ADP Study Reveals Highest-Earning, Young, and Female Workers Are Working Fewer Hours
With the unemployment rate near a 50-year low and businesses hiring left and right, it would seem the American worker is hustling like never before just to keep up with the rising cost of living.
But not everyone is hustling equally.
According to a recent study conducted by payroll provider ADP and its Research Institute, the highest-earning workers, as well as young workers and female workers, are working fewer hours than they did before the pandemic. The study found that the average workweek in 2023 was the lowest in five years.
“For significant cohorts of the population, including women, they’re working less now than they did before the pandemic,” said Nela Richardson, chief economist at ADP. “There’s never been more people working in America, and yet, individuals, on average, are working less.”
ADP tracked 13 million hourly workers who kept the same job for four years ending last December—meaning, the drop in hours wasn’t because people were laid off or switched jobs. And while it’s not clear if workers or employers initiated the drop, the pullback among the highest-paid provides a clue, Richardson said.
Workers in the highest-paid 25%—those making $79,500 or above—had the largest drop in hours worked. On the other hand, the lowest-paid workers are working more.
What’s interesting is that a significant portion of people working fewer hours saw their incomes rise, not fall. This indicates that less work isn’t necessarily a bad thing for the budget bottom line.
“The mixed blessing of those double-digit wage gains [during the pandemic] is some people are able to make the same salary by working fewer hours a week,” Richardson said. “We think this is a complication of the fact that some people experienced higher wage gains and also had more flexibility to design their own schedules.”
Richardson suggests that knowledge workers, who are not typically in the leisure and hospitality sector, may have more flexibility now than before. They might be doing more gig work or have more control over their hours.
Other groups working fewer hours include women and workers under 35. These are individuals who are either required or able to prioritize other aspects of their lives besides paid labor.
Historically, a large drop in hours worked is a bad sign as it usually means there’s less work for employees to do and often leads to layoffs. However, economists believe that this time may be different. Companies have been hiring, and overall layoffs remain low. This suggests that companies may be hoarding workers and working them less intensively instead of laying them off.
“In response to softening in demand, companies have been loath to lay anyone off. So instead there’s this idea that they might keep their workers but just work them less intensively,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Richardson shares a similar perspective, noting that the pandemic made companies realize that they can’t grow and shrink their workforce on demand. Instead, they prefer to have a deep bench and give each worker less playing time.
The change in working hours may also be a result of the disillusionment with work that many experienced during the pandemic and the Great Resignation. Tens of millions of people quit their jobs and went into business for themselves, leading to a normalization of the “work to live” perspective and an insistence on work-life balance.
Throughout history, workers have gravitated towards higher pay and less work. As societies transitioned from agrarian to industrial and now post-industrial, the workweek has consistently shrunk. Western European social democracies have seen even greater reductions in working hours compared to the United States.
“If you look at average hours worked across various countries, there’s huge variation, and the U.S. is pretty close to the top there,” said Hunter. “You could argue there’s scope for Americans to work less, [but] that’s not for me to say.”
The ADP study sheds light on the changing dynamics of the American workforce. While some groups are working fewer hours and enjoying higher incomes, it remains to be seen how this shift will impact the overall economy and the future of work in the United States.