MACRO: The 40-Hour Work Week; Dr Eunseong Ma (Yonsei University)

Abstract

Approximately half of U.S. employees adhere to the constraints of the traditional 40-hour work week. This study examines multifaceted implications of this standardized work schedule. To this end, a novel heterogeneous-agent model is developed, incorporating a wage penalty function faced by households when working fewer hours than a specific threshold. The calibrated model captures the salient features of the empirical distribution of hours worked, with a notable spike at the 40-hour mark. The study reveals the 40-hour work week as a critical determinant of both micro and macro labor supply elasticities. It yields a small micro elasticity with heterogeneity across households, while the macro elasticity is larger, making the extensive margin more influential. Moreover, the findings suggest that the conventional underlying primitive associated with elasticity plays a limited role. Ultimately, this paper uncovers the vulnerability of households constrained by this work schedule to the adverse effects of business cycle fluctuations. standardized work schedule. To this end, a novel heterogeneous-agent model is developed, incorporating a wage penalty function faced by households when working fewer hours than a specific threshold. The calibrated model captures the salient features of the empirical distribution of hours worked, with a notable spike at the 40-hour mark. The study reveals the 40-hour work week as a critical determinant of both micro and macro labor supply elasticities. It yields a small micro elasticity with heterogeneity across households, while the macro elasticity is larger, making the extensive margin more influential. Moreover, the findings suggest that the conventional underlying primitive associated with elasticity plays a limited role. Ultimately, this paper uncovers the vulnerability of households constrained by this work schedule to the adverse effects of business cycle fluctuations.

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