Posted in Finance, Accounting and Economics Terms, Total Reads: 1127
Definition: Aggregate Hours
“Aggregate hours” refers to the total number of hours worked by the employed population of an economy in a period of one year. It includes labor hours of people who are employed in both full time and part time jobs. “Aggregate hours” can be calculated for individual industries or for a collection of all industries put together.
Usually the measure is used to understand how much labor effort was put in to contribute to the country’s GDP. It is a better measure of employment of a country as against “unemployment rate” as “Aggregate Hours” actually indicates the exact number of work hours recorded in a year. Unemployment rate gives a measure of the number of people who are without jobs and seeking employment, but there may be workers who are currently “employed” in certain jobs but who are not really contributing to the growth of the company, and in turn, the economy.
Example: Unemployment rate of 30% does not necessarily imply that 70% of the labor force is employed “and” contributing to the country’s GDP.
“Aggregate Hours” mitigates such inefficiencies of other indicators by calculating the number of actual “work hours” over just a count of “employed people”.
An increase in aggregate hours is a positive factor for an economy, however it does not necessarily translate to better labor productivity as the increase in aggregate hours may simply be because of growth in population.
Also, “Aggregate Hours” does not account for the shift in quality/type of work done by the worker. There may be cases when people quit higher paying jobs and switch to lower-paying full-time jobs because of, say, a recession in the economy. These downward shifts (negative effects) are not captured in “Aggregate Hours”.