The Effect of Overtime Working Hour Restrictions on Wages in Taiwan, ROC

Taiwan’s Labor Standards Law (LSL) requires employers to implement overtime working hour restrictions. These restrictions have a greater effect on women, who are not allowed to work as many overtime working hours as men. This paper examines two hypotheses: First, as the hour restrictions can encourage the efficiency of workers, it will increase wages for women in the covered sector relative to others. Second, the foreign workers importation will increase the economic freedom for employers, leading to a smaller effect of hour restrictions. This paper develops a model to measure the effect of overtime hour restrictions on wage rates. Using the Manpower Utilization Survey, this paper finds that these restrictions have an apparent effect on raising the wage rates. However, the LSL will reduce the gender wage gap via the overtime restrictions. It provides the empirical evidence that the LSL may affect the gender wage gap in Taiwan. On the other hand, the effect of the hour restrictions on wages will decline as a result of the foreign worker importation.