30 Monthly Labor Review February 2000

Overtime Hours Overtime Hours

Analyzing the recent upward

surge in overtime hours

During the economic expansion of the 1990s,

employers in manufacturing industries were more likely

than in previous recoveries to increase overtime hours

among existing employees than to hire new workers

Ron L. Hetrick

Ron L. Hetrick is an

economist in the

Division of Monthly

Industry Employment

Statistics, Bureau of

Labor Statistics.

From March 1991, the end of the last recession, to early 1997, average weekly overtime in manufacturing increased by 1.6 hours,

reaching its highest level—4.9 hours—since BLS

began publishing the series in 1956.1 Overtime remained at or near this high level over the next year,

retreating slightly by the end of 1998. These data

are from the BLS Current Employment Statistics

(CES) survey, a monthly survey of payroll, hours,

and earnings collected from a sample of more than

400,000 of the Nation’s employers. The CES program defines overtime as hours for which premiums were paid because they exceeded the number

of straight-time workday or workweek hours. Average overtime is computed by dividing the total number of overtime hours in a given industry by the

number of production workers in that industry, including those that work no overtime at all.

Historically, average overtime has increased with

recoveries and fallen with recessions, with the level

never exceeding 4.1 hours. Average overtime fell from

3.7 to 3.3 hours during the 1990-91 recession, but the

current expansion has seen overtime reach an

unprecendented level. This article analyzes the striking growth in overtime from March 1991 to January

1998 and its relationship to employment.

Overtime growth in the 1990s

Following the 1990–91 recession, cyclical job loss

in manufacturing continued until mid-1993. Indeed,

after losing 683,000 jobs during the downturn, another 400,000 manufacturing jobs were lost after

the recession officially ended in March 1991. Interestingly, however, the cyclical trend in manufacturing overtime hours turned around exactly the same

month that the recession ended. By the time that

manufacturing employment started its cyclical recovery in July 1993, average overtime had increased

from 3.3 to 4.1 hours. (See chart 1.) Overtime hours

continued to surge, reaching 4.8 hours in the last

quarter of 1994. Manufacturing employment expanded until April 1995, adding a total of 541,000

jobs in a period of less than 2 years.

Average factory overtime fell by 0.6 hour in 1995.

In 1996, it started inching upwards again, while

employment in the industry experienced a mild

downward trend. By December of 1996, average

weekly overtime had reached 4.6 hours, after starting the year at 4.2 hours. Employment also started

back on a growth trend early in 1996, but at a very

slow pace. By March 1997, overtime had reached a

record high of 4.9 hours—a level it sustained for

the next 2 months and then revisited at the end of

the year. In contrast, employment, while still growing, ended 1997 at a level nearly 700,000 lower than

its prerecession peak in March 1989.

Sources of overtime growth

Manufacturing’s record-setting increase in average weekly overtime is the result of two factors.

The first, as shown in table 1, is that, from March

1991 to January 1998, overtime increased in all

but one of the component industries in manufacturing. The increases ranged from a notable 3-hour

gain in transportation equipment to a relatively

slight increase of 0.6 hour in apparel products. As
Monthly Labor Review February 2000 31

the table illustrates, more than half of the 20 industries within

manufacturing had increases of at least 1 hour over the 1991–

98 period. In fact, many of these industries had set records for

their overtime series by early 1997.2

Some specific industries made exceptional contributions

to the growth in overtime hours. Within transportation, for

example, overtime in the motor vehicle manufacturing industry jumped by a remarkable 4.4 hours. Similarly, within primary

metals, overtime in iron and steel foundries grew by 3.7 hours,

and within industrial machinery and equipment, refrigeration

and service machinery overtime increased by 2.9 hours.3

The second factor driving the increase in overtime is that

the distribution of employment in manufacturing was shifting

towards component industries that were adding the most

overtime over the 1991–98 period. This effect can be quantified by dividing the industries in the table into two groups.

The 10 industries that had the greatest increase in overtime

after the recession together averaged 5.2 overtime hours,

which was 1.2 hours more than the average for the other 10

industries. At the same time, the 10 industries with the highest average overtime increase also had an accumulated increase in production workers of 11.2 percent, while the bottom 10 lost 4.7 percent of their production workers.

