Wednesday, January 1, 2014

Shorter Workweeks are Likely in the New Year

Copyright, The New York Times Company

Three economic forces are pushing toward shorter workweeks for employees during the new year.

The red line in the chart below is a monthly index of the employment-to-population ratio, normalized to a value of 100 in December 2007, when the recession began. In this series, each employed person counts the same, regardless of how many hours she or he works.

Average weekly hours of private employees (blue line) have returned to the level last seen before the recession of 2008-9, shown as gray area. But the percentage of Americans with jobs (red line) plummeted in the two years after the recession began and has remained steady since then.Federal Reserve Bank of St. Louis Average weekly hours of private employees (blue line) have returned to the level last seen before the recession of 2008-9, shown as gray area. But the percentage of Americans with jobs (red line) plummeted in the two years after the recession began and has remained steady since then.

By that measure, there has been hardly any labor market recovery because, as indicated by an index value of 93, employment per capita still remains 7 percent below what it was before the recession began.

Average weekly hours of private-sector employees (the blue line) returned comparatively quickly to near their prerecession level and have maintained that level over the last two years.

I predict that average weekly work hours will decline again over the next year because fiscal policy is now switching from penalizing part-time work to rewarding it.

Since 2008, government benefits for the long-term unemployed have served as a penalty for part-time work, because unemployment benefits are largely – if not entirely – withheld when an unemployed person accepts a part-time position. Moreover, people moving to part-time work from either full-time work or unemployment will find that the move renders them eligible for fewer benefits the next time they are laid off from a job.

Many of the part-time-work penalties disappear this week when the federal government stops paying long-term unemployment benefits (short-term unemployment benefits will continue, and they embody some of the same incentives), although the penalties would reappear should Congress resurrect the program.

Full-time work has traditionally offered health and other benefits that part-time jobs rarely do, and those benefits have kept a number of workers in full-time positions. The Affordable Care Act aims to end that advantage, by giving workers opportunities to obtain insurance outside the workplace.

In addition, in some cases the new insurance opportunities can be so inexpensive compared with employer insurance that people stand to, paradoxically, have more disposable income from working part time than they do from working full time.

The third economic force is that in January 2015 the Affordable Care Act begins to penalize employers that do not offer affordable health insurance, except that part-time employees (working less than 30 hours or four days a week) are exempt for the purposes of determining the penalty. This is another reason that part-time work – especially positions with 29-hour weekly work schedules – would increase at the expense of full-time work, at least if the mandate goes ahead as planned.

All together, it looks like many of the jobs in the new year will involve less work.


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