The trend facing these workers was believed to be a temporary product of the Great Recession that would soon right itself. However, recent reports illustrate that the current level of IPT employment with respect to the low unemployment rate is inconsistent with pre-recession rates. The last time the unemployment rate was 4.1 percent was in August 2000 but the San Francisco Fed found that the level of IPT employment is 40 percent higher now, in 2018, than it was back in 2000. Even in the face of historic unemployment rate lows, the rate of IPT employment—“hidden unemployment”-- remains high, revealing that the labor force may not be as strong as we thought.
The root cause of a higher IPT employment rate is structural variation in the labor market. Generally, IPT employment follows cyclical variations—the booms and busts of the business cycle. In 2016, though, the cyclical factor of IPT employment had returned to pre-recession levels while the structural component remained constant. The San Francisco Fed finds that the change in industry composition—an increase in employment for hospitality, leisure, education, health-services, and informal “gig” sectors—accounts for the higher levels of IPT employment. Coincidentally these were the sectors that experienced growth during and after the recession.
Why should we worry about IPT employment? IPT employment is more likely to affect minorities and those who did not receive their high school diplomas. Part-time workers experience various challenges that make it difficult to make ends meet. They receive insufficient work hours that are oftentimes highly variable, twice as variable as full time workers. Combined with insufficient work hours, IPT employees earn 19 percent less than full-time workers in similar jobs. They also lack sufficient health insurance and other benefits that are available to their full-time counterparts. All of this contributes to the fact that IPT employees are five times more likely to live in poverty than their full time peers. If we ignore the problem, it will only get worse with time and more people will be affected. This will cost our government in the future due to increased use of low income programs. The US also squanders the potential these workers have to increase national production.
One solution could be to spur job growth in other sectors to allow people to move out of the aforementioned sectors responsible for the rise in the IPT employment rate; however, while a more comprehensive and permanent solution, it is by no means easy and involves tackling various aspects of the economy and creating consumer demand in a sector to warrant increased demand of labor. To ease the issue of limited hours, the government could guarantee people a certain number of hours worked/week if they are below a certain income threshold. Due to the law of diminishing marginal returns, though, this may not be in the company’s best interest. The government could also gather more data on these people’s skills in order to better connect them to job opportunities that are better suited for them or have schedules that coincide with their needs. This would likely be the best solution since it connects people as opposed to forcing companies to take on workers. Additionally, increasing education across the board would open more opportunities for workers and land them more skilled positions that pay higher wages or require more hours. Extending education is another more permanent solution and is better than the previous, however, it requires much more time and funding to be successful.
Regardless of the possible solutions, it is imperative to recognize that this issue of high IPT employment rate caused by structural unemployment cannot continue. If it does, though, the number of IPT employees will continue rise, causing more people to face the plight five million Americans already suffer.