 The combined effect of the growth in overtime in nearly

every industry and the employment increases in industries

with large gains in overtime can be seen in aggregate overtime

(the product of production workers and average weekly overtime hours). The top ten overtime gainers accounted for 68

percent of the total manufacturing aggregate overtime in January 1998, compared with 60 percent in March 1991.

Overtime hours also would increase if employment in industries with high overtime levels grew faster than employment in industries with lower levels of overtime. To determine

whether this was a factor, manufacturing overtime in 1998 was

computed using the employment distribution of March 1991.

The results showed that the shift in industry mix contributed

little to the increase in overtime, adding just 0.1 hour.

Substituting overtime for employment

Historically, both employment and overtime have increased

as the U.S. economy emerged from recessions, with overtime

gains generally occurring prior to the employment gains.

While this has remained the case since March 1991, employers appeared to rely more heavily on overtime in the current

expansion than on hiring new employees. This part of the

analysis focuses on overtime growth from the beginning of

the current recovery until overtime hours peaked 82 months

later, in January 1998, comparing it with employment growth

over the same period. The data are compared with two other

expansions that lasted at least 82 months. (See table 2.)

When the recoveries that began in March 1961 and DecemChart 1. Employment and average weekly overtime hours in manufacturing, 1990-98,

 seasonally adjusted

Employment

(in thousands) Hours

1990 1991 1992 1993 1994 1995 1996 1997 1998

17,000

17,500

18,000

18,500

19,000

19,500

20,000

3

3.5

4

4.5

5

5.5

Employment

Overtime 

Overtime
32 Monthly Labor Review February 2000

Overtime Hours

ber 1982 were 82 months old, they had added 3.5 million and 1.3

million manufacturing jobs, respectively. The peak levels of average

overtime associated with those recoveries were 4.1 hours in February through April 1966 and 4.0 hours in February and April 1989. The

current recovery’s overtime gain of 1.6 hours is slightly below the

two previous recoveries; however, because the level at the onset of

the current expansion was significantly higher, the peak levels of the

two previous recoveries were superseded in less than 2 years. Even

with this record-setting strength in overtime, employment grew by

only 397,000, or just 17 percent of the average job growth in the two

earlier recoveries.

The implied substitution of overtime for hiring can be quantified

using full-time equivalents. Full-time equivalents are computed by

taking the aggregate overtime and dividing it by 40, the number of

hours in a standard workweek. For example, if 20 people worked 6

hours of overtime, the full-time equivalent of that overtime would be

3—that is, 3 extra production workers could have been hired rather

than existing workers accumulating 120 weekly overtime hours.

From March 1991 to January 1998, the number of production

workers in manufacturing increased by 601,000. Over the same

period, the full-time equivalent of the aggregate overtime change

in manufacturing was 571,000 jobs. (See table 3.) That means that if

employers had hired new workers instead of increasing overtime,

nearly twice as many production workers would have been hired.

The table also shows where these workers would have been

hired. Transportation equipment, which includes auto and aircraft assembly, had an overtime change valued at 107,000 fulltime equivalent jobs, or one-fifth of the total for all manufacturing. Industrial machinery and fabricated metals also would have

accounted for a large portion of the hiring during this period.

Other industries with relatively large full-time equivalents included rubber and plastics, electronics, and primary metals.

A common factor among the industries that added the most

overtime was a highly skilled workforce. The data suggest that

when the overall skill level among workers in an industry is

relatively high, firms tend to increase overtime during expansions rather than hire new workers. Training highly skilled

workers is costly, especially if many of them may be laid off

during the next recession. For similar reasons, workers in some

highly skilled occupations are in short supply and thus may not

be available to the hiring establishment. The 10 industries

within manufacturing with the largest overtime gains since the

recession had more than 17 percent of their employment in

highly skilled positions; the comparable figure for the 10 industries with the least gains is 8 percent.4

