Expectations and the adjustment of hours and employment.

The relation of output to workers and hours is a frequently investigated topic. The points addressed are the development of wages over the business cycle or the adjustment of the workweek and employment if output is fluctuating. Some papers concerned with wages take supply factors into account,[1] whereas other authors only consider the demand for labour.[2] This paper is of the second kind, disregarding labour supply or wage effects it is only looking at the effects of current or expected production and orders regarding the adjustment of labour.
In this paper the question of how expected output determines the demand for hours of work and employment is investigated more closely. An adjustment model for employment and hours per worker is discussed. This model leads to conclusions which modify the hypotheses of Topel (1982) and Rossana (1985). One feature of this model is the consideration of adjustment costs of recruitment and overtime premiums. The costs associated with the worker are not constant over time. Usually in the beginning of an employment relationship fixed costs arise. These fixed costs are caused by training expenditures and foregone output in the period when workers are settling into their new jobs. Other fixed costs are expenditures for search and screening by the employer. [ABSTRACT FROM AUTHOR]