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Is Your Economy Improving Only Part-Time?

November 21, 2014

“The economy is improving… the recession is finally over… more jobs are being created.” While all these statements are correct, the one labor/employment number that hasn’t gotten more headlines (but should have) is this: the number of workers who are employed in part-time jobs because they can’t find full-time work is actually larger today than it was before the recession.

While the level of involuntary part-timers has declined in construction and manufacturing (many of these workers have found full-time jobs within a year), the retail and hospitality sectors stubbornly remain as bastions of part-time workers.

About 3.3 million full-time jobs were created in the last year, but even with this improvement, the full-time employment level is still about 2 million jobs short of pre-recession 2007 levels, according to figures from the Federal Reserve of Atlanta.

Many are quick to blame the Affordable Care Act (ACA) or “Obamacare” if you prefer that terminology; it mandates employers with more than 50 full-time employees provide workers with health insurance. Workers hours are being cut in an effort to dodge the requirement. However, reports from the Robert Wood Johnson Foundation and the Urban Institute suggest that while part-time work has increased this year above what could be expected, the increase doesn’t apply to part-time jobs below the ACA 30-hour threshold. If businesses were chopping workers hours for expressly this reason , we would see a lessening of average work week hours – but just the opposite has occurred in the travel/hospitality sector.

Wage data should also point to businesses favoring p/t over f/t, but full-time employee wage growth, while still anemic, has outperformed part-time wages, according to the Atlanta Fed.

What we are seeing is the growth of the so-called involuntary part-time worker, millions of people in the U.S. who would like to work a full-time position, but can’t find one and have to settle for a part-time position… or even two or three of these p/t jobs. That is exactly my situation.

The big unanswered question: is this a temporary cyclical problem, one that will minimize over time as the economy improves, or is it more structural and permanent, the result of a decades long shift away from a manufacturing economy and toward one centered around the service sector?

Most analysis I’ve seen on this say the problem isn’t exclusively cyclical or structural, but instead a mix of both. Stubbornly persistent economic uncertainty coupled with rising labor costs, including higher minimum wages in many states, ACA mandates and overall business regulation contribute to the growth of part-time work. But businesses aren’t paying higher wages to part-time workers as compared to their full-time counterparts; this would be a clear indicator of changes in hiring preferences.

Janet Yellen, chairwoman of the Federal Reserve, has highlighted the problem that there are still too many people who are working part-time but would instead like to be working full-time. As one of the millions, I applaud her efforts to bring attention to this problem.

This has important implications for the Fed. If the shift is truly structural, we should see wages rise. This indicates the Fed would move to raise interest rates. However, if cyclical, the Fed has a little more wiggle room on rates. Only time (and more data) will tell.

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