Employment and overtime in 1998

After starting 1998 at the record-setting level of 4.9 hours, by

the end of the year, average weekly overtime in manufacturing had fallen by 0.4 hour. (See table 4.) Meanwhile, employment in manufacturing declined by 238,000 over the

same period, as many export-sensitive industries reacted to

the economic crises then occurring in Southeast Asia, Russia, and Brazil. The industry groups with the largest aggregate overtime declines in 1998 included specific (three-digit)

industries that were the most export-sensitive of all manufacturing industries, including computers, aerospace, semiconductors, and household audio and video equipment.5 The 0.4-

hour reduction in manufacturing overtime is equal to 157,000

full-time equivalents—that is, had overtime not been reduced

Change in overtime hours in manufacturing industries, March 1991–January 1998

SIC March January Level Percent

code 1991 1998 change change

20–39 Total, manufacturing ...... 3.3 4.9 1.6 48.5

37 Transportation equipment .... 3.1 6.1 3.0 96.8

33 Primary metal industries ..... 4.2 6.8 2.6 61.9

34 Fabricated metal products .. 3.1 5.2 2.1 67.7

32 Stone, clay, and glass

products ........................... 4.2 6.2 2.0 47.6

35 Industrial machinery and

equipment ........................ 3.6 5,6 2,0 55.6

25 Furniture and fixtures .......... 2.0 3,9 1.9 95.0

30 Rubber and miscellaneous

plastics products ............. 3.2 4.7 1.5 46.9

22 Textile mill products ............. 3.5 4.9 1.4 40.0

24 Lumber and wood products . 3.0 4.3 1.3 43.3

Electronic and other

electrical equipment ......... 3.1 4.3 1.2 38.7

28 Chemicals and allied

products ........................... 4.3 5.3 1.0 23.3

26 Paper and allied products .... 4.7 5.7 1.0 21.3

38 Instruments and related

products ........................... 2.9 3.8 .9 31.0

31 Leather and leather

products ........................... 1.6 2.5 .9 56.3

39 Miscellaneous

manufacturing .................. 2.4 3,2 .8 33.3

20 Food and kindred products . 4.3 5.1 .8 18.6

27 Printing and publishing ........ 2.6 3.4 .8 30.8

21 Tobacco products ................ 2.1 2.8 .7 33.3

23 Apparel and other textile

products ........................... 1.6 2.2 .6 37.5

29 Petroleum and coal

products ........................... 6.1 6.1 .0 .0

NOTE: These data are seasonally adjusted; only not seasonally adjusted

data for overtime are published on a monthly basis. Industries are listed in

descending order, beginning with the industry having the greatest change

over the period in the level of overtime and ending with the industry having

the least change in overtime.

Table 1.

Manufacturing peak overtime in selected

recoveries and employment growth after 82

months of expansion

Overtime hours Employment (in thousands)

Peak Level Percent

 level change change

March 1961 ........ 4.1 2.0 3,505 21.8 43

December 1982 . 4.0 1.7 1,280 7.1 16

 Average ............ 4.1 1.9 2,393 14.4 30

March 1991 ........ 4.9 1.6 397 2,2 5

Start date

Table 2.

Average

monthly

change

Change

Industry
Monthly Labor Review February 2000 33

by 0.4 hour, employers would have had to lay off an additional

157,000 factory workers in 1998.

UNLIKE IN PREVIOUS EXPANSIONS, manufacturing employers

in the 1990s were more likely to increase overtime hours among

existing employees than to hire new employees. Despite beginning the current expansion at historically high levels, overtime

increased by nearly as many hours as in the earlier expansions

of the 1960s and 1980s, bringing the level to a record high (4.9

hours) by the end of 1997. From its low of 3.3 hours in March

1991, overtime increased by 48 percent. The gains in overtime

were spread throughout the manufacturing industry groups,

with the largest gains occurring in durable goods, especially

transportation equipment and primary metal industries.

