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Listening to workers: The overtime versus hiring dilemma

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  • Singer, Marcos
  • Obach, Juan José

Abstract

To reach a certain production level, firms sometimes allow overtime and/or adjust the number of their personnel. Under some circumstances, workers can decide to work overtime to gain additional compensation, even though the firm might not need that time. This type of overtime exists because of an information asymmetry that favors workers: they know better than management the everyday routines, the temporary bottlenecks, and the malfunctions in the workplace. This study models this situation as an infinitely repeated game. In each stage-game the workers decide whether to work overtime, and the firm decides whether to adjust the amount of personnel. The game characterizes the conditions of the Nash equilibriums, some of which might lead to collaborative communication between the workers and the firm. The study empirically tests two propositions with data from a Chilean smelting plant. The results identify under which circumstances the firm should “listen” to the workers (i.e., take into account how much overtime they incur) when making personnel decisions.

Suggested Citation

  • Singer, Marcos & Obach, Juan José, 2013. "Listening to workers: The overtime versus hiring dilemma," Journal of Business Research, Elsevier, vol. 66(10), pages 1771-1779.
    • Handle: RePEc:eee:jbrese:v:66:y:2013:i:10:p:1771-1779
    DOI: 10.1016/j.jbusres.2013.01.009
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    References listed on IDEAS

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    1. Marcos Singer & Patricio Donoso & Garo Konstantinidis, 2009. "Who wants to break the hockey-stick sales pattern in the supply chain?," Annals of Operations Research, Springer, vol. 169(1), pages 131-147, July.
    2. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 381-402.
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    4. John Addison & Lutz Bellmann & Thorsten Schank & Paulino Teixeira, 2008. "The Demand for Labor: An Analysis Using Matched Employer–Employee Data from the German LIAB. Will the High Unskilled Worker Own-Wage Elasticity Please Stand Up?," Journal of Labor Research, Springer, vol. 29(2), pages 114-137, June.
    5. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March.
    6. Hart, Robert A. & Ma, Yue, 2010. "Wage-hours contracts, overtime working and premium pay," Labour Economics, Elsevier, vol. 17(1), pages 170-179, January.
    7. Earl F. Lundgren & V. Schneider, 1971. "A Marginal Cost Model for the Hiring-Overtime Decision," Management Science, INFORMS, vol. 17(6), pages 399-405, February.
    8. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
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    10. Trejo, Stephen J, 1993. "Overtime Pay, Overtime Hours, and Labor Unions," Journal of Labor Economics, University of Chicago Press, vol. 11(2), pages 253-278, April.
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    Cited by:

    1. Raventós, Pedro & Ospina, José Miguel, 2013. "Strategic management in Latin America: Introduction to a special section," Journal of Business Research, Elsevier, vol. 66(10), pages 1725-1727.

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