Where Are the Workers? From Great Resignation to Quiet Quitting

Brandon Adams Comment: Fig 10 is interesting. Higher earners work more, and that was true in all years (07, 13, 19, 22). I only see one violation of monotonicity in all four years, which is remarkable (in 2022, 8th decile earners worked more than 9th decile workers). So in 39 of 40 observations, higher earners worked more. Individual labor supply curves are unknowable. When, if ever, they backward-bend is largely unknowable. It is interesting, though, that for 9th and 10th decile earners, working hours were greatest in 2007, followed by ’13, then ’19, then ’22. Research finds that Americans are working 3% fewer hours annually in the aftermath of the pandemic. This reduction in hours worked means labor markets are even tighter than LFP would imply. “…The negative impact of the Great Recession on aggregate hours worked and the ensuing slow recovery through 2019 materialized almost exclusively along the extensive margin. However, of the 3% decline in annual hours worked per person (including those who do not work) between 2019 and 2022, more than half is accounted for by the intensive margin. That is, focusing only on the extensive margin (lower employment and participation rates) will underestimate the total decline in labor supply by more than half. The most striking fact is the lower participation of young male cohorts without a bachelor’s degree, whose participation rate is up to 7pp below that of older cohorts at the same age. The Great Recession seems to be casting a very long shadow, even on those who were in their teens when it happened…”

Description automatically generated Bottom line, “To better understand the tight post-pandemic labor market in the US, we decompose the decline in aggregate hours worked into the extensive (fewer people working) and the intensive margin changes (workers working fewer hours). Although the pre-existing trend of lower labor force participation especially by young men without a bachelor’s degree accounts for some of the decline in aggregate hours, the intensive margin accounts for more than half of the decline between 2019 and 2022. The decline in hours among workers was larger for men than women. Among men, the decline was larger for those with a bachelor’s degree than those with less education, for prime-age workers than older workers, and also for those who already worked long hours and had high earnings. Workers’ hours reduction can explain why the labor market is even tighter than what is expected at the current levels of unemployment and labor force participation.”

Core findings

“…The negative impact of the Great Recession on aggregate hours worked and the ensuing slow recovery through 2019 materialized almost exclusively along the extensive margin. However, of the 3 percent decline in annual hours worked per person (including those who do not work) between 2019 and 2022, more than half is accounted for by the intensive margin. That is, focusing only on the extensive margin (lower employment and participation rates) will underestimate the total decline in labor supply by more than half….”

“…The decline in labor force participation is a continuation of a trend that existed before the pandemic. The most striking fact is the lower participation of young male cohorts without a bachelor’s degree, whose participation rate is up to 7 percentage points below that of older cohorts at the same age. The Great Recession seems to be casting a very long shadow, even on those who were in their teens when it happened….”

“…The decline in hours worked per worker (excluding those who do not work) between 2019 and 2022 was larger for men than for women. Among male workers, the decline was larger for those with a bachelor’s degree than those with less education, and for prime-age workers than older workers. Furthermore, the hours declined by more for workers who already worked longer hours and had higher earnings…”

“…Circumstantial and direct evidence indicates that the hours reduction among workers is voluntary. In addition, although the reduction may have been caused by the pandemic situation, it is expected to persist…”

Evidence

“…To understand the role of education in the difference in participation rates across cohorts, we construct the analogue of Figure 3 separately for the two education groups. In the left panel of Figure 4, we plot the deviation of the participation rates of younger male cohorts in the SMC- category from those of the 1966-67 cohort in the SMC- category. In the right panel, we do the same for those in the BA+ category. It is clear that the lower participation rates of younger male cohorts are largely driven by those with less education. Compared with the SMC- group of the 1966-67 cohort, the SMC- group of the 1991-92 and the 1986-87 cohorts has participation rates that are on average 7 percentage points lower. While the BA+ group of younger cohorts also has lower participation rates than the BA+ group of the 1966-67 cohort, the gap is smaller, 3 percentage points on average…”

“…Figure 5 is for women, the left panel for the SMC- group and the right for the BA+ group. The two education groups paint very dierent pictures. For the less educated, younger female cohorts have lower participation rates than the 1966-67 cohort, after they turn 30. To the contrary, the BA+ group of younger cohorts has higher participation rates than the BA+ group of the 1966-67 cohort, after they turn 30. These opposing patterns of the two education. group roughly offset each other, generating the that pattern around zero in the right pane of Figure 3….”

“…In the left panel of Figure 7, we repeat the decomposition, but separately for men and women. During the first period, men recorded more than double the fall in annual hours worked than women. The recovery during the second period was more even between men and women. In both periods, most of the adjustments occurred along the extensive margin. During the last period, it was again men who experienced a much larger drop in annual hours worked per person. For both men and women, the drop along the intensive margin was at least as large as along the extensive margin. The right panel shows the annual hours worked per worker (i.e., excluding those not working) for men and women since 2007. Working men log longer hours than working women, but the drop in hours since 2019 is much larger for men than for women. In addition, we see that working women’s hours actually increased since 2007, unlike working men’s….”

Decline of Hours Worked among Male Workers

“…In Table 1, we report selected percentiles of the annual hours worked distribution among men who worked in a given year. Because people report weekly hours, which we then multiply by 52, the values cluster to certain integers. For example, in all four years, the 25th percentile and the median are 2,080 hours of work during the year. Nevertheless, it is clear that those who work very long hours cut back on their hours between 2019 and 2022, evidenced by the signicant hours reduction at the 75th and the 90th percentiles, but not at the median. In 2019, one had to work for at least 2,860 hours to rank in the top 10 percent of workers working longest hours. In 2022, he needed to work only 2,600 hours to win this dubious honor. We can also examine the reduction in annual hours across the earnings distribution. For each year, we construct earnings deciles and compute the average hours worked of male workers in each decile. The result is in Figure 10….”

“..We make two observations. First, the average hours worked in a given earnings decile remained fairly stable between 2007 and 2019. Second, the average annual hours worked between 2019 and 2022 declined in all deciles except the lowest two, but declined more at the higher end of the earnings distribution. Male workers in the ninth and the top deciles of the 2022 earnings distribution worked 67 and 77 fewer hours than those in the respective earnings decile in 2019. In summary, it is male workers working long hours and earning more that reduced their annual hours worked between 2019 and 2022….”

Dain Lee, Jinhyeok Park and Yongseok Shin, “Where Are the Workers? From Great Resignation to Quiet Quitting,” National Bureau Of Economic Research, January 2023, https://www.nber.org/papers/w30833