Keywords: Salaried workers, workweek, cyclical movements in hours worked
Abstract: The movement of hours worked over the business cycle is an important input into the estimation
of many key parameters in macroeconomics. Unfortunately, the available data on hours do not
correspond precisely to the concept required for accurate inference. We study one source of
mismeasurement--that the most commonly used source data measure hours paid instead of hours
worked--focusing our attention on salaried workers, a group for whom the gap between hours
paid and hours worked is likely particularly large. We show that the measurement gap
varies significantly and positively with changes in labor demand. As a result, we estimate
that the standard deviations of the workweek and of total hours worked are 25 and 6 percent
larger, respectively, than standard measures of hours suggest. We also find that this measurement
gap is an unlikely source of the acceleration in published measures of productivity since 2000.
Full paper (91 KB PDF)
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Last update: September 23, 2005