Paradox of Overtime Working and Unemployment in Iran

For more than three decades Iranian economy has been suffering from high unemployment rates, and at the same time vast, widespread overtime working rates; such that in some years 61% of job holders with more than 31 years of experiences have worked more than 42 hours a week in their main job. At the same time, high rates of unemployment have been observed between urban Iranaian labour forces. Labors’ tendency to preserve their purchasing power beside employment fix costs is considered main explanation of this dilemma. Therefore it seems that, an appropriate wage policy (Overtime Premium regulation in our study) might be an effective instrument to redistribute the existing job opportunities by reducing the overtime hours. This paper intends to assess the feasibility of “Work Sharing” in Iranian labor market. To do so, we have used “Double Sample Selection” methodology to formulate two selection equations together with a decision rule. Our data has been extracted from the “Households’ Income-Expenditure Survey” published by Statistical Center of Iran (SCI) in 2006. Our findings explore that overtime working is more prevalent among the married labor force who have been employed in private sector. Also a "backward bending" is observed in overtime hours supply respect to overtime wage. The latter observation provides an opportunity of work sharing amongst higher wage earners in Iranian labor market.
JEL Classification: J22, J23 and J33