Policymakers Must Address Earnings Instability

Current policy debates are often focused on static income or employment status, such as being employed or unemployed, and annual income changes. However, the growing issue of earnings stability is largely overlooked in these discussions.

On December 17, Sen. Elizabeth Warren (D-Massachusetts) and Representatives Rosa DeLauro (D-Connecticut) and Jan Schakowsky (D-Illinois) reintroduced the Schedules That Work Act and Part-Time Worker Bill of Rights (SB 3550 & HR 6786). These are critical federal measures to explicitly address these issues, ensuring predictability and stability for low-wage workers’ economic life. As the labor market slows, the economic wellbeing of wage workers depends not just on how much they earn, but also on whether they can count on steady pay in the weeks and months ahead.

Many workers — particularly in industries like retail and food services, hospitality, and personal care— often encounter changes in their working hours as employers continue to pass on the costs of disrupted business, which is the biggest driver of today’s income instability. Expanded unemployment insurance provisions during a layoff made being out-of-work relatively manageable for many workers; however, many of these policies were temporary. Changes in work hours are often temporary and do not make a worker eligible for unemployment insurance. As a result, workers facing volatile or frequent hour cuts and declining incomes often fall outside the scope of protections.

Not all involuntary volatility has the same consequences. Treating volatility as a single phenomenon can obscure the fundamentally different work scheduling trajectories that workers experience, each with distinct implications for wellbeing. For instance, upward work-hour trajectories that do not include significant reductions, even if volatile, may be associated with positive outcomes and greater resilience. In contrast, a consistent month-to-month decline in hours, or frequent fluctuations with periods of large hours shock, is likely to undermine financial security in ways that consistently stable or upward trajectories do not. Workers who experience relatively mild fluctuations, without substantial drops or gains, may be better positioned to offset the financial and psychological costs of uncertainty.

Measuring Work-Hour Volatility

Consistent with prior research, I calculated the hours instability index using the standard deviation of arc percentage change. This index measures the extent of fluctuations in a worker’s hours over a four-month period. A higher index value reflects greater volatility. Workers are classified into four mutually exclusive categories based on their experience: (1) hours spike only, defined as at least a 20 percent increase in month-to-month hours; (2) hours dip only, defined as at least a 20 percent decrease from one month to the next; (3) both hours spike and dip; and (4) stable hours throughout.

For most time periods, the instability index for individuals experiencing a steady decline in work hours is nearly three times higher than for those with only an increase in hours (see figure below). Workers who face both significant drops and surges in monthly hours have about twice the index compared to those with only increased hours. As expected, individuals with consistently stable work hours, despite minor fluctuations, show a lower and relatively steady instability index.

Why does this matter? Over the next decade, three of the five occupations with the most job growth (as projected by the Bureau of Labor Statistics) are paid disproportionately low wages, are overwhelmingly occupied by workers of color, women, and often do not require a college degree. Volatility will be an enduring feature of the labor market.

There are two policy pathways that could potentially ease stress over unstable work hours and incomes. First, local, state or federal policy measures could support workers in low-wage jobs with frequently unpredictable scheduling. Currently, several cities — such as San Francisco, Emeryville, Seattle, New York City, Philadelphia, Chicago, Evanston, Berkeley, and Los Angeles — and one state (Oregon) have passed scheduling laws. At least ten states have considered the legislation.

Second, a monthly child allowance is another option for policymakers concerned about those with children — particularly unmarried parents in low-wage jobs — and wanting to offset some financial stress caused by work-hour insecurity.

This first appeared on CEPR.

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