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The Shadow Margins of Labor Market Slack

Jason Faberman (), Andreas Mueller, Aysegul Sahin () and Giorgio Topa ()

No 26852, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 Aggregate Hours Gap 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 Aggregate Hours Gap also does well in accounting for wage movements over our sample period.

JEL-codes: E24 J21 J60 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-lma and nep-mac
Note: EFG ME
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