Full Employment and Annual Hours Worked

June 27th, 2013 at 4:44 pm

Appropos of nothing in the news, I wanted to share a figure from some forthcoming work on the benefits of full employment, benefits that are sorely lacking from our persistently slack job market (data courtesy of Heidi Shierholz of the Economic Policy Institute).

When the job market really tightens up, at least two good things tend to occur for less affluent working families: they find more hours of work at higher hourly wage rates.   And the least well-off benefit the most.

The figure below focuses on the first “good thing.”  It shows the percent change in hours worked in the paid labor market over three different business cycles, the 1980s (1979-89), the 1990s (1989-2000), and the 2000s (2000-07) by low, middle, and high-income households.   EPI sums up labor supply within each household, so that a household with a full-time worker (about 2,000 hours per year) and a half-time worker would count as 3,000 hours in the labor market.  The last set of column breaks out the unique period of moving to full employment–1995-2000–a period I’ve often emphasized as a living example of the benefits of truly tight labor markets.

Putting aside the uniquely weak 2000s recovery for a moment, the other sets of bars show that the hours worked by lower income households increased slightly faster than those with middle incomes, while high income households gained the least.  To be clear, that’s not because the wealthy households are lazy.  To the contrary, they’re already maxed out, with annual household hours around 4,000, implying two full-time, full-year workers and at least in this regard, they’re pretty insulated from recessions.

The experience in the 2000s make my point in reverse: in weak job markets, those at the low end get hit the hardest.  And visa-versa, as the economy move towards full employment in the 1atter 1990s, the predicted gradient is particularly clear, as seen in the more elastic response in hours worked by the least well off households.

One is remined that in our current job market there are about 12 million unemployed and 8 million part-timers who want but can’t find full-time work.  Doing the math–let’s see…carry the 9…that’s about a gazillion hours of lost labor, missing output, and for many, family hardship.



Source: EPI

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3 comments in reply to "Full Employment and Annual Hours Worked"

  1. urban legend says:

    Why hasn’t the President made “Full Employment” his central rallying cry — with every policy judged based on how much it contributes to that goal? It can’t be because it would be a political loser.

    • Jared Bernstein says:

      I think he doesn’t have a good answer to the first question he’d get: how you gonna get there?

      • SheilaGirl says:

        Simply put, it’s time for a new economic paradigm. One that ensures that the disparity between CEO and working class shrinks considerably. Can only do this if you can get the top % to give more to the rest, and not so much as they should pay more taxes( though, yes some should) as they should share more of the profits with all that contribute, accordingly. Seriously, most people work for a meagre existence, this isn’t right, anyone with a moral and socially responsible conscience couldn’t seriously thinks that is okay. Once the money is funnelled back into the broad society, more commerce leads to a healthier, more dynamic society. The new economy must focus on sustainable and life promoting industries, capitalism at what ever cost has got to be extinguished before the monster devours all the good things we so highly value, and cannot exist without. From clean air, water to healthy food, clean energies being a BIG one, as all others are so dramatically effected. Yes, time for a big change, starting with the education and the necessary business reforms to corporations and the top percenters, essentially the Power Elites. Power rarely concedes anything without being forced. One could hope there is a universal enlightenment among the top say, 5%, that would be really nice. The problem is the time for Hope has near run out.