Still falling short on hours and pay

Part-time work becoming new normal

Report By Lonnie Golden
December 5, 2016 - Economic Policy Institute

What this report finds: An ongoing structural shift toward more intensive use of part-time employment by many employers is driving the elevated rate of involuntary part-time work. Over six years into an economic recovery, the share of people working part time because they can only get part-time hours remains at recessionary levels. The number working part time involuntarily remains 44.6 percent higher than it was in 2007. This growth is being driven mainly by a few industries.

Why it matters: 6.4 million workers want full-time jobs but are working only part-time hours. Involuntary part-time workers are not only earning less income than they would prefer, but suffer because part-time jobs offer relatively lower wage rates and benefit coverage, and have more variable and unpredictable work schedules.

How we can fix the problem: In addition to traditional expansionary policies that would heighten demand for more hours of labor, here are seven policies that would help curb the excessive use of part-time employment and address the harmful effects of involuntary part-time working.

Introduction and key findings

While average annual working hours of all workers rose 9 percent from 1979 to 2013 (Mishel 2013), this statistic masks a hardship faced by many workers in the United States. Particularly for middle- and low-wage earners, the key problem is often too few hours, and/or too variable hours. In other words, they would prefer to be working more hours, and to not have to navigate through erratic work hours or schedules.

Not getting enough hours is the “time-related” type of underemployment, a phenomenon where people may be working but not up to their desired amount, and it is a sign of labor underutilization in the economy.1 The monthly rate of workers in the U.S. labor market who are working “part time for economic reasons”—who are considered “involuntary” part-timers because they want to and are available to work full time—is the most consistent indicator of such underemployment. That rate is higher now that it was before the Great Recession and during the depths of the early 2000s recession. That it remains stubbornly high indicates that there is more labor market slack than is captured by the unemployment rate alone.2

Over six years into an economic recovery and economic expansion, as the unemployment rate has fallen, inadequate work hours are still a concern, as noted by many reporters, commentators, economists, and the chair of the Federal Reserve Bank.3 Indeed, the economic weight of involuntary part-time work has been an issue in the presidential campaign.4

There is not only an incomplete recovery in the labor market—which is likely inhibiting the strength of economic expansion—but greater labor market hardship for many workers than is apparent on the surface. Part-time employment generally comes with many disadvantages vis-à-vis full-time jobs, such as lower rates of overall compensation per hour and work schedules that are often less stable or predictable. When working part time is involuntary, the harms are compounded.

This report suggests that, in addition to cyclical forces (in this case, lingering effects of the recession), there is an ongoing structural shift in many businesses toward more intensive use of part-time employment, driving the elevated rate of involuntary part-time employment. Increased employer use of part-time positions is particularly evident in industries in which part-time jobs are already more prevalent, such as retail, and hotels and food service.

The report identifies and explains the monthly and annual trends in involuntary part-time work, the role of key industries driving much of those trends, the kinds of workers and industries most affected by part-time work, and the myriad challenges that workers in part-time jobs face. Following are a summary of the key findings:

Key findings

Trends and causes of involuntary part-time employment

• The share of people working part-time involuntarily remains at recessionary levels. In 2015, there were 6.4 million workers who wanted to work full time but were working part time, accounting for 4.4 percent of those at work; this is roughly 2.0 million more involuntary part-time workers, or a 1.3 percentage-point increase in the rate of involuntary part-time employment prior to the recession. In fact, data from 2007 to 2015 show that involuntary part-time work is increasing almost five times faster than part-time work and about 18 times faster than all work.
• It is this rise in involuntary part-time work that is driving an overall increase in part-time employment generally, as the share of the workforce working part time voluntarily has been stable since 2007. Thus, the “new normal” of underutilized labor primarily reflects the increased employer use of part-time employees and not any increased preference among workers for part time employment.
• The currently elevated level of part-time work—and of involuntary part-time work in particular—is no longer “cyclical,” i.e., it does not reflect a delayed and slow recovery, although reaching full employment could eventually yield a diminution in part-time work as workers are able to secure full-time employment.
• The structural nature of today’s involuntary part-time employment is evident in the decrease in workers who say they are involuntarily part time due to slack work. Involuntary part-time work has gradually decreased since 2009 but almost entirely because fewer workers are working part-time hours due to “slack work or business conditions,” which had ballooned during the Great Recession. Slack work is an indicator of cyclical business lows. In contrast, the share of those working involuntarily part time because they “could find only part-time” work (i.e., employers were offering only part-time work, indicative of structural factors) is just as high as it was at the end of the recession in 2009.
• Involuntary part-time work and its growth are concentrated in several industries that more intensively use part-time work, specifically, retail and leisure and hospitality. Retail trade (stores and car dealers, etc.) and leisure and hospitality (hotels, restaurants, and the like) contributed well over half (63.2 percent) of the growth of all part-time employment since 2007, and 54.3 percent of the growth of involuntary part-time employment. These two industries, together with educational and health services and professional and business services, account for the entire growth of part-time employment and 85.0 percent of the growth of involuntary part-time employment from 2007 to 2015.
• Trends in the reason for part-time employment by industry also suggest structural factors in play. In 2015, involuntary part-time workers made up 7.8 percent of all those at work in the retail sector. That is 3.4 percentage points higher than before the recession started, in 2007. Roughly 60 percent of this growth in involuntary part-time work reflects those who “could find only part-time work.” Involuntary part-time work was an even higher proportion of employment, 10.4 percent, in the leisure and hospitality industry in 2015, up 3.6 percentage points from 2007. Roughly half of this growth in involuntary part-time work reflects those who “could find only part-time work,” indicating structural factors were at least as important as cyclical factors.
• The suggestion that the “shared responsibility provision” of the Affordable Care Act (ACA) is behind some of the shift toward part-time work is not supported by the data. The provision requires that certain employers pay a fee if they don’t offer a minimum level of health insurance to employees working 30 or more weekly hours. Had these health care–related labor costs prompted employers to reduce more positions to part-time hours, there would be a number of trends in the data that suggest a structural change in involuntary part-time working or hours worked, and these trends do not appear.

