Beyond the 9 to 5: Decoding the Overemployment Trend

Overemployment, with its implications for labor market capacity, gains further context from Fed Chair Jerome Powell in his Dec. 4, 2024, assessment of the broader economy. He explained that the Federal Reserve’s September rate cut was a proactive measure to address a perceived weakening in the labor market, based on rising unemployment and slowing payroll growth. However, subsequent data revision, as Powell stated, “strongly suggests that the economy is even stronger than we thought.” Despite the most recent data revisions by the Bureau of Labor Statistics (BLS), the unemployment rate of 4% in January remains very low historically.

While the labor market has returned to a better balance, as measured by the alignment between available vacancies and unemployment, one could still argue that it is one of the tightest labor markets in recent history. This tightness is driven by both cyclical and secular factors, including demographic trends such as the tail-end retirement of the baby boom generation and fluctuations in migration flows.

The rise in overemployed workers has contributed to the persistence of a tight labor market.For an economy, the total number of workers is somewhat limited by labor force participation, which refers to the portion of the population that is either employed or actively seeking employment. However, workers can hold multiple jobs and be overemployed. Workers, by holding multiple positions, increase their total working hours, thereby filling employment gaps even in occupations that may not demand a traditional full-time commitment. However, this comes with a trade-off: It may limit the creation of new full-time positions for unemployed workers actively seeking them.

What Are Some Employment Outcomes for Multiple Jobholders?

Using data from the Current Population Survey (CPS), this analysis examines recent trends in overemployment—defined as occurring when individuals have a full-time job and also work additional hours for other employers.This definition is very precise and excludes individuals currently working overtime for a single employer. The CPS asks employed individuals about holding multiple jobs and the number of hours worked across all jobs. As illustrated below in the first figure, the percentage of employed individuals with more than one job has decreased since 1996, falling from a peak of nearly 7% in November 1996 to 5.5% in December 2024. During the onset of the COVID-19 pandemic, this rate dropped to approximately 4%, but it has since rebounded to prepandemic levels.

Percentage of Employed People with More than One Job

SOURCES: Current Population Survey and authors’ calculations.

NOTE: Series are seasonally adjusted and smoothed with a three-month moving average.

Looking at work hours, overemployed individuals average roughly 35 hours per week at their primary job. They supplement this with an average of 13.5 hours per week across their other jobs. Notably, these average hours have remained relatively stable over the past three decades. The second figure illustrates these trends, with the blue line representing main job hours and the orange line depicting hours worked in other jobs.

Average Weekly Hours Worked by Multiple Jobholders

SOURCES: Current Population Survey and authors’ calculations.

NOTE: Series are seasonally adjusted and smoothed with a three-month moving average.

What Are the Demographics of Multiple Jobholders?

CPS data reveal demographic trends among overemployed individuals. First, the average age of multiple jobholders has consistently increased over the last three decades, aligning with population aging. As shown in the third figure, the most substantial increase occurred between 1994 and 2012, when the average age of multiple jobholders rose from approximately 37 to 42. More recently, the average age has stabilized around 42.5.

Average Age of Multiple Jobholders

SOURCES: Current Population Survey and authors’ calculations.

NOTE: Series are seasonally adjusted and smoothed with a three-month moving average.

Second, the educational profile of overemployed workers has shifted. As displayed in the fourth figure, the share of those with a four-year college degree has risen, while the share without has fallen. The pandemic acted as a pivot, bringing both groups to nearly equal representation. Currently, about half of all multiple jobholders have a college degree.

Composition of Multiple Jobholders by Education

SOURCES: Current Population Survey and authors’ calculations.

NOTE: Series are seasonally adjusted and smoothed with a three-month moving average.

The table below provides a comparative analysis of those holding multiple jobs and those holding a single job, focusing on their real hourly earnings, annual hours worked and real annual earnings.Analyzing financial incentives for overemployment is challenging because of the CPS’ limitations. Though it lacks weekly job-specific pay, the CPS March supplement provides annual earnings and estimated work hours, offering valuable data on compensation dynamics. For each of these variables, the table displays the distribution through various percentiles, as well as the average and standard deviations.

A key observation is that single jobholders have higher hourly earnings, but lower annual work hours compared to multiple jobholders, across all income levels.It’s important to understand that a worker’s ranking within different categories can vary. For instance, someone in the top 10% of hourly earnings may not be in the top 10% of annual hours worked. This difference is reflected in the mean annual hours, which are 1,937 for single jobholders and 2,111 for multiple jobholders. Despite working fewer hours, single jobholders have only slightly lower annual earnings ($56,965) than multiple jobholders ($57,865). Furthermore, single jobholders show a wider range of hourly and annual earnings, while multiple jobholders have a broader spread in annual hours worked (based on standard deviation).

In terms of measuring the difference in hourly wages between multiple and single jobholders, one needs to also account for differences between the two groups in terms of demographic characteristics (age, education, gender and race), occupational choices and cyclical trends. Using a regression specification to account for these differences, we found that the real hourly wages of multiple jobholders without a college degree were 5.4% lower relative to those of single jobholders without a college degree. On the other hand, this gap was nearly twice as large when we compared the hourly wages of multiple versus single jobholders with a college degree.

Conclusion

Overemployed workers demonstrate a clear willingness to trade higher hourly wages for increased total earnings. By working significantly more hours, they effectively increase their annual compensation. This behavior might be attributed to a desire to keep pace with recent inflation, as individuals actively seek ways to supplement their income and counteract the erosion of purchasing power.

Notes

1. For an economy, the total number of workers is somewhat limited by labor force participation, which refers to the portion of the population that is either employed or actively seeking employment. However, workers can hold multiple jobs and be overemployed.
2. This definition is very precise and excludes individuals currently working overtime for a single employer.
3. Analyzing financial incentives for overemployment is challenging because of the CPS’ limitations. Though it lacks weekly job-specific pay, the CPS March supplement provides annual earnings and estimated work hours, offering valuable data on compensation dynamics.
4. It’s important to understand that a worker’s ranking within different categories can vary. For instance, someone in the top 10% of hourly earnings may not be in the top 10% of annual hours worked.