Income and Wages

NBER Study: Shorter Day and Higher Living Standards for Low-Wage Workers

The steep decline in hours worked is an under-appreciated improvement in American living standards, says economist Dora Costa in recent studies for the National Bureau of Economic Research. Furthermore, the common way of measuring inequality in wages among workers may underestimate long-run improvements in living standards among low paid workers.

  • From 1890 to 1919, real wages increased by 43 percent and the work day fell from 10 hours to 8 hours, and time diary studies suggest that today's average employee logs in less time at work than a strict 9-to-5 schedule.

  • In the past, the lowest-paid workers toiled away the longest -- workers earning less than 90 percent of all workers in the 1890s labored nearly 11 hours, while those making more than 90 percent of all workers labored less than 9 hours.

  • Now, it's the high-wage workers that put in the most hours: in 1991, the comparable figures were roughly 7.5 hours and 8.5 hours, respectively.

  • Costa found 26 percent of earnings inequality among male workers between the top and bottom groups from 1973 and 1991 could be attributed to differences in hours worked.

In addition to the role of hours worked in earnings inequality among men , she says that the same phenomenon accounts for more than half of the earnings inequality among women and 17 percent of the increase in total household earnings inequality among husband and wife households.

Source: Chris Farrell, "Shorter Hours Raise Living Standard of the Poor," NBER Digest, September 1998, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, Mass. 02138, (617) 868-3900.

For text http://www.nber.org/digest/sep98/w6419.html

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