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Why Hasn’t Full-time Employment Recovered?

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Since the end of the Great Recession in June 2009, the number of full-time employed in the United States is 2.2 million below its 2007 pre-recession peak (Figure 1). Although, the number of individuals working part time has remained high, it’s starting to decline (Figure 2). Part-time work increased during the recession, which is typical. The increase was high, which is not surprising given the magnitude of the recession. However, the persistence of part-time work levels in the ongoing recovery and expansion is unusual because it’s accompanied by a slow recovery in the number of full-time workers.

Why do people work part time? The Bureau of Labor Statistics (BLS) differentiates between economic and noneconomic reasons. One economic reason is that workers who prefer full-time work are typically regarded as involuntary. They are working part time because in slack times businesses cut back employee hours. Sometimes workers can’t find full-time work.

Noneconomic reasons involve voluntary part-time workers who work part time because of medical needs, child-care issues, other family or personal obligations, school or retirement.

Most part-time work is for noneconomic reasons. Part-time work for economic reasons rises in recessions and falls in recoveries (Figure 3). This is an example of what economists call “cyclical” unemployment. The increase during the Great Recession was especially large, and there is still a high prevalence of involuntary part-time employment.

When people who want to work lack the skills employers are demanding, economists call it “structural” unemployment. Analysis of part-time work for economic reasons shows that part-time work levels are due to business slack that is still above pre-recession levels and continuing to fall (Figure 4). The continued high incidence of individuals working part-time for economic reasons can be traced to the slow recovery of jobs lost during the Great Recession rather than a permanent shift toward part-time jobs. There have been alternative explanations of the persistent high level of involuntary part-time work. These include:

  • limited education of some prime-age workers age 25 to 54 (Figure 5) and
  • the 30-hour cutoff for employee health benefits under the Affordable Care Act (ACA).

The first explanation is a structural issue. It relates to the skills and education of the workforce. The United States faces some daunting educational challenges to prepare people to work in a globalized economy. Effective solutions for structural employment begin with improved education, which tends to be expensive and take a long time to pay off. To achieve full employment, skill mismatches between workers and employers must be resolved. Otherwise, the economy could grow, but there wouldn’t be enough qualified workers to fill the vacancies.

The second explanation reflects employers’ incentive for creating part-time jobs to avoid paying health benefit costs. Part-time employees usually work less than 35 hours weekly. Recent research suggests the ultimate increase in the incidence of part-time work in response to the ACA provisions is likely to be temporary and small. In Hawaii, for example, part-time work increased only slightly in the 20 years following enforcement of a state employer health-care mandate. Also, as occurred after Massachusetts’ implementation of a similar law, the increased cost may cause firms to shift compensation from wages to health care.

Many articles and blogs have taken issue with the type of employment growth in the current economic recovery and expansion. Interestingly, the complainants maintain that part-time jobs displace full-time positions and cause a fundamental change in the labor market. Such complaints have existed since the 1991 recession.

The lack of new full-time jobs has contributed to the modest recovery in the U.S. economy, including the housing market. Whether a prospective homebuyer works fulltime or part time is key when deciding to purchase a home. It also affects consumption behavior and the demand for goods and services because part-time positions include fewer benefits.

Going forward, involuntary part-time work should be monitored to asses if working part time for economic reasons reflects the slow recovery in full-time employment rather than permanent changes in the proportion of part-time jobs.

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part-time by economic reasons

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