The Effects of Fair Workweek Laws on Store Performance: Evidence from Chicago

Abstract

In recent years, various jurisdictions in the United States have passed laws to protect shift-based workers from unstable work schedules. Often referred to as “Fair Workweek” laws, these laws require employers to compensate employees if their previously scheduled shifts are adjusted or if new shifts are added without enough advance notice. Accordingly, these laws introduce a form of labor adjustment costs that make it more expensive for some businesses to adjust their labor in response to new information (e.g. changes in demand). We use a difference-in-differences strategy around the passing of such a law in Chicago, referred to as Chicago’s Fair Workweek Ordinance, to study the effects of such laws on retail store performance. Examining a sample of more than 3,000 retail stores, we estimate persistent and sizeable declines in output among stores in Chicago, with no effect on aggregate labor utilization. Specifically, we observe reductions in transactions of 13.9% that persist more than 24 weeks after the effective date of the law. Consistent with the objectives of Chicago’s Fair Workweek Ordinance, affected stores schedule short-notice shifts with much lower frequency. Using instrumental variables, we relate this reduction in short-notice shifts directly to the decline in output. Overall, this paper suggests that some businesses may rely on flexible scheduling practices that are made more expensive by Fair Workweek-related laws.