Cyclical and market determinants of involuntary part-time employment

Abstract

The fraction of the U.S. workforce identified as involuntary part-time workers rose to new highs during the U.S. Great Recession and came down only slowly in its aftermath. We assess the determinants of involuntary part-time work using an empirical framework that accounts for business cycle effects and persistent structural features of the labor market. We conduct regression analyses using state-level panel and individual data for the years 2003-2016. The results indicate that the persistent market-level factors, most notably shifting industry composition, can largely explain sustained elevation in the incidence of involuntary part-time work since the recession.2

Why does part-time employment increase in recessions?

“…The extra detail available in the US data shows that, in a typical recession in that country, the number of part-time workers stating slack business conditions plays a predominant role in the increase in overall involuntary part-time work [3], [4], [5].…”

“…Taken at face value this suggests the prevailing increase in involuntary part-time employment reflects structural, as opposed to cyclical, factors. There is some US evidence suggesting that persistence in involuntary part-time work during the recovery is due to changes in the industry composition of employment [4], as well as evidence that the composition of involuntary part-time employment is shifting toward workers who cannot find a full-time job and away from workers on slack business conditions [3], [8]. On the other hand, the lack of signs of a strong recovery in both countries suggests elevated part-time employment may be a sign of weak economic conditions.…”

Are Payday Loans Harmful to Consumers?

“…A key factor in this increase in income volatility is the rise in part‐time work, on‐demand hours, and tenuous independent contractor arrangements. Twenty percent of employed individuals are working part‐time, the highest part‐time rate since 1983 (Valletta & Bengali, ). These part‐time jobs—and many full‐time jobs—come with less security and benefits than they used to, a third factor underlying financial instability.…”

The welfare effects of involuntary part-time work

“…In her 2014 address to the annual Jackson Hole Conference, Federal Reserve Chair Janet Yellen listed involuntary part-time work among the top labor market "surprises" worth worrying about (Yellen [2014]). Concomitant research by economists at the Federal Reserve suggests that the unusually elevated levels of involuntary part-time employment observed over the past years are partly explained by structural changes in the U.S. labor market (see Valletta and Bengali [2013]; Canon et al [2014]; Cajner et al [2014]; Valletta et al [2015]). 2 Recently, Borowczyk-Martins and Lalé [2016c] document that the probability to work part-time involuntarily faced by employed individuals has increased during the past four decades, in absolute terms and even more so relative to the probability of becoming unemployed.…”

“…They are classified as involuntary part-time workers for two reasons: if they cannot find a full-time job or if they work part-time because of slack demand conditions in their current job. 2 In Valletta et al [2015], structural changes refer to long-run changes in the demographic characteristics of workers, technology used in the workplace and the structure of labor costs. The Affordable Care Act, which dictates that employers in large firms must provide health insurance to their full-time employees, is an additional factor that could contribute to long-run changes in the U.S. labor market.…”