So far during the current recession, the drop in employment hours has been much greater than the drop in employment. Some have described this as evidence that firms are seeking to hang onto their skilled workforce by reducing work hours rather than laying people off. Julia Gillard, for example, interpreted this as reflecting the fact that many employers, working co-operatively with employees and trade unions, are striking innovative arrangements to keep people attached to work during these difficult days (SMH, Aug 7, 2009). Is this a reasonable interpretation? Are employers moderating the impact of the recession by moving valued workers to part time work instead of laying them off?
I think the answer is ‘no’. First, the experience of part-time work in this recession appears to be similar to the experience in the last recession – though it is too early to be sure. Second, even though part time employment has increased in relative terms during the recession, this has not been because more people are moving from full-time to part-time employment. Rather, there has been a fall in the number of part-timers taking up full-time jobs.
Figure 1 shows overall employment and full-time employment, relative to the working age population, for the last 30 years (ABS trend estimates). Figure 2 shows the percentage of employment that is part-time.
Employment and full-time employment both fluctuate significantly with the economic cycle – with significant dips in the early 1980s, early 1990s and in 2009. The proportion of employed people working part-time has steadily grown over most of the period – except for between 2002 and 2008 where it was relatively steady. The recent decrease in average hours worked per employed person can be seen as a blip upwards at the very end of the period (denoted by C). However this pattern does not look particularly unusual, there were similar blips upward in the two previous recessions (A and B on the figure). It will be some time before we know if the pattern this time is different.
Moreover, how should we interpret these increases in part-time work during recessions? Is it evidence of a new flexible arrangements where workers reduce their hours rather than face unemployment? Or does it simply reflect the casualisation of the workforce, with more workers in positions where the employer can easily vary the work hours from week to week?
Figure 3 suggests the latter rather than the former interpretation. About 80% of people in the ABS labour force survey are in the survey in successive months. The figure shows the number of people moving between full-time and part-time, as a percentage of the number of people employed in this sub-sample. Because there is much seasonal volatility, I show a 12 month moving average of the trends. That is, the July 2009 estimate is the average monthly movement over the previous 12 months.
On average, around 3 per cent of the employed population moves from full to part-time status each month. This has been growing over time as part-time work has become more important. The fraction moving to full-time is slightly larger than the fraction moving to part-time despite the fact that the share of part-time employment has been growing. The growth in part-time employment stems from the fact that more people are moving from non-employment to part-time than to full-time employment (not shown here).
There is no evidence that the flow from full to part-time has increased in the last year. Quite the opposite. The labour market slow-down has been associated with a general slow-down in movement between these two employment states. Moreover, the greatest change has been in flows from part-time to full-time, which have dropped significantly over the past two years. People who would have moved from part to full-time status are now staying in part-time employment.
This seems much more consistent with a story of a general growth in labour market flexibility than a story of arrangements being made between employers and workers to reduce hours during the recession so as to retain skills. Rather than telling full-time workers that they have to work fewer hours, employers are telling part-time workers that they cannot move (or move back) to full-time work. In some respects, this is still a good news story it may mean that fewer workers are being made unemployed. On the other hand it suggests that the burden of reduced work is still being concentrated on the most disadvantaged in the labour market. The part-time stepping stone between unemployment and full-time employment might simply have moved a little closer to the former.