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In the Nation's Interest

Is It Good or Bad to Work Part Time? Pros and Cons for the Economy

Just this week I took my very first Uber ride.  My driver, Anwarul, cheerfully told me how he’s a part-time, IT support person as his primary occupation, but loves how he’s been able to fill in some of the gaps in his regular work by driving for Uber.  He gets to earn extra income, meet new and interesting people, and put himself and his car to full use.  On my side, I loved the convenience and low cost of the whole experience.  What a good example of how technological advances and the “sharing economy”—with all its new, flexible work arrangements and innovative customer services—are a wonderful, beautiful thing. 

In May I wrote about the rise in part-time employment in the U.S. as just one part of what seems to be emerging as the “new normal” for our economy. As I emphasized, the rising trend in people working part time for “noneconomic” reasons (i.e., by choice) over the past several decades is explained in large part by rising female labor force participation and the growth in the relative size of the service-providing sector.  The latter trend is at least partly explained by what seems to be people’s growing preference for consuming “experiences” more than “things” (which I wrote about here).  Most recently, younger men entering the workforce have started to look more like younger working women in terms of choosing part-time over full-time work.  This is likely a reflection of a new generation of men who seem to be participating more in what economists call “household production” (a.k.a., duties on the home front).

Citing a new study, the Christian Science Monitor’s Schuyler Velasco wrote that 63 percent of employees in fields “that typically have traditional work schedules” felt that “a fixed, 9 to 5 workday was an outdated concept.”

There are many good economic reasons for and positive outcomes associated with this trend of rising part-time employment, but there are also some not-so-good and unanticipated consequences.

First, the good: 

(i) Greater flexibility.  Part-time work can be one way to achieve more flexibility in work schedules and thus improve the overall quality of and satisfaction with one’s job.  The most recent OECD economic survey of the United States lists “work-life balance” as a key characteristic of a “good job,” citing a Gallup survey showing that “some employers are recognizing that such good jobs can also mean good business…help[ing] to attract and retain good workers, leading to savings in recruitment and gains in productivity, among other benefits.”

Having a flexible work schedule is important to both young Millennials and old(er) Baby Boomers.  Millennials want time to care for and enjoy their young children (see this Forbes blog by Karyn Twaronite and this New York Times piece by Claire Cain Miller).  Baby Boomers want more time to enjoy their life, even or especially as “empty nesters” (see this Boston College study).   I am looking forward to getting there myself in a couple more years!

(ii) Increased productivity.  A more mobile and agile labor force is good for productivity.  In a recent Conference Board report, “Prioritizing Productivity,” the very first of four principles for a business “productivity strategy” is that “The workforce matters most.”  The report notes (emphasis added):

Business leaders believe that productivity is best achieved by strengthening their workforce through in-house improvements.  In this regard, they also need to take into account important opportunities that arise from changes in the demographic composition of the labor force.  For example, companies should leverage the greater availability of higher educated and skilled women, compared to even a decade ago; and they should facilitate innovative work conditions for a larger contingent of older employees such as phased retirement and transfer of knowledge between different age groups in the workforce through mentoring programs.

The OECD’s recent Future of Productivity study (summarized in these charts from CED’s latest member update call) explains why greater freedom of movement of workers—across jobs, occupations, industries, and geographies—lets resources flow more easily to their highest-valued uses.  Part-time jobs are often easier to start and stop than are full-time jobs since the hiring and termination processes can be less cumbersome. This helps employees move more easily to better options and employers achieve greater continuity and efficiency with their workforce.

But, researchers have recently identified some not-so-good economic effects of the rising trend in part-time work: 

(i) Job polarization. In their May 2015 study on economic inequality, the OECD identifies the growth in part-time work as a factor contributing to rising inequality.  Women and the young, the two groups who most value flexibility, are overrepresented among “non-standard” workers (which include those in temporary, part-time, and self-employment work arrangements). But most non-standard jobs also pay lower hourly wages and are held disproportionately by workers with less education.  The OECD argues (see chapter 4 in particular) that the growth in non-standard employment has thus contributed to “job polarization” (the disappearance of middle-class jobs) and increased income inequality.

(ii) Lack of benefits. Highlighting another downside, the Bureau of Labor Statistics (BLS) reports in the June 2015 Monthly Labor Review that most part-time workers do not receive employer-provided benefits.  Part-time work is most prevalent in the service-providing industries, which are growing as a share of the economy.  For example, 60 percent of total jobs in the accommodation and food services industry are part-time jobs.  Meanwhile, in the goods-producing sector and the major industries of construction, manufacturing, mining, and utilities, just 5 percent or fewer of total jobs are part-time:

The BLS also finds that among both the “lower hour industries” (the largely service-providing industries) and the “higher hour industries” (more of the goods-producing industries), part-time workers are much less likely to receive important benefits such as retirement savings plans and employer-provided health insurance, as shown in the charts below.  The BLS finds the discrepancy in access to benefits between part-time and full-time workers is greater in the higher hour industries where full-time jobs are more prevalent and part-time jobs less common.  The BLS report does not speculate as to the “why,” but I suspect the explanation has much to do with the fact that higher hour industries tend to be older, goods-producing industries with relatively male workforces.  Companies with lots of part-time workers have more incentive and opportunity to “learn” how to employ and satisfy part-timers.

(iii) An enduring gender gap?  Finally, Harvard economist Claudia Goldin suggests women just can’t win or at least can’t catch up with the men, whether they find flexibility within a full-time job or via a non-standard arrangement. That is, the various types of “temporal flexibility” are a “prized benefit” for women (working mothers in particular) but come at “a high price in terms of earnings.”  She summarizes her January 2014 American Economic Association presidential address as follows (emphasis added):

The converging roles of men and women are among the grandest advances in society and the economy in the last century.  These aspects of the grand gender convergence are figurative chapters in a history of gender roles.  But what must the “last” chapter contain for there to be equality in the labor market?  The answer may come as a surprise.  The solution does not (necessarily) have to involve government intervention and it need not make men more responsible in the home (although that wouldn’t hurt).  But it must involve changes in the labor market, especially how jobs are structured and remunerated to enhance temporal flexibility.  The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours.  Such change has taken off in various sectors, such as technology, science, and health, but is less apparent in the corporate, financial, and legal worlds.

So, there are really two edges to this part-time sword.  On the one hand, the part-time option can add flexibility and “work-life balance” to the lives of working families of all types, and particularly for working moms.  That flexibility can help employers attract and retain high-quality employees who would otherwise choose not to participate in the labor force.  That improves the bottom line for businesses and the economy’s overall level of productivity.  On the other hand, the part-time option increases employers’ flexibility in their hiring and compensation practices, which can either benefit or harm particular workers.  If flexibility comes at the price of lower pay and benefits, then the rising trend in part-time employment could be perpetuating and worsening economic inequality—both between lower-wage and higher-wage workers, as well as between those workers who seek more flexible work arrangements and those who do not.