The Enigma of Reduced Average Work Hours: A Complex Web of Factors
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The reasons for the drop in average hours worked are not clear cut
It is tough to get a full picture of what’s causing the average hours worked per person to remain so low. Oddly, the number of people working part-time has decreased since the start of the pandemic, which actually has a positive effect on average hours worked. When looking at the average number of hours worked by part-timers, these are even increasing at the moment. On the other hand, the number of hours worked by full-timers has come down.
Part-time work has dropped significantly since the start of the pandemic
Sick leave and labour hoarding are plausible reasons for the drop in average hours worked, as the ECB also concluded in a recent blog post. Sick leave was up significantly in 2022 for countries providing data, such as Germany, the Netherlands and Spain, but it is hard to match the numbers to the loss of hours worked. This seems to be in part related to "long-Covid", but other types of longer-term sick leave also seem to be up, according to anecdotal evidence.
Labour hoarding could also contribute to the lower average hours worked. In these times of shortages, businesses could be holding onto employees they might need in the future by making them work fewer hours. The ECB reports that “firms have been reluctant to let go of skilled employees who would be needed in the future”.
What could also be happening is that the people who have been hired since the pandemic want to work fewer hours, bringing the average hours worked down. In a tight labour market, this could happen as people are able to make more demands in negotiations with employers. There is no data to provide evidence on this though.
There is also a compositional effect at play, but that does not fully explain the fall in average hours worked. Still, the reduction is influenced to a degree by the demographics of those in work and in what sectors. Female full-time workers work fewer average hours per week than men and women have been entering the workforce more in recent years. Female employment (at 32 average hours per week) has grown by 4% since the fourth quarter of 2019, while male employment (at almost 38 hours per week) grew by just 0.8% over the same period. While this contributes to the average decline, there has also been a sharp fall for both men and women in average hours worked, indicating that the compositional effect does not explain the full story.
The same can be said when looking at the sector breakdown. More people have found employment in sectors with lower average hours worked, but the impact of that is marginal to the overall outcome. If we held the shares of employment from 2019 steady throughout the pandemic, this would not have resulted in a different employment outcome. We do note that hours worked fell more for the sectors that saw employment grow quicker, but we would be cautious in calling that a compositional explanation for the decline in average hours worked. It seems more logical that the stronger drop in average hours worked resulted in more demand for workers to keep output up. Indeed, labour shortages are largest in sectors that saw average hours worked fall most.
So overall, it is hard to fully pinpoint the causes of why average hours worked per person are now so much lower than they were prior to the pandemic. A variety of reasons like sick leave, labour hoarding, and the composition of the labour market will play a role. That means that both the demand and supply side of the labour market influence this. But we could of course also miss contributing factors.
Vacancy rates are highest in the sectors with the largest drop in average hours worked
