Employment and Length of the Working Week in a Unionized Economy in which Hours of Work Influence Productivity

Conditions are derived for signing the employment effects in a unionized economy of a legislated cut in hours when productivity depends on the number of hours worked each week. Aggregate data suggest that employment will generally increase after a small cut in hours for the United Kingdom but the employment effect is ambiguous for Australia. Disaggregate data for Australia suggest that the employment effect of a cut in hours is often positive. However, any cut in hours imposed on a monopoly union, without a cut in pay, will unambiguously lead to a drop in employment.