CARE Seminar: Simon Quach, University of Southern California

Speaker

Simon Quach, University of Southern California

Title

“The Labor Market Effects of Expanding Overtime Coverage”

Abstract

This paper examines the labor market effects of overtime coverage in the United States, where salaried workers are covered for overtime if their base pay falls below a legislated salary threshold. Using an event-study design with administrative payroll data from ADP and state-level threshold changes from 2014-2021, I find evidence of frictions in hours reallocation and wage adjustments. Contrary to the historical intent of overtime, f irms do not increase employment by substituting more workers for fewer hours. Firms also do not offset the costs of overtime by lowering workers’ base pays, as predicted by models of compensating differentials. Instead, employers raised salaries above the threshold to keep workers exempt from overtime. Taken together, these findings suggest that overtime coverage increases workers’ earnings without negatively impacting hours or employment.