Work Hours Mismatch

We apply a revealed preference approach to administrative data from Washington to show that constraints on work hours are widespread: Workers have limited discretion over hours at a given employer, and there is substa...

We apply a revealed preference approach to administrative data from Washington to show that constraints on work hours are widespread: Workers have limited discretion over hours at a given employer, and there is substantial mismatch of workers who prefer long hours to employers that provide short hours. Voluntary job transitions imply a ratio of the marginal rate of substitution of earnings for hours to the wage rate of 0.5–0.6 for prime‐age workers. The average absolute deviation between observed and optimal hours is about 15%, and low‐wage workers face particularly acute constraints on hours. On average, observed hours tend to be less than preferred levels, and workers would require a 12% higher wage with their current employer to be as well off as with an employer offering ideal hours. These findings suggest that hour constraints are an equilibrium feature of the labor market because long‐hour jobs are costly to employers.