Search the Site

Trading Overtime


The latest Economist has an article about an Italian firm whose workers negotiated a deal during the recession for time off with no pay cut in exchange for promises to work overtime without extra pay when the firm’s demand recovers.
The smoothing of pay improves the situation of workers, who I assume are risk averse. Both they and the company are better off in the highly regulated Italian economy. Yet in the supposedly unregulated U.S. economy, this kind of Pareto improvement could not be made.
Despite numerous attempts to pass amendments that would allow companies to give employees compensatory time off in exchange for extra work later, our overtime laws currently prevent trades like this. Too bad for both the workers and their employers. Too bad for the U.S. labor market also.