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The Shadow Margins of Labor Market Slack
Author(s) -
FABERMAN R. JASON,
MUELLER ANDREAS I.,
ŞAHIN* AYŞEGÜL,
TOPA GIORGIO
Publication year - 2020
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12756
Subject(s) - unemployment , economics , demographics , labour economics , great recession , shadow (psychology) , work (physics) , wage , sample (material) , recession , unemployment rate , demographic economics , macroeconomics , engineering , mechanical engineering , psychology , chemistry , demography , chromatography , sociology , psychotherapist
We use a mix of new and existing data to develop the Aggregate Hours Gap (AHG), a novel measure of labor market underutilization. Our measure differentiates individuals by detailed categories of labor market participation and uses data on their desired work hours as a measure of their potential labor supply. We show that desired hours vary widely by demographics and detailed labor force status, and that the gap between desired and actual work hours is strongly positively correlated with reported search effort. The AHG suggests a more sluggish labor market recovery since the Great Recession than either the official unemployment rate or alternative measures of labor market underutilization. Modest amounts of underutilization among the part‐time employed and a substantial degree of underutilization among those out of the labor force account for the disparity. The AHG also does well in accounting for wage movements over our sample period.