Eliminating the Overtime Premium: Short-Run Impacts on U.S. Manufacturing

An input demand model for U.S. Manufacturing serves as the basis for simulating
the short-run monthly growth rate effects of a counterfactual elimination of the overtime premium. Estimation of the model entails Nonlinear Seemingly Unrelated Regressions with cross-equation restrictions and correction for first-order serial correlation. Policy effects were modest to negligible in the pre-Covid period but modest to sizeable during Covid-19. In the Covid period, the policy effects were particularly pronounced for jobs previously associated with overtime. While these growth rate effects were relatively large in absolute value, they were of opposite signs and largely offsetting as between production overtime and non-production overtime. Hence, for total manufacturing during Covid, the simulated growth rate effect was negative but small for employment, moderately positive for the workweek, and moderately positive for weekly earnings.