Today’s headlines trumpet a red-hot labor market. There are myriad stories of employers unable to fill vacant posts and an epidemic of talk about purported skill shortages. A closer look at key labor statistics, however, shows a troubling pattern of lower engagement in the workforce. Declines in labor force participation rates have been a major contributor to today’s ultra-low unemployment rates.[i] Economists, journalists, politicians, and others have attended to this trend. But attention has mainly focused on men’s declining labor force participation. It is time to give equal attention to the implications of declining labor force participation among women.
Why is lower labor force participation (LFP) for women important? First, the opportunity to be in the paid workforce is certainly as important to women as men. Both genders deserve equal opportunity in the labor market. And it should go without saying that women’s talents and abilities are vital to our economy; a labor market unwelcoming to women leaves our economy deprived of talent and our society diminished. In addition, poverty and near poverty in America is female – with 16% of women living in poverty, that’s 40% higher than for men. In today’s labor market, marked by the consequences of decades of stagnant wages, connecting women to work does not on its own provide an escape from poverty, but it does create access to means-tested social supports, such as the Supplemental Nutritional Assistance Program and the Earned Income Tax Credit, most of which are now contingent on working. Making progress toward pay equity and higher labor force participation rates for women are important steps to address poverty, make progress toward the ideal of equal opportunity, and build a flourishing and vibrant economy. While this blog attends to women overall, we also note that both LFP and median earnings are lower for women in all race and ethnic groups than the corresponding men. With the exception of Asian women, LFP is higher and median earnings are lower for Latinas and other women of color compared to white women.
Fact 1: Millions of women are “missing” from the labor force compared to pre-recession levels.
We calculate that 2.5 million or more women are not in the labor force as of 2018, compared to the decade preceding the Great Recession. Before the mid-1960s, a much lower share of women than men were in the formal labor force. The gender gap in labor force participation narrowed markedly from 1965 to 1999, when the rate of women’s labor force participation peaked. But the sharp change during the Great Recession and thereafter is striking. In 2008, female LFP stood at 56.6%. It sagged down to 53.1% in 2012. Recovery since then has been frustratingly slow. The graph below illustrates that the average annual LFP for women dropped from 56.7 % in the decade before the recession to 53.8% in the 10 years through 2018.
The decline of 2.9 percentage points translates into as many as 3.9 million fewer women in the labor force. Even as the LFP rose to 54.6% in 2018, there were still 2.5 million “missing women” due to the 1.8 percentage point decline from the pre-recession average.
Fact 2: The price tag for lowered women’s lower labor force participation may be quite high.
We may be foregoing trillions of dollars in wages and economic activity due to the impact of lower women’s labor force participation. For example, if the 2.5 million “missing” women were in the labor force and earning $40,000 on average,[ii] household wage earnings would be up by $100 billion each year or $1 trillion over the decade. Even in an almost $20 trillion annual economy, that is a nontrivial amount. And, considered in the context of household budgets and financial needs, it is large indeed.
Fact 3: The great recession and recovery generated a disproportionate shock wave on women.
While men lost more jobs in the Great Recession, they benefited from a steadier recovery. Women also suffered significant job losses during the recession. Perhaps as importantly, many women suffered an involuntary shift to part time work. The rate of women working part time because they could not find full time jobs doubled from 10% before to about 20% immediately after the recession. And while the rate has come down since, it remains the case that the rate of involuntary part-time employment is higher among women than men. That trend reduces earnings and discourages efforts to find and hold a job.
The reliance by women on public sector jobs – women are 50 percent more likely to work in the public sector compared to men – is a further factor. Public sector employment was severely cut in and after the recession. For example, jobs at all government levels increased by 12% over the course of the decade before the recession, but declined sharply in the aftermath of the recession and has yet to fully recover.
Fact 4: Pay disparity for women remains high.
The large and persistent gender pay gap is narrowing – albeit exceedingly slowly. But its persistence reflects discrimination and society’s tendency to pay too little for jobs held by women. The weekly gender pay gap for full-time workers according to the Institute for Women’s Policy Research is 18.9%. Women’s median earnings are lower than men’s in nearly all occupations, whether they work in occupations predominantly done by women, occupations predominantly done by men, or occupations with a more even mix of men and women. (IWPR) In addition, women’s jobs are concentrated in industries confronting slow growth or decline in jobs and wages. Declines in sectors like retail, for example, meant that the loss of almost a million retail jobs was disproportionately absorbed by women. (IWPR) And women who are mothers face particular challenges in equitable access to work, with implications for experience and pay throughout their careers. Audit studies find that resumes submitted to employers of equally qualified women that differed only in terms of an extra activity that indicated whether an applicant was a parent yielded lowered callbacks for the likely mothers.
Conclusion – Policy Change Is Overdue
The US is less supportive of working women than other advanced economy countries. In Female Labor Supply: Why is the US Falling Behind?, Economists Francine Blau and Lawrence Kahn note that in 1990 US women had one of the highest labor force participation rates among economically advanced nations. But by 2010 most economically advanced countries had surpassed the US women’s labor force participation rates. Blau and Kahn see the lack of progress in US policies designed to facilitate women’s participation as a contributing factor to slumping women’s LPF. Most nations with advanced economies have enacted policies that address the availability, affordability, and quality of child care; the need for paid family leave; and workplace rights and job protections that facilitate women’s equal participation in the labor market. The US still lacks these policies and an effort to catch up on policy and practice is an urgent priority.
*An earlier version of this post misstated the increase in annual household earnings from 2.5 million additional women workers. It has been updated to correct the error.
Tweet Headlines trumpet a red hot labor market, but a closer look reveals a more troubling pattern. While attention has focused on men’s labor force participation, it is time to give equal attention to women’s.
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[i] Data series on Labor Force Participation Rates (LFP = ratio of individuals in paid work or actively looking for a job to total population) or Employment-to-Population Ratio (E/P) are somewhat different but tend to move together. High Labor Force Participation Rates or Employment/Population figures are not an unalloyed good – for women, men or the society overall. There are important things besides work for pay that are important in life – e.g. child rearing and family care, leisure, retirement, etc. We also don’t count in GNP or GDP work that is not paid in the home or elsewhere. Nor can unpaid or woefully underpaid work yield the funds always necessary to meet fundamental needs and build a cushion to help bridge through tough financial times.