The Demand for Hours of Labor: Direct Evidence from California

For many years California has required that most women receive time-and-a-half for hours of work beyond 8 in a given day. In 1980 this daily overtime penalty was extended to men. This change provides a unique opportunity to estimate the impact of an exogenous increase in the relative price of a marginal hour of labor on the demand for hours of work. Analyzing Current Population Survey data from 1973 and 1985, we find that the overtime penalty substantially reduced the amount of daily overtime worked by California men compared to men in other states and to women in California. Our estimates imply that the price elasticity of demand for overtime hours is at least -0.70.