The Welfare Effects of Involuntary Part-time Work

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Abstract

Employed individuals in the USA are increasingly more likely to move to involuntarily part-time work than to unemployment. Spells of involuntary part-time work are different from unemployment spells: a full-time worker who takes on a part-time job suffers an earnings loss while remaining employed, and is unlikely to receive income compensation from publicly provided insurance programmes. We analyse these differences through the lens of an incomplete-market, job-search model featuring unemployment risk alongside an additional risk of involuntary part-time employment. A calibration of the model consistent with US institutions and labour market dynamics shows that involuntary part-time work generates lower welfare losses relative to unemployment. This finding relies critically on the much higher probability to return to full-time employment from part-time work. We interpret it as a premium in access to full-time work faced by involuntary part-time workers, and use our model to tabulate its value in consumption-equivalent units.
Original languageEnglish
JournalOxford Economic Papers
Volume70
Issue number1
Pages (from-to)183-205
Number of pages23
ISSN0030-7653
DOIs
Publication statusPublished - 2018

Bibliographical note

Published online: 10. August 2017

Keywords

  • Business Fluctuations
  • Cycles
  • Consumption
  • Saving
  • Wealth
  • Labor force and employment
  • Size
  • Structure

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