CBO projects that incentives under current tax law will influence the average number of hours worked. Higher tax rates on individual income take effect when certain provisions of the 2017 tax act expire at the end of 2025 under current law, which slightly reduces the average number of hours worked beginning in 2026. In addition, CBO expects effective tax rates on individual income rise because of bracket creep. Given economic trends and current law, CBO expects the average number of hours worked to decline slightly over the next 30 years. By 2050, CBO expects the average worker to work about 0.6 percent fewer hours per week than he or she does today.

Total Hours Worked. On the basis of projections of the size of the labor force, average hours worked, and unemployment, CBO estimates that total hours worked increase at an average annual rate of 0.3 percent between 2020 and 2050. That is less than the average annual increase of 0.9 percent in total hours worked over the past three decades. The deceleration in the growth of total hours is mainly because the population is expected to grow more slowly in the future than it has over the past 30 years.

In CBO’s projections, the average growth in total hours worked is 0.2 percent in the first decade, 0.3 percent in the second decade, and 0.4 percent in the third decade. Growth in total hours worked increases in the second and third decades because of a falling unemployment rate. It also increases in the third decade because the rate of labor force participation stops decreasing by 2046 and begins to increase in 2047.

Earnings as a Share of Compensation. Workers’ total compensation consists of taxable earnings and nontaxable benefits such as employers’ contributions to health insurance and pensions. Over the years, the share of total compensation paid in the form of wages and salaries has declined—from 91 percent in 1960 to 81 percent in 2019—mainly because the cost of health insurance has risen more quickly than total compensation.11 Because CBO expects that trend in health care costs to continue, the portion of total compensation that workers receive as earnings declines to 80 percent over the 2020–2050 period and to 79 percent by 2050.