MNI: Remote Work Draws Workers Who Work Fewer Hours -Paper

The increasing popularity of remote work since the Covid-19 pandemic is likely to draw more workers into employment but these workers are also more likely to work fewer hours on average, with implications for overall labor supply, according to research to be presented at the Fed's annual Jackson Hole monetary policy conference Friday.

The changing composition of the workforce is a continuation of the trend for the U.S. and Europe over the two decades prior to the pandemic and could affect the responsiveness of labor to business cycle shocks, monetary policy shocks and tax policy shocks, said authors St Louis Fed research officer Alexander Bick, Vanderbilt University professor Adam Blandin and Nicola Fuchs-Schundeln of Goethe University Frankfurt.

Fed officials have expressed disappointment over how slowly labor supply has recovered post-pandemic, saying it has exacerbated labor market tightness. (See: MNI INTERVIEW: US Labor Force 'Missing' 2.5M Workers - KC Fed and MNI INTERVIEW: Wages Hotter Than Labor Dept Data-Atlanta Fed)

An important task for central banks is to project potential labor supply and potential output several years into the future, and hours per worker are at least as important as employment rates in these analyses, the paper argues.

In fact, average hours worked per worker -- not the number of workers -- were primary drivers in aggregate labor supply in the two decades prior to the pandemic, according to a sample of 18 European countries and the U.S. Focusing only on the number of workers overstates the average growth rate in output per person by 0.32 percentage points per year, the paper said.