Compensation Patterns of Overemployed Workers

In a recent post, we discussed trends of overemployed workers in the U.S. in the last three decades. As we said in that post, from our perspective, the concept of overemployed workers refers to individuals who have a full-time job and work additional hours for a different employer, according to the monthly Current Population Survey (CPS). Note that this definition immediately excludes overtime employment by the same employer.

One of the potential reasons why workers may choose to be overemployed is financial: the desire to increase overall compensation. A relevant question is whether the marginal hours worked in the second or subsequent jobs are compensated at a higher or lower hourly rate than in the primary occupation. If the primary occupation offers overtime pay, then the second employer would need to offer an hourly wage that exceeds the overtime rate to make the additional work financially attractive for the employee. Conversely, if the primary occupation does not offer overtime pay, the second employer may be able to offer a lower hourly rate and still attract workers seeking to supplement their income.

Earnings of Workers with Multiple Jobs vs. Those with Single Jobs

Determining the financial incentives that drive overemployment requires a thorough understanding of the compensation dynamics between primary and secondary occupations. However, a significant challenge lies in the limitations of the CPS, the primary data source for identifying trends and characteristics of overemployed workers. While the CPS does not provide separate weekly compensation data for each employer, valuable insights can be gleaned from its March supplement, which collects annual labor earnings and annual hours worked (calculated as weeks worked times usual hours worked in a week) for the preceding year.

These data allow for the identification of multiple jobholders in a reported year and their annual labor earnings and hours worked from the previous year. For example, we know how many workers had more than one job in 2001 and their earnings and hours in 2000, but we don’t know whether these workers also held multiple jobs in 2000. Due to these data limitations, to calculate their hourly and annual compensations, we had to assume that multiple jobholders in one year also held more than one job in the previous year. Consequently, the comparison is between multiple jobholders and single jobholders in a reported year, but we compared their earnings from the previous year.

Using this approach, it is possible to construct a sample of employed workers between 1994 and 2021 and calculate the real hourly labor earnings of individuals by using information on annual labor earnings (adjusted for inflation using the consumer price index) and annual hours worked.

Annual Earnings Were Slightly Higher for Workers with Multiple Jobs

The table below compares key summary statistics for multiple and single jobholders by presenting the distributions of real hourly labor earnings, annual hours worked and real annual labor earnings. It displays different percentiles in the distribution for each variable, along with the mean and standard deviations.

It’s crucial to note that the workers within a particular percentile are not necessarily the same across variables. For example, the workers in the top 90th percentile of hourly labor earnings do not necessarily belong to the top 90th percentile of annual hours worked.

Notably, hourly labor earnings are higher but annual hours worked are lower for single jobholders than for multiple jobholders across the distribution. This difference is reflected in the mean average hours between the two groups, which are 2,112 for multiple jobholders and 1,937 for single jobholders.

Overall, annual labor earnings are slightly higher for multiple jobholders at $57,660, versus $56,854 for single jobholders. We also note that hourly labor earnings and annual labor earnings are much more dispersed (measured by the standard deviation) for single jobholders than for multiple jobholders, while the dispersion in annual hours worked is larger for multiple jobholders.

Comparing Earnings for Workers with and without College Degrees

These findings do not consider observable differences between the two groups in terms of demographic characteristics such as age, education, gender and race; occupational choices (measured in terms of two-digit SOC occupation classification); and cyclical trends. Using a regression specification to isolate these effects reveals that the real hourly labor earnings of multiple jobholders without a college degree are 5.6% lower relative to those of single jobholders without a college degree.

Examining workers with college degrees, the analysis reveals that hourly earnings are 22.9% higher for multiple jobholders with a college degree than for single job earners without a college degree. However, single jobholders with a college degree earn 37.0% more than their counterparts without a college degree. This implies that the hourly earnings are around 10.3% lower for multiple jobholders relative to those of single jobholders when both possessed a college degree. This gap of 10.3% between college-degreed jobholders is nearly twice as large as the 5.6% gap between jobholders without a college degree.

The Hourly Pay of Multiple Jobholders Was Lower

Overall, our findings indicate that hourly earnings were on average lower for multiple jobholders than for single jobholders, especially when both groups had a college degree. This is surprising because one might expect that if working at a second job is associated with lower average hourly earnings, then workers should instead choose to work overtime at their main job.

There may be at least two potential explanations for workers’ opting to labor at more than one job despite lower hourly pay. First, their main employer may simply not offer overtime pay. This would force income-poor individuals to look for additional jobs to earn additional income. Second, workers may choose to work at additional jobs to accumulate new skills as a form of human capital investment, and thus forgo some hourly earnings in expectation of higher future earnings with new skills.