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Someone Notices the Decline in Hours

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Wednesday, 08 May 2013 04:39

Most coverage of the April jobs report celebrated the 165,000 new jobs reported for the month which was somewhat better than consensus predictions. Almost no one noticed the decline in the length of the average workweek. As a result of the fall in average hours, the April reduction in the index for total hours worked tied for the largest drop in the recovery.

Catherine Rampell does pick up on this point in a NYT Economix blog post today. Noting the decline, she raises the possibility that it is related to the Affordable Care Act, which requires firms that employ more than 50 full-time workers to either provide health insurance or to pay a penalty. Since the cutoff for a full-time worker in this provision is 30 hours per week, there would be an incentive to keep hours under this cutoff.

While Rampell expresses skepticism of this explanation, it probably deserves even less credence than she gives it. It is important to remember that this issue would only be relevant for firms that employ more than 50 workers and don't currently provide health insurance for their workers. The overwhelming majority of firms that employ more than 50 workers already provide health insurance. Furthermore, most workers are employed at firms that employ fewer than 50 workers and are not close to this cutoff.

The share of the workforce that could plausibly be affected by this cutoff would almost certainly be well under 10 percent. This means that we would have to see very large movements in hours for this group of workers in order to move the overall average. Also, this issue just became relevant in 2013 which will provide the basis for the firms' obligations when this provision of the ACA comes into effect next year. If the ACA is a big factor in the general trend in hours then we should be seeing a very different pattern in 2013 than we did in 2012. We don't.

The post also notes two industries that seem to be bucking the trend toward shorter hours, trucking and temporary employment. The pattern in these industries toward longer hours is striking, but it is worth noting that it is not new. Both industries have seen an upward trend in hours for more than two decades. (The figures show data for production workers rather than all workers. This group accounts for more than 80 percent of employment. Data for all workers is only available back to 2006.)

Truck Transportation

trucking hours

Temporary Employment

temp hours

Source: Bureau of Labor Statistics.

 

As can be seen, while both industries (especially trucking) show some cyclical variation, there is a clear upward trend in both sectors over this whole period. This means that developments in the economy in the last five years are probably not responsible for the recent rise in hours in these sectors.

 

Note: In comments DV tells us that the FT was on the job last Friday. Rex Nutting at MarketWatch also.

Comments (10)Add Comment
Wait For It
written by Last Mover, May 08, 2013 8:04
The reason for higher weekly hours in trucking and temporary employment is obviously structural unemployment since employers cannot find skilled workers for these jobs and were forced to increase hours worked by experienced employees due to uncertainty.

This also explains why the remaining jobs for which weekly hours declined face cyclical unemployment since no special skills are required for jobs facing suppressed demand.
FT noted fall in work hours
written by DV, May 08, 2013 8:27
The 0.4% fall in work hours was noted by FT soon after the jobs report. Here is the link: http://www.ft.com/intl/cms/s/0...z2SYruPccz (Reading between the lines of US jobs data, May 3, Robin Harding).
...
written by Rex, May 08, 2013 10:05
Dean: I was there early Friday as well. Dark side to jobs report: Big drop in hours worked. http://www.marketwatch.com/sto...2013-05-03
Wait for what?
written by jjmsan, May 08, 2013 10:44
If employers cannot fine skilled workers for jobs because of structural reasons, where are the temporary workers coming from?
there will be a change in policies...
written by pete, May 08, 2013 11:37
Currently the kind of health care provided by a lot of retail types is high deductible, low premuim. I.e., the perfect fit for healthy young folks in entry level jobs. It is basically catastrophic health care, the kind we really only need. If this changes to super plans like many of us enjoy, then the cost rises dramatically. Emanuel had a nice piece on this, suggesting that young folks be encouraged to buy health insurance, much like buying saving bonds in WWII. Hilarious.
...
written by PeonInChief, May 08, 2013 11:56
The reason firms of 50 employees provide health insurance of some kind to their employees is that they are large enough to get the better deals that small employers (fewer than 25 employees) can't get.
...
written by kharris, May 08, 2013 12:19
I'm pretty sure the second round of commentary from most bank economists mentioned the drop in hours. The correct thing to have written would have been that "just about everybody with any experience in reading the jobs report paid special attention to the drop in the workweek".
...
written by liberal, May 08, 2013 3:01
PeonInChief,

IIRC from my short years in a public policy consulting firm, it's also because smaller firms tend towards cheaper labor, so there's less room to provide benefits.
truck and temp hour trends
written by NWsteve, May 08, 2013 3:33
as a general recent trend, with both truck and temp hours rising, how much of the "gains" are the result of the growth of amazon, apple, ebay, etc.
...
written by watermelonpunch, May 08, 2013 4:12
@ DV - anything that FT reports is unlikely to be seen by the vast majority of people, since to even view that you have to register & you're pestered with a subscription sales pitch before you can see sentence one of that article.

@ jjmsan - you're obviously unaware of Last Mover's ongoing comment satire contributions.

@ Last Mover - LOL :)

@ PeonInChief - Thank you. I wish more people would repeat this truth more, because most people seem to be clueless about this unless their small employer (someone who would purchase the employee health insurance) shares with them the details of the issues involved in getting an affordable employee health insurance plan for a small group - some who might be in higher risk / higher premium categories.

I learned about this when I worked for a small company that did offer a decent insurance plan, but without prescription coverage - which some of us wanted (and one older employee really needed)... and it was shown to me the pricing issues involved. In order to get a prescription insurance plan that would've benefited exactly 2-3 of the 10 employees on the plan, it would've cost more than $150 per month, per employee. Obviously 7 or 8 employees were not going to want to pay that out of their pay when only 2 or maybe 3 employees would actually make out on it financially.
Didn't help that the owners of the business themselves would not have benefited financially from having a prescription plan. And certainly were not going to just give out a pay raise of that amount for all the covered employees by buying the prescription plan.

Until this was shown to me in black & white, I had no idea the pricing issues for small businesses, or the issues involved in choices made for plans for employees.
I think most people have no idea.

I worked for another small company... who had twice as many people on the health insurance plan, and even just 20 people in the pool seemed to get them a better deal. That company had cheaper per employee expenses, even with prescription & dental.
(In that case I knew the prices they were paying because of COBRA.)

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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