Certain groups of Americans are most vulnerable to the burdens of involuntary part-time work

• Hispanic and black workers have been hardest hit by the structural shift toward involuntary part-time work. Hispanics and blacks are relatively much more likely to be involuntarily part-time (6.8 percent and 6.3 percent respectively) than whites, of whom just 3.7 percent work part time involuntarily. And blacks and Hispanics are disproportionate shares of involuntary part-time workers: together they constitute just 27.9 percent of those “at work,” they represent 41.1 percent of all involuntary part-time workers. The greater amount of involuntary part-time employment among blacks and Hispanics is due to their both having a greater inability to find full-time work and facing more slack work conditions. Black and Hispanic women (and women of “other race/ethnicity”) are the groups most likely to experience involuntary part-time employment and represented 21.1 percent of all involuntary part-time workers in 2015.
• Prime-age workers are a disproportionate share of involuntary part-time workers. Workers ages 25 to 54 comprised 57.8 percent (3.5 million) of all involuntary part-time workers (6.1 million) despite being only 44.0 percent of all part-time workers.
• Men and women are similarly afflicted by involuntary part-time working—with an incidence of 5.1 percent among women and 4.0 percent among men.
• The service occupations (e.g., healthcare support, food preparation, building and grounds maintenance, personal care, etc.) contribute the most to involuntary part-time employment, followed by sales. Service occupations provide 17.2 percent of all persons at work but represent double that share (34.5 percent) of all involuntary part-time workers. Sales and office occupations account for 26.8 percent of all involuntary part-time employment.
• Part-time workers work about half as many hours per week as full-time workers, with the clear adverse consequence of a corresponding reduction in one’s weekly earnings.
• The biggest disadvantage that part-time workers face is their relatively lower rates of pay and their benefit coverage. Prior research shows that the part-time wage penalty (the percent less in hourly wages that part-timers make relative to similar full-timers) is 19 percent for men and 9 percent for women. Part-time jobs, particularly those with the fewest weekly hours, also provide relatively less access to benefit coverage. Part-timers have only one-third the access to health insurance coverage as do full-timers—22 percent compared with 73 percent.
• Part-time workers must navigate varied and unpredictable hours. Part-time workers are much more likely to have work hours that vary from week to week—at a rate 2.5 times higher than among full-time workers. (Involuntary part-time workers face the most variability). Surveys show that part-timers also face greater irregularity in their work shift times and unpredictability in their work schedules.

Clearly part-time employment, especially involuntary part-time employment, has various adverse consequences. In addition to traditional expansionary policies that would heighten demand for more hours of labor, we need policy innovations to help curb the excessive use of part-time employment by many employers and address the harmful effects of involuntary part-time work. Remedies explored at the conclusion of this report include compensation parity for part-time jobs, reforms to unemployment insurance systems, an employee “right to request” changes in hours, and laws giving part-time workers priority access to increased hours of work that become available. Moreover, laws requiring that workers receive minimum pay for shifts that are canceled or schedules that are changed, along with unemployment insurance reforms would both incentivize reductions and mitigate the adverse impacts of involuntary part-time working.