the Fair Labor Standards Act: A Study of Retail and Wholesale Trade, 1938-1950 ABSTRACT JEL Classifications: J33, J38 When the Fair Labor Standards was first implemented, a 5 percent reduction in the length of the standard work week reduced by at least 18 percent the proportion of men and women working more than 40 hours per week. In the south, the impact of the Act was even larger. The proportion of men working over 40 hours fell by 23 percent and the proportion of women by 43 percent. Although employers in the north responded to the overtime provisions of the Act by adjusting straight-time wages, southern firms were less able to adjust straight-time wages because the minimum wage provisions of the Act were much more binding in the south than in the north. 2 The wages, standard hours, and overtime premia of workers in the United States are regulated by the Fair Labor Standards Act of 1938 and by subsequent amendments to the Act. One of the aims of the Act in imposing a federal minimum wage and an overtime premium of one and a half times the straight-time wage for all hours above 40 was to eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and the general well-being of workers. 1 Another goal was to increase employment by spreading the amount of available work. 2 This goal still motivates most proposals to reduce standard hours or raise the overtime premium both in the United States and in Europe. Economic theory tells that a necessary, but not sufficient, condition for employment to increase is that hours must fall, but that the effect of reductions in the standard work week on hours worked is ambiguous. This paper evaluates whether the Fair Labor Standards Act reduced weekly hours between 1938 and 1950 by comparing trends in weekly hours between workers in wholesale and retail trade. Workers in wholesale trade were covered by the Act in 1938 whereas retail workers, because of the successful lobbying efforts of the American Retail Federation, did not begin to be covered until 1961. Weekly hours were well above 40 in both of these sectors at a time when average hours in manufacturing were less than 40. I am therefore able to examine the effect of a substantial decline in the statutory work week on hours worked. I am also able to examine whether hours are less likely to fall when employers cannot adjust straight-time wages because...
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flsaillr - H OURS OF W ORK AND THE F AIR L ABOR S TANDARDS...

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