“Effect of Demand Elasticity and Product Durability on Involuntary Part-Time Employment”

Maria E Canon, Federal Reserve Bank of St Louis

Marianna Kudlyak, Federal Reserve Bank of San Francisco

Guannan Luo, City University of Hong Kong

After the Great Recession, an important constitution of underemployment is working part-time for economic reasons -- willing to work full-time but are working less than 35 hours per week because of slack work or unfavorable business conditions, inability to find full-time work, or seasonal declines in demand. This paper explores the involuntary part-time employment by first investigating a theoretical search and match model with full-time and part-time jobs and then quantifying the pass-through effect of fluctuations in households' demand for final goods on fluctuations in firms' demand for workers at industry level. We find that firms substitute a lot more part-time workers for full-time in the industries of services and construction than in agriculture; the recovery speed in expenditure and employment varies according to the income elasticity of demand and product durability.