Hours mismatch

We characterize work hour constraints in the labor market and quantify welfare gains to workers
from moving from their current hours to their optimal hours. There is a firm component
to work hours that explains approximately 27% of the overall variability in hours. Contrary to
predictions from established models of work hours determination, there is virtually no correlation
between worker preference for hours and employer hour requirements. Instead, high-wage
workers are more likely to sort to firms offering more hours even though they have a preference
for fewer hours. Using a revealed preference approach, we find that workers are off their labor
supply curve, on average. The typical worker has an inelastic labor supply and prefers firms
that offer more hours. Workers are willing to trade off 25% of earnings on average to move
from their current employer to an employer that offers the ideal hours, at a given wage level.

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