Production worker and full-time equivalent

growth in manufacturing, March 1991 to

January 1998

[Numbers in thousands] Meanwhile, employment in manufacturing grew quite

modestly during the 1990s expansion, increasing by about 4

percent from its trough in June 1993 to its peak in March

1998. Over comparable periods in the 1960s and 1980s, by

contrast, employment increased by 15 percent and 5 percent,

respectively. Largely as a result of economic crises abroad,

employment began to decline in early 1998, with losses concentrated in export-sensitive industries. But just as overtime

had substituted for job gains in the current expansion through

1997, it acted as a cushion against job loss in 1998. In fact,

had overtime not been reduced by 0.4 hour in 1998, instead of

a loss of nearly a quarter-million jobs in manufacturing, the

loss would have been closer to 400,000. Manufacturing employment continued to decline in 1999, while overtime hours

held steady, rising slightly by the end of the year.

Notes

1

 The "official" starting and ending dates of recessions and expansions are determined by the National Bureau of Economic Research

(NBER)—a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works.

NBER identifies economic turning points—that is, dates when economic

activity turned in the opposite direction. For more information, see

NBER's website, on the Internet at http://www.nber.org/, accessed February 2000. 2

 Industries are defined by the Standard Industrial Classification (SIC)

system. The 20 component industries within manufacturing are those at the

two-digit SIC level of aggregation. For more information on the SIC system,

see Standard Industrial Classification Manual, 1987 (Washington, DC,

Office of Management and Budget, 1987).

3

 Overtime data for specific (three-digit) industries within transportation equipment, primary metals, and industrial machinery are not

seasonally adjusted. Therefore, to avoid seasonal fluctuations, overtime hours are measured from December 1990 to December 1997.

4

 Data from the BLS 1996 Occupational Employment Statistics

program.. Highly skilled positions were defined as engineers, technicians, scientists, and precision workers and assemblers.

5

 This analysis is based on the percent of employment tied to exports

Industry

Table 4. Change in production workers, full-time

equivalents and overtime hours in selected

industries, 1997–98

[In thousands except for overtime]

Change in Change in Change in

production full-time overtime

workers equivalents hours

Total, manufacturing .................. –238 –157 –.4

 Industrial machinery and

 equipment ........................... –25 –41 –1.1

 Transportation equipment ....... –40 –34 –.9

 Electronic and other electrical

 equipment ........................... –50 –21 –.6

 Primary metal industries ......... –16 –14 –.8

 Fabricated metal products ..... –11 –13 –.4

NOTE: Changes are calculated from December 1997 to December 1998, 

using seasonally adjusted figures.

Industry

Production

worker

growth

Full-time

equivalent

growth1

Combined

total2

Total manufacturing ................ 601 571 1,172

 Durable goods ...................... 722 443 1,165

 Lumber and wood

products ............................ 115 30 145

 Furniture and fixtures ........... 47 22 69

 Stone, clay, and glass

 products ........................... 36 26 62

 Primary metal industries ..... 13 38 51

 Fabricated metal products ... 146 71 217

 Industrial machinery and

equipment.......................... 178 86 264

 Electronic and other

electrical equipment .......... 85 39 124

 Transportation equipment ..... 141 107 248

 Instruments and related

 products ........................... –53 6 –47

 Miscellaneous

 manufacturing ................... 14 6 20

 Nondurable goods .................. –121 123 2

 Food and kindred

products ............................ 46 30 76

 Tobacco products ................ –4 0 –4

 Textile mill products ............. –53 13 –40

 Apparel and other textile

 products ........................... –187 2 –185

 Paper and allied products .... 5 14 19

 Printing and publishing ......... –6 17 11

 Chemicals and allied

products ............................ –2 14 12

 Petroleum and coal

 products ........................... –11 –2 –13

 Rubber and miscellaneous

plastics products ............... 126 39 165

 Leather and leather

 products ........................... –35 0 –35

1 Full-time equivalents are computed by taking the total number of overtime

hours and dividing it by 40, the number of hours in a standard workweek. This

analytical tool provides an estimate of the number of production workers that

could have been hired if employers had hired new workers instead of increasing overtime.

2 This hypothetical total is obtained by combining the figures for actual

production worker growth over the period with those for full-time equivalents.

Thus, these figures represent the total number of production workers that

could have been hired had employers not increased overtime.

Table 3.

in 1993; data are from the BLS Office of Employment Projections.