Making the Most of Recession's Lost Work Time: Erik Hurst

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By Erik Hurst

The Bureau of Labor Statistics reports that the time American workers spent at their paying jobs decreased by more than 8 percent between 2007 and 2010.

This sharp decline in aggregate market work hours occurred for two reasons: The unemployment rate  increased dramatically during this period, and the downturn reduced the average hours worked per week for those who were employed. It isn't surprising that the time people spend working in the labor market falls during recessions. But a close look at what individuals do with the lost work hours yields important insights into how they adjust to the hardships of a weak economy.

Recent news articles suggest that the foregone work hours during this recession were being fretted away, as people increased the time they spent watching television and sleeping by the exact amount that their market work hours fell. In the study I co-wrote with Mark Aguiar and Loukas Karabarbounis, "Time Use During Recessions," we show that such claims simply aren't true. To figure out how individuals spent their time away from market work during the past recession, we needed to first determine what would have been the allocation of time across different activities had the economy not gone into decline.

Creating such a counterfactual is important given that during the decade before the recession, individuals had been steadily changing the way they used their time. For example, from 2003 to 2007, people within the U.S. between the ages of 18 and 65 increased their television-watching time by about 0.7 hours per week. Between 2007 and 2010, individuals in that age range spent an additional hour per week watching television. The important question is this: How much of the 2007-2010 uptick in television-watching was due solely to the recession and how much of that would have occurred anyway, given that TV time had been trending up steadily during the prior period?

In our paper, we used business-cycle variation across U.S. states to better control for potential pre-recession trends in time use. We document that the trends in time use across different categories of activity (like television watching) were roughly similar across the U.S. before the recession. We then gauged the effects of the downturn by comparing the change in time spent on different activities within states that experienced big declines in market work between 2007 and 2010 (such as Nevada or California) with the change in the time spent on those activities within states that experienced smaller declines in market work (such as New York and Texas).

To perform this analysis, we relied on the detailed time-use data provided by the American Time Use Survey, which is conducted by the Bureau of Labor Statistics to get a more complete picture of how individuals are allocating their time. These surveys sample a large cross-section of Americans and ask them to complete detailed time diaries about how they used their time the previous day.

Our first major finding was that about 35 percent of the foregone market work hours during the recession were reallocated to housework (about 30 percent) and child care (about 5 percent). Housework includes the time individuals spend on activities such as cooking meals, cleaning the house, doing laundry, shopping for groceries and fixing their cars. According to the BLS, about 260 million hours per week of market work was lost between January 2007 and December 2010. Our findings suggested that during that time period, total time spent in housework and child care increased by about 92 million hours per week.

From an economic perspective, why is the reallocation of time toward housework and child care important? There is strong evidence that by engaging in such home production, people can reduce their family expenditures and save money. Instead of going out to restaurants, for example, they can prepare meals at home. Similar stories can be told about laundry and house-cleaning services and car repair. Increased shopping intensity can also yield better bargains for the household.

How do households spend the remainder of their foregone market work hours during recessions? About 13 percent of that time is reallocated to individual investments in education (8 percent), civic and religious activities (2 percent) and health care (3 percent). Surprisingly, very little of the foregone work hours go to job searches (about 1 percent). The bulk of the remaining time (about 50 percent) is devoted to “leisure” activities. These include socializing with family and friends, exercising, engaging in hobbies, and, of course, television-watching and sleeping. Our results conclude that television watching and sleeping absorb roughly 30 percent of the foregone market work hours during the recession. This isn't a trivial amount, but it belies claims that all the lost market work hours during this recession were reallocated to these activities.

Overall, our findings suggest that some of the work time lost to recessions is allocated to productive activities. The ability of individuals to be more involved in housework and child care, as well as their ability to increase the time they invest in improved health, increased human capital, and larger community and civic investments, all help to mitigate the burden of recessions.

There is no doubt that recessions are hard on individuals. But the data don't support the belief that the "Great Recession" was akin to a "Great Vacation."

(Erik Hurst is professor of economics at the University of Chicago Booth School of Business and a contributor to Business Class. The opinions expressed are his own.)

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-0- Aug/12/2011 14:05 GMT