More Women Seek Paid Work And Will Do So Increasingly

Milton Ezrati

Chief Economist

American women have begun to “lean in,” as the expression has it. After years, indeed decades of decline, women’s participation in paid work has begun to rise again. The recent wage acceleration no doubt has prompted their return to the workplace, but demographic trends suggest that this recent turn has staying power.

Labor Department data offer considerable drama. Statisticians there calculate that the proportion of women in prime working years, ages 25-54, either working or seeking work outside the home has increased from 73.3% three years ago to 75.2% recently. At first blush, this change might seem small. The figure, after all, still falls far short of men’s participation rate, which verges on 91%, but it nonetheless constitutes a significant move, adding some 1.5 million more women to the workforce an almost 1.0% increase in the amount of available labor.

This is all a remarkable turn from past trends. After 2000, American women bucked international trends and opted out of paid employment. Participation among prime-working age women dropped from 76.6% at the beginning of this period to a trough or 73.3% in 2015. That 3.3 percentage point drop removed some 2.4 million presumably talented workers from the American labor force. Especially interesting was how this long decline flew in the face of international trends. In every other developed country in the world, working-aged women opted for higher participation in paid employment. In the Euro area, for instance, women’s participation rate rose 5 full percentage points. In the United Kingdom it increased some 3.3 percentage points, in Canada some 2.0 percentage points, and in Australia some 4.6 percentage points. Whereas 20 years ago American women led the world in workforce participation, the figures today, even with the relatively recent turn, show that women in most other developed economies now participate at higher rates.

The interaction of wage rates and the cost of childcare tell much about the recent change and the international differences. Though feminist trends have