Board of Governors of the Federal Reserve System

June 2014

The Decline of Drudgery and the Paradox of Hard Work

Brendan Epstein and Miles S. Kimball

Abstract:

We develop a theory that focuses on the general equilibrium and long-run macroeconomic consequences of trends in job utility. Given secular increases in job utility, work hours per capita can remain approximately constant over time even if the income effect of higher wages on labor supply exceeds the substitution effect. In addition, secular improvements in job utility can be substantial relative to welfare gains from ordinary technological progress. These two implications are connected by an equation flowing from optimal hours choices: improvements in job utility that have a significant effect on labor supply tend to have large welfare effects.

Keywords: Labor supply, work hours, drudgery, income effect, substitution effect, job utility

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