Hours-Wage Tradeoffs and Job Mobility

Abstract

The paper examines how hours constraints affect the decision to change jobs and the patterns of hours-wage tradeoffs which result from job changes. We analyze job mobility in a labor market in which work hours on a given job are inflexible and it is costly for workers to locate and move to alternative jobs. Costs of mobility and imperfect information about job offers will prevent a worker from adjusting hours by costlessly moving to jobs which offer wage—hours combinations on the his or her labor supply schedule. Consequently, workers will trade off wage gains for hours adjustments in making job changes. Specifically, we show that the partial effect of a positive change in hours by job changers who were overemployed (underemployed) on their prior job is to increase (reduce) the size of the wage gain required to induce a quit. The partial effect of a positive change in hours by job changers who are overemployed (underemployed) on their new job is to increase (reduce) the size of the wage gain associated with the quit. We test these propositions through an empirical study of the relationship between the wage change and interactions among the change in hours and indicators of overemployment and underemployment on the old job and the new job. Despite the limitation imposed by small sample sizes and lack of information on the magnitude of hours constraints, our results are supportive of the theory.