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  5. Hours and Productivity during the COVID-19 Pandemic and Beyond
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Hours and Productivity during the COVID-19 Pandemic and Beyond

Paper Session

Saturday, Jan. 7, 2023 8:00 AM - 10:00 AM (CST)

New Orleans Marriott, Preservation Hall Studio 4
Hosted By: Society of Government Economists
  • Chair: Lucy Eldridge, U.S. Bureau of Labor Statistics

The Impact of COVID on Productivity and Potential Output

John Fernald
,
Federal Reserve Bank of San Francisco and INSEAD
Huiyu Li
,
Federal Reserve Bank of San Francisco

Abstract

The U.S. economy came into the pandemic, and looks likely to leave it, on a slow-growth path. The near-term level of potential output has fallen because of shortfalls in labor that should reverse over time. Labor productivity, to a surprising degree, has followed an accelerated version of its Great Recession path—with initially strong growth followed by weak growth. But, as of mid-2022, it appears that the overall level of labor and total factor productivity are only modestly affected. The sign of the effect depends on whether we use the strong income-side measures of pandemic output growth or the much weaker expenditure-side measures. There is considerable heterogeneity across industries. We can explain some but not all of the heterogeneity through industry differences in cyclical utilization and off-the-clock hours worked. After accounting these factors, industries where it is easy to work from home have grown somewhat faster than they did pre-pandemic. In contrast, industries where it is hard to work from home have performed extremely poorly.

Has the Willingness to Work Fallen during the COVID Pandemic?

Jason Faberman
,
Federal Reserve Bank of Chicago
Andreas I. Mueller
,
University of Texas-Austin
Aysegul Sahin
,
University of Texas-Austin

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.

Long Social Distancing

Steven J. Davis
,
University of Chicago
Jose Maria Barrero
,
Autonomous Technological Institute of Mexico
Nicholas Bloom
,
Stanford University

Abstract

More than 10% of Americans who worked in 2019 say they will continue social distancing after the COVID-19 pandemic ends, and another 45% will engage in limited forms of social distancing. We uncover this Long Social Distancing phenomenon in our monthly Survey of Working Arrangements and Attitudes (SWAA). It is more prevalent among women, older persons, the less educated, and those with lower earnings. Persons who will continue social distancing have lower labor force participation than those who plan a complete return to pre-COVID activities – unconditionally and conditional on demographics and industry of the current or most recent job. By our estimates, Long Social Distancing lowers force participation by about 2.5 percentage points as of early 2022. This drag on labor force participation shows no sign of abating over the past year, suggesting it could depress labor force size for a long time. It will also twist labor force participation away from less productive persons, raising average labor productivity through a composition effect.

Hours of Work during the COVID-19 Pandemic: Implications for Labor Productivity Measures

Sabrina Wulff Pabilonia
,
U.S. Bureau of Labor Statistics
Jay Stewart
,
U.S. Bureau of Labor Statistics
Drake Palmer
,
U.S. Bureau of Labor Statistics

Abstract

The BLS measures hours worked for its estimates of productivity growth using hours-paid data from its establishment survey adjusted for off-the-clock work, annual paid leave granted, and average sick leave taken. However, these adjustments miss quarterly variation in paid time off. Although this variation is mainly due to seasonal patterns in paid annual and sick leave, a number of factors related to the COVID-19 pandemic (illness, the Payroll Protection Program, changes in leave policies, and increased telework) could have caused average weekly hours worked to vary to a much greater extent during that time. Using detailed household data, we develop an alternative hours-worked-to-hours-paid adjustment ratio that accounts for variations in actual paid time off. We then assess the impact of making this adjustment on aggregate hours and labor productivity measures. We find that, in 2020, this ratio fell considerably in some industries in the second quarter and subsequently rose in the third quarter, resulting in a meaningful impact on measured work hours and labor productivity.

Discussant(s)
Jay Stewart
,
U.S. Bureau of Labor Statistics
Julie Hotchkiss
,
Federal Reserve Bank of Atlanta
Joshua Montes
,
Federal Reserve Board
André Kurmann
,
Drexel University
JEL Classifications
  • E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
  • J2 - Demand and Supply of Labor