Why so many part-time workers isn’t all bad

October 6, 2014, 8:27 PM UTC
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Kyle Bean for Fortune

Most of the jobs created during the recovery have been full-time jobs, but the number of part-time workers out there remains high. Is that a bad thing? Not necessarily.

The Federal Reserve has said part-time jobs are hurting the current economic recovery. Those jobs offer fewer fringe benefits than full-time jobs, and they are usually of lower quality and lack an option to negotiate for higher wages. This generally leads to lower consumption growth than if those workers were in full-time gigs, at least in theory.

However, it’s a complex issue and generalizations are problematic.

There are two kinds of part-time employees, according to economists: The “good” kind and the “bad” kind. Although that description oversimplifies things, it helps to create a sharper picture of what’s going on in the workforce.

The bad kind: workers who want full-time work, but can’t find it right now. These are the partially employed people that the Fed and other economists are worried about — as they should be. The number of these workers remains high at 7.1 million, but their ranks have thinned significantly — by 23% — over the past five years.

“There are still too many people who want jobs but cannot find them, too many who are working part-time but would prefer full-time work,” said Fed Chairman Janet Yellen in a Sept. 17 press conference. The issue is still at the top of the Fed’s concerns, representing a “significant underutilization of resources.”


“Part-time workers have come down quite a bit,” said Liz Ann Sonders, chief investment strategist for Charles Schwab (SCHW). She added that the decline is similar to what has happened following past economic downturns.

The trend in the number of involuntary part-time workers has been similar to past recessions, and, on an adjusted basis, actually peaked lower than the resulting damage from the early-1980s recession, according to a study by the Federal Reserve Bank of San Francisco.

There’s certainly more work to be done to bring those involuntary part-timers into the full-time workforce, but that’s only half the part-time employment story.

The good type of part-time workers are those who do it by choice: Students, or parents who want to take care of their family, or people who otherwise want more flexibility sometimes choose part-time jobs.

The number of these workers is actually rising as the economy improves. This points to a larger structural change that’s happening in the employment market, and a portion of this is because of a shift by aging Baby Boomers.


The number of people choosing a more flexible work schedule has grown by 1 million since 2009. Older workers, those over 65 who would normally be retired, are a huge part of this trend. You may see them greeting shoppers at Wal-Mart (WMT), or giving directions at Disney World.

“When you look at age distribution, a lot of workers that are choosing to work part time are older workers that in the past would be retired,” Sonders said. “We’re living longer and healthier than we’ve been before, and many people are not willing to retire at 65 and sit around.”

Nearly 65% of Baby Boomers — roughly speaking those born between 1946 and 1964 —say they want to work after age 65, and many envision moving into jobs that require fewer hours, according to a study by Transamerica Center for Retirement Studies.

In fact, the labor force participation of those over 65 has been steadily increasing — a combination of the aging Baby Boomers and the changing expectations of retirement.

Keeping older people in the workforce and contributing to economic output — especially given the large population of Boomers — could help push the economy along. And, given the plodding recovery, any boost big or small is welcome.


While this is good news for many older workers who aren’t ready to spend all day in front of the TV, or on the golf course, it has an unintended side effect: suppressed wages.

Part-time workers, both by choice and because of economic reasons, are holding down overall wage increases and, thus, inflation. If large numbers of workers choose to stay part-time, wages may not rise as quickly or as much as some hope. That, again, is both good news and bad news.

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