The job market balancing act
Turns out if you pay people more per hour, they don't need to work as much. Case in point: People want to work fewer hours than they did before March 2020, according to a working paper published recently by the Chicago Fed.
Why it matters: The findings suggest that the labor market is even tighter than many realize. Pay is better, especially for those at the bottom of the wage scale — and that means people aren't as desperate for more hours or a second job.
- "They had to work longer hours [before] because they were making lower wages," said economist Ayşegül Şahin, one of the paper's co-authors and a professor at the University of Texas, Austin.
By the numbers: Hourly pay is up 5.1% over the last year, according to the latest numbers from the Labor Department, higher than it's been in years.
- Lower-paying industries are seeing bigger raises; in leisure and hospitality, wages were up 14%, a recent Washington Post analysis found.
- The bigger chains are paying rates no one could've imagined pre-pandemic, like Target offering $24 an hour for certain jobs.
The big picture: This jobs recovery is very different from what happened after the financial crisis when pay stagnated and people couldn't find enough hours or the right jobs. There's less mismatch now.
- Back then, part-timers wanted full-time work. Baristas wanted to be editorial assistants, etc.
Where it stands: While this trend is good for workers, companies throughout the economy still face crippling worker shortages. And, as this study makes clear, at some point raising pay might actually make shortages worse!
- Meanwhile, some economists worry that ever-higher wages could contribute to more inflation.
- Oh, and, there are more jobs available than people to hire, as WSJ's Justin Lahart points out.
How it works: Şahin started surveying Americans about their desired work hours back in 2013 when she was a researcher at the Federal Reserve Bank of New York, as part of its Survey of Consumer Expectations.
- They asked people: “Assuming you could find additional work, how many hours would you want to work?” They also asked how many hours they actually worked.
- It's a broader way of looking at the potential labor force than the actual labor force participation rate, which only includes those working or actively looking for work and doesn't distinguish between part-time and full-time.
- This survey loops in students, retirees or those out of the workforce for longer — who might be ready to jump back in if given a good opportunity.
The bottom line: There is not a lot of "slack" in this labor market. Most folks are working about as much as they want.
Go deeper: Why there's a child care worker shortage