Association for Public Policy Analysis & Management

The Great Recession reached every corner of the American economy, but the lasting impacts of the recession are felt more by some than by others. While unemployment and unemployment duration were the major headlines during and after the Great Recession, the labor market showed many other symptoms of distress. While most indicators of economic distress, such as the civilian unemployment rate, the ratio of long term unemployed relative to the unemployment rate, and discouraged workers have receded from the highs experienced during the Great Recession and in the expansion that followed, the ratio of workers employed part time for economic reasons to the unemployed has remained at an elevated level throughout the economic expansion to the present (Sederberg, 2018). Experiencing an involuntary reduction in hours of employment, and thereby income, can deal a devastating blow to workers who are unable to utilize other sources of income or wealth to smooth consumption. However, workers employed part time for economic reasons, unlike the unemployed, are unlikely to qualify for transfer payments that could assist in weathering the financial storm. This research parallels that for unemployment, similar to Dickens et al. (2017), to show the inequalities amongst workers who experience spells of reduced hours, and workers who do not. These calculations include but are not limited to the amount of time that a worker can smooth their consumption using savings, other financial holdings, means tested transfer payments, and other asset drawdown during spells of reduced income. I also show the ensuing growth impacts of the use of reduced hours for economic reasons. These impacts may not be short lived; just as spells of unemployment produce persistent effects on workers who experience them, spells of reduced hours may do the same. If this is the case, then there are serious concerns that need to be addressed. There may, in fact, be a place for public policy to assist workers who experience involuntary part time employment if it is to be part of the new normal in the United States labor market. There may be avenues for public policy to accommodate workers who experience an involuntary reduction in hours and income through adjusting the qualification criteria for means tested transfer payments that the worker may not qualify for under current program rules due to asset limits. Assets are not easily liquidated, so liquidating them for consumption smoothing purposes is not always optimal, especially when the worker hopes that they will eventually become re-employed at full time hours. Like tiered and triggered unemployment insurance benefits, there may be a place for labor market situation based public policy to improve economic stability of individuals and households who have fallen on hard times.