Employment, Unemployment

& Part-Time Employment

The structure of the U.S. economy has been changing.

It once had a primarily industrial base, but it has been moving toward a high-technology, service-oriented economy.

The practice of outsourcing has become increasingly common.

Outsourcing occurs when companies contract out work rather than doing it in-house.

Outsourcing allows the company to avoid overhead costs associated with pensions and rising health insurance premiums.

Types of Unemployment

Frictional Structural Cyclical

Frictional Unemployment

• Occurs when new entrants and reentrants enter the labor force, and when workers are between jobs, either having just quit or lost their last jobs.

• Occurs even when there are enough appropriate jobs available, because it takes time to find a job.

Structural Unemployment

• Occurs when those looking for work do not have the right skills or are not in the right location to fill the vacancies that exist.

• Is more persistent than frictional unemployment because these difficulties are not easily or quickly remedied.

Cyclical Unemployment

• Is associated with an overall deficiency in demand.

• Occurs when there is an excess of workers relative to the number of unfilled positions.

Frictional and structural unemployment exist to some extent, even when there is no deficiency in demand.

The natural rate of unemployment or full employment unemployment rate is the acceptable rate of unemployment that exists in a healthy, active economy.

The natural rate of unemployment had been believed to be around 5 or 6 percent but may be lower than that.

This graph shows unemployment rates in 2007, just prior to the recession, when the overall unemployment rate was low, and in 2011, when unemployment rates remained quite high after the recession. Unemployment rates are higher among Blacks than among Whites. Unemployment rates are higher among teenagers than among those over 20.

Discouraged workers

These are workers who would like a job, but have not looked for work in the prior four weeks because they believe they would not find employment.As of 1994, to be classified as a discouraged worker, an individual must be available for work and have looked for work in the past year.

Underemployment

Occurs when workers have to

• take jobs for which they are clearly over-qualified, or

• work fewer hours than they would like.

Definition of full-time versus part-time employment

full-time: at least 35 hours per week

part-time: less than 35 hours per week

When an individual works part-time because he/she is unable to find full-time employment.

Part-time for Economic Reasons or Involuntary Part-time

Gender Differences in Unemployment and

Involuntary Part-Time Employment

In the past, women have been less attached to the labor force and had higher turnover rates than men. Women were more likely to be new entrants or reentrants to the labor force. They were, therefore, more likely to be frictionally unemployed as they searched for jobs.

On the other hand, unemployed women are more likely to drop out of the labor force than men, especially during recessions. (So the unemployment rate of women rises less than that of men during recessions.) They are then counted as “out of the labor force” instead of unemployed.

Women are more likely to be employed in the service sector, which has a higher unemployment rate than some sectors.Men, however, are more likely to be employed in blue-collar jobs and in durable manufacturing, where there are more layoffs and also high unemployment rates. There is greater cyclical variation in employment in blue-collar jobs and in durable manufacturing, with employment increasing more in economic upswings and declining more in downturns.On balance, the occupational distribution appears to lower the female unemployment rate relative to the male rate.

Prior to 1980, the net effect of these opposing forces was that women’s unemployment rates were higher than men’s.Beginning in the 1980s, women’s unemploy-ment rates have been about the same as men’s and, during recessions, even lower.

• There has been an increase in women’s labor force attachment, which has reduced their turnover rate relative to men’s.

• The disproportionately female service sector has expanded relative to the disproportionately male manufacturing sector.

Some Possible Reasons for this Change

Regarding part-time for economic reasons, a larger proportion of women than men are involuntary part-time workers.

The reasons here are not clear and may be either supply or demand based.

Employment Outcomes of Workers Displaced from their Jobs

Older workers who lose their jobs are less likely to find re-employment and more likely to be unemployed or to drop out of the labor force.

This is probably because of the difficulty of retooling, the decision to take early retirement, or age discrimination.

Women workers who lose their jobs tend to be more likely than men to drop out of the labor force.

This may be because traditional gender roles make it easier for women to fall back on the homemaker role, as well as because difficulties women face in the labor market lower the probability of re-employment and the rewards to extended search.

