Negative Impact of Uncertainty in Demand on Working Part-Time for Economic Reasons after the Great Recession

Description

After the Great Recession, an important constitution of underemployment is workingpart-time for economic reasons -- willing to work full-time but are working less than35 hours per week because of slack work or unfavorable business conditions, inability tofind full-time work, or seasonal declines in demand. This project will investigate howuncertainty in demand for goods that firms produce affects the firms' cyclical behaviorsof converting full-time jobs into part-time and recruiting part-time workers instead offull-time. These two dynamics will be matched to working part-time because of slackwork or unfavorable business conditions and inability to find full-time work,respectively, during business cycles.In contrast to the recent research of voluntary part-time employment on workers' supplyside, the project will explore the involuntary part-time employment on firms' demandside in the labor market. According to the date from Current Population Survey,immediately after the Great Recession, firms doubled the number of full-time workerswho were converted into part-time because of slack work or unfavorable businessconditions. Even though this number has been decreasing gradually since 2009, the levelof working part-time because of inability to find full-time work has caught up.We will first study this involuntary part-time employment in a theoretical search andmatch model with full-time and part-time jobs. Then we will quantify the pass-througheffect of fluctuations in households' demand for final goods that firms produce onfluctuations in firms' demand for part-time workers (relative to full-time) at industrylevel, using data from Current Population Survey, Consumer Expenditure Survey, Bureauof Economic Analysis, and the Conference Board. From the now-available part of data,we see that firms substitute a lot of part-time workers for full-time in the industries ofservices and construction, but not so many in agriculture; the expenditure recovers veryfast in food, slower in housing, and slowest in services. We propose two ways of thinkingof the problem: income elasticity of demand, and durable versus nondurable. Food isinelastic and nondurable, so the demand for it should not drop too much and recoverfast. Housing is inelastic but durable, so the demand for it dropped a lot but increasegradually after the crisis. Service is elastic and nondurable, so it has the slowestrecovery process.