The Federal Reserve Bank of Atlanta
By Ellyn Terry
A subtle shift appears to be emerging in the public discussion
of part-time employment in the United States. In monetary policy
circles, elevated levels of part-time employment have generally
been taken as a signal of lingering weakness in the labor market.
(See, for example,
.) In this view, the rise in the use of part-time workers is a
response to weak economic conditions, and the rate of part-time
utilization will return to something approaching the pre-recession
average as firms respond to strengthening demand by increasing the
hours of some of part-time staff who want more hours (thus reducing
the number and share of part-time workers who would like full-time
work) and by creating more full time jobs for those who want them
(thus reducing the share of involuntary part-time workers).
But some labor market observers interpret the recent rise in the
share of part-time jobs as more structural in nature-and hence less
likely to be remedied by demand-inducing strategies such as
monetary stimulus. If the arithmetic of having full-time or
part-time workers has changed (for example, we frequently hear
about increased compensation costs resulting from health care
changes associated with the Affordable Care Act), then employers
might lean more on part-time workers, at least while they can.
Employers might be more able to do so while there is an ample
supply of unemployed people and fewer full-time job opportunities,
or if technology has made it sufficiently easy to manage workers'
hours. Virginia Postrel at BloombergView recently wrote
about how technology is helping firms better manage part-time
employees. From that essay:
For many part-time workers in the post-crash economy, life has
become like endless jury duty. Scheduling software now lets
employers constantly optimize who's working, better balancing labor
costs and likely demand.
Perhaps the "demand" aspect of that passage refers to the level
of overall spending in the economy (a point made in
BloombergView piece that Postrel's column cites). But there is an
undeniable technological slant to this story-one that is not so
obviously about the condition of the economy. And based on
recent legislative proposals
out of Congress, some lawmakers seem to see an issue that is likely
to persist beyond the current business cycle.
So is our issue insufficient demand, about which monetary policy
can arguably do something, or is it a change in the nature of work
in the United States, which is arguably impervious to the effects
of changes in monetary policy?
Both of these questions seem valid, and reasonable perspectives
support both of them (see, for example,
). So as we try to sort this out, we turned to the Atlanta Fed's
Regional Economic Information Network
of business contacts and went to the source: employers
First, though, let's review a few facts. During the recession,
full-time employment fell substantially while the number working
time actually increased. Today, there are about 12 percent more
people working part-time than before the recession and about 2
percent fewer people working full-time hours. As the chart below
shows, this slow rebound in full-time employment-and the sustained
level of part-time employment-has resulted in a greater share of
employed working part-time: 19 percent of employed people are
working fewer than 35 hours compared with 17 percent of all
employed before the recession began.
To delve more deeply into these facts, we collected the
responses of 339 firms with at least 20 employees to two questions:
"Compared to before the recession, is your current mixture of
part-time and full-time employees different? Do you think your
current mixture will change over the next couple of years?" The
responses (presented in the chart below) are weighted by national
firm size and industry distributions.
About two-thirds of firms indicated their mixture of full-time
and part-time employees was not currently different than before the
recession began. One quarter of firms said they currently have a
higher share of part-time employees, and 8 percent have a smaller
share. Looking forward, 31 percent believe their workforce will
possess a greater share of part-time workers in two years than it
What did employers cite as the reason for the increase in
part-time employment? Firms that currently have a higher share of
part-time employees gave about equal weighting to cyclical and
structural factors, as the chart below indicates. Most chose the
options "Full-time employee compensation costs have increased
relative to those of part time employees" and "Business conditions
(sales) are not yet strong enough to justify converting part-time
jobs to full-time" as either somewhat important or very important.
These firms saw the other options - "Technology has made it easier
to manage part-time employees" and "More job candidates are willing
to take part-time jobs" - as less important.
The next chart shows that structural factors are on the minds of
employers, especially among firms who haven't yet increased their
share of part-time employees. Expectations of increases in the
compensation cost of full-time employees relative to part-time
workers were cited as the most important factor for all firms, but
the difference in the relative importance among expected
compensation costs and other factors was greater among firms that
have not yet increased their part-time share of employment.
Expected weak sales and future ample supply of people willing to
work part-time were also seen as somewhat important factors for
Do firms anticipate a return to their prerecession mix of
part-time and full-time employment? Although we didn't ask this
question directly, the next chart constructs an answer based on
their responses to our other two questions.
Compared with pre-recession levels, 34 percent of firms
indicated they expect the share of part-time employees in their
firm to be higher in two years. This segment includes the vast
majority (90 percent) of the 25 percent of firms who already have a
higher share now than before the recession and 12 percent of other
firms who currently have the same share but anticipate increases
during the next two years. Surprisingly, only about 2 percent of
firms increased their share of part-time workers but anticipate
decreases over the next two years (they are represented in the
above chart in the "no change" category).
To sum up, the results have something for people on either side
of the cyclical-versus-structural debate. Weak business conditions
and the increase in the relative cost of full-time employees have
been about equally important drivers of the increase in the use of
part-time employees thus far. Thinking about the future, firms
mostly cite an expected rise in the relative cost of full-time
workers as the reason for shifting toward more part-time employees.
So while there are some clear structural forces at work, a large
amount of uncertainty around the future cost of health care and the
future pace of economic growth also exists. The extent to which
these factors will ultimately affect the share working part-time
remains to be seen.
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