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Has the Willingness to Work Fallen During the Pandemic?

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Abstract

We examine the effect of the Covid pandemic on willingness to work along both the extensive and intensive margins of labor supply. Special survey questions in the Job Search Supplement of the Survey of Consumer Expectations (SCE) allow us to elicit information about individuals’ desired work hours for the 2013-2021 period. Using these questions, along with workers’ actual labor market participation, we construct a labor market underutilization measure, the Aggregate Hours Gap (AHG), following Faberman et al. (2020). The AHG captures changes in labor market underutilization for the full population along both the extensive and intensive margins using data on desired work hours as a measure of their potential labor supply. We find that the sharp increase in the AHG during the Covid pandemic essentially disappeared by the end of 2021. We also document a sharp decline in desired work hours during the pandemic that persists through the end of 2021 and is roughly double the drop in the labor force participation rate. Ignoring the decline in desired hours overstates the degree of underutilization by 2.5 percentage points (12.5%). Our findings suggest that, as of 2021Q4, the labor market is tighter than suggested by the unemployment rate and the adverse labor supply effect of the pandemic is more pronounced than implied by the labor force participation rate. These discrepancies underscore the importance of taking into account the intensive margin for both labor market underutilization and potential labor supply.

Suggested Citation

  • R. Jason Faberman & Andreas I. Mueller & Ayşegül Şahin, 2022. "Has the Willingness to Work Fallen During the Pandemic?," Working Paper Series WP 2022-08, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:93800
    DOI: 10.21033/wp-2022-08
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    Cited by:

    1. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2023. "Long Social Distancing," Journal of Labor Economics, University of Chicago Press, vol. 41(S1), pages 129-172.
    2. Robert A. Hart, 2023. "Hours vs employment in response to demand shocks," IZA World of Labor, Institute of Labor Economics (IZA), pages 393-393, February.
    3. Carrillo-Tudela, Carlos & Clymo, Alex & Comunello, Camila & Jäckle, Annette & Visschers, Ludo & Zentler-Munro, David, 2023. "Search and reallocation in the COVID-19 pandemic: Evidence from the UK," Labour Economics, Elsevier, vol. 81(C).
    4. William D. Craighead, 2022. "Pandemic Preference Shocks and Inflation in a New Keynesian Model," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 50(3), pages 133-146, December.
    5. Forsythe, Eliza & Kahn, Lisa B. & Lange, Fabian & Wiczer, David, 2022. "Where have all the workers gone? Recalls, retirements, and reallocation in the COVID recovery," Labour Economics, Elsevier, vol. 78(C).
    6. Oleksiy Kryvtsov & James (Jim) C. MacGee & Luis Uzeda, 2023. "The 2021–22 Surge in Inflation," Discussion Papers 2023-3, Bank of Canada.
    7. Beckmannshagen, Mattis & Schröder, Carsten, 2022. "Earnings inequality and working hours mismatch," Labour Economics, Elsevier, vol. 76(C).
    8. Joseph Richardson, 2023. "Health Risks and Labour Supply," Working Papers 379420583, Lancaster University Management School, Economics Department.
    9. Sargent, Kristina, 2023. "The labor market impacts of Brexit: Migration and the European union," Economic Modelling, Elsevier, vol. 121(C).

    More about this item

    Keywords

    labor market slack; Covid pandemic; desired work hours; potential labor supply;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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