Unpredictable by design? How wage policy shapes hourly work

• In Event: Boosting Wages: The Role of Public Policy

Abstract

Over half of workers in the United States are paid hourly. Many of these workers are subject to ‘just-in-time’ scheduling, with shifts assigned or cancelled at short notice, no guaranteed minimum number of hours per week, and a high level of variation in the number of hours and which days they are scheduled to work week-to-week. This study contributes to the literature by examining how changes to the minimum wage impact the schedule and income volatility of workers in service sectors, where an estimated 80% of minimum wage workers reside, and where scheduling volatility is typically at its highest (BLS, 2024). 

Keeping to such unpredictable schedules impacts worker overall wellbeing, with studies showing negative ramifications for worker health, productivity, and ability to budget for expenses in a given month. Despite these consequences for worker welfare, volatility among hourly workers is understudied, with limited documentation on whether this non-wage disamenity moves in tandem with wages, serving as a complement or substitute. Economic theory would predict that in a perfectly competitive labor market, as minimum wage increases, the disamenity of unpredictable schedules and earnings would also increase in order to compensate. However, if labor markets are monopsonistic, the prediction becomes more uncertain, with past studies finding that non-wage amenities are complements to wage increases in the presence of high employer market power.

Using daily payroll data from thousands of small businesses across the US, I document patterns in scheduling among hourly workers in the service industry from 2016-2024, demonstrating how this varies across employee tenure and labor market tightness. I then utilize staggered rollouts of minimum wage hikes at the state and sub-state level over this time period to show the causal relationship between increased wages and regularity of worker hours and take-home incomes. Lastly, I show the previously undocumented phenomenon of how weather shocks negatively impact the stability of worker schedules, decreasing hours worked and increasing the difference between scheduled and worked hours at extreme levels of temperature and rainfall. I then use these weather events as exogenous shocks to the amenity of a predictable work schedule, and document how this amenity changes after a rise in minimum wages. 

All together, this paper investigates the complementarity of non-wage amenities of scheduling and earning stability with minimum wage increases, and studies the implications of minimum wage policies for resilience to weather shocks in the labor market. It contributes to our understanding of the structure of hourly work, and how wage policies shape the welfare of workers on the receiving ends of such changes.

Author

• Hannah Farkas, Columbia University
  Presenting Author