Nonstandard Work Force

“individuals whose employment is arranged through an employment intermediary such as a temporary help firm, or individuals whose place, time, and quantity of work are potentially unpredictable.” [BLS definition]

4 Categories of Alternative Arrangements

• temporary help agency workers (“temps”) - employed by agencies & sent out to other businesses as needed

• on-call workers - employed as needed, generally for a short time (includes substitute teachers & construction workers supplied by a union hiring hall)

• contract workers - employed by a firm that contracts out employees or services to other companies

• independent contractors or freelance workers - individuals who obtain customers on their own to whom they provide a product or service

Women’s share of employment in nonstandard work is 39% overall (lower than their 48% share in regular employment).Women are over-represented among temps and under-represented among independent contractors and contract firm workers.

Nonstandard Workers: Racial Representation

• Blacks and Hispanics are heavily represented among temporary workers and underrepresented among independent contractors.

• Hispanics are also underrepresented among contract firm workers.

Nonstandard Workers: Occupations

• Many independent contractors are employed in executive & managerial positions, as well as professional & sales jobs.

• Workers from contract firms are often in professional specialties (such as computer programming), service occupations (such as landscaping & janitorial work), and skilled blue-collar occupations including precision production & craft jobs.

Education among Nonstandard Workers

% of Workers with Bachelor’s Degree or more:

Contract firm workers 38.9

Independent contractors 34.3

Traditional workers 31.1

On-call workers 27.9

Temps 21.2

Nonstandard Workers: Earnings & Benefits

• Independent contractors and contract firm workers tend to earn more than workers in traditional arrangements; on-call workers & temps earn less.

• While workers in all alternative arrangements are less likely than those in traditional arrangements to be covered by health insurance & pensions, independent contractors & contract firm workers are more likely than on-call workers & temps to to be covered.

The category of part-time workers shares some of the same problems as those in nonstandard employment, such as often having limited training and promotion opportunities and receiving few if any benefits.

Some Reasons for Nonstandard Work• Small and medium-sized firms may benefit from the

use of contracted services in specialized areas like computer support, since it may not be cost effective for them to hire staff whose skills are only used occasionally.

• If production is characterized by peak and off-peak periods, firms may find it more cost effective to contract out during peak periods, to avoid keeping excess staff or incur repeated hiring and firing costs.

• Nonstandard jobs can be attractive to students, the semi-retired, and homemakers in need of flexibility because of family responsibilities.

Possible Reasons for Increase in Nonstandard Workers

• The cost of benefits, especially health insurance, has increased, providing additional incentive for firms to use nonstandard workers to avoid these expenses.

• There has been an increase in the number of small firms, who are particularly likely to benefit from contracting out for specialized services.

• Judicial decisions have imposed increased restrictions on the doctrine of “employment at will,” the concept that allows an employer to fire any employee for any reason at any time.

Self-EmploymentTrends and Patterns

A higher percentage of men than women are self-employed.

The gender gap in self-employment has decreased slightly in the last few decades.

There are some factors that might make self-employment particularly attractive to women.

It may provide greater flexibility to combine work and family responsibilities.

It could be an avenue of escape from the glass ceiling that limits women’s advancement in the wage and salary sector.

It could also provide a possible route out of poverty for low-income women; a small amount of financial and technical assistance is available to low-income women for starting their own businesses.

Research generally finds that female self-employed workers earn less than wage and salary workers with the same qualifications.

However, this aggregate finding may mask differential effects by occupation.

Self-employed women in professional occupations appear to earn more than wage and salary workers. This finding is consistent with the idea that, for these women, self-employment provides an expansion in opportunities.

Self-employed women in non-professional occupations, however, earn less than wage and salary workers. For many of these women, self-employment may serve as a means to increase workplace flexibility.

For men, the evidence is mixed. Some studies have found higher earnings for the self-employed, but one study reported lower earnings.

Overall, the evidence suggests that many women and some men may forgo some earnings in exchange for greater autonomy.

Thus, the lower earnings of some self-employed individuals may represent a compensating differential.

Self-employment rates among black men and women are lower than for other racial/ethnic groups, in part due to the fact that they tend to have fewer assets and less access to credit than other groups.