The effects of labor composition on hours volatility: Evidence from the U.S

Abstract

For the past few decades, labor composition has changed drastically in the U.S. This paper examines how these changes help to explain the recent decline in aggregate hours fluctuations. I disaggregate workers by gender, education, marital status, and spousal characteristics among married workers, and quantify the impact of their changing shares on cyclical volatility of hours at both the extensive and intensive margins. The main result is that these labor composition changes explain little of the reduction in hours volatility along the extensive margin, yet they explain a significant fraction of the fluctuations at the intensive margin. Educational attainment is the single most important factor in aggregate hours fluctuations: it accounts for 1% and 14% of cyclical volatility of employment rate and average weekly hours, respectively. I also find that spousal education among married workers with a working spouse played an important role in the phenomenon.