Manufacturing Earnings and Cycles: New Evidence

The first term allows for all N workers to be paid at the standard rate, W
for standard hours, H^s. These latter hours are averaged over non-overtime
workers and we expect H^s < 40. Therefore, the second term allows for the
fact that N⁰ overtime workers, assumed to be working 40 standard hours, are
compensated at W for (40 — H^s) hours. The final term shows that overtime
workers are further compensated at the overtime rate, W⁰ for overtime hours,
V. The maximum number of standard hours and the hourly overtime premium
are fixed by legislation.

There are two problems with the definition of A in (A7): (i) the BLS
Establishments Survey does not provide data on N⁰ and У; (ii) the arith-
metic average used to calculate (A7) is additive and accordingly cannot be
algebraically decomposed into its separate parts. We deal with each of these
problems in turn.

The wage rate - i.e. W_t in (A7) - is approximated by BLS by adjusting
average hourly earnings through the elimination of premium pay for overtime
at a rate of time
where H^s(= H — H⁰) and H⁰ are, respectively, standard and overtime hours
averaged over all workers (i.e. overtime and non-overtime workers). ²³ No
adjustment is made for other premium payment provisions such as holiday
work, late shift work, and premium overtime rates other than those at time
and one-half. W is calculated only for manufacturing industries because data
on overtime hours are not calculated in other industries. This is the principal
reason why we concentrate our attention on the manufacturing sector.

The BLS Current Population Survey does gather (unpublished) data per-
taining to N⁰.²⁴ Strictly, N⁰ defines the number of workers working in excess

²³Note that (A6) follows the definition given by BLS (Handbook of Methods, 1997, Ch.
2, p 22): “[Average hourly earnings excluding overtime] ... are computed by dividing the
total production payroll ... by the sum of the total production worker hours and one-half of
the total overtime hours, which is equivalent to the payroll divided by standard hours.”

²⁴Basic information regarding the Survey and the published data can be found in BLS
Handbook (Chapter 1) and the February 1994 issue of the BLS publication called Employ-
ment and Earning. There is a complication with these data. If, for example, a person
worked 40 hours a week at a manufacturing job and then worked another 20 hours in the
same week as a clerk in a store, that person would be shown as working 60 hours that week

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