The Impact of Federal Overtime Legislation on Public Sector Labor Markets

Abstract

In this paper, I study one of the largest changes in the overtime provisions of the Fair Labor Standards Act (FLSA) in the last two decades ? the extension of coverage eligibility for state and local government workers. The Supreme Court's 1985 decision in San Antonio Metropolitan vs. Garcia made 80 percent of state and local government workers eligible to receive compensation for overtime hours worked. Using a difference-in-differences approach, I compare hourly state and local government workers to multiple control groups, specifically hourly federal government employees and salaried state and local government employees. Although the cost of overtime went up for public sector employees under the law, surprisingly there is little evidence that the overtime hours and amount of overtime worked by the treated workers went down relative to the control groups. At a minimum, there is no change in overtime hours, and for many of the groups, overtime hours actually went up after the change. The behavior of public sector workers seems to be consistent with a Coasian model where overtime provisions are explicitly bargained by the parties involved, likely making the overtime legislation less important. To further explore overtime coverage for unionized public sector workers, I collected a data set of union contracts from the American Federation of State and County Municipal Employees that represents almost 65,000 public sector workers in the state of Illinois in 1985. This case study evidence shows the majority of unionized workers in the public sector in Illinois did have explicitly stated overtime coverage in their union contracts which was at a minimum the same as the provisions granted to them in the Garcia decision.