The implications of changes in hours fluctuations on welfare costs of business cycles

•Hours volatility has changed non-monotonically across skill groups since the mid-1980s.•The welfare cost of mid-skilled workers became similar to that of high-skilled workers.•The relative welfare cost of low- to high-skilled workers remains very high.•Treating mid- and low-skilled workers as one group provides incorrect information.

Hours volatility has changed non-monotonically across skill groups since the mid-1980s. The welfare cost of business cycles of mid-skilled workers became similar to that of high-skilled workers, while the relative welfare cost of low- to high-skilled workers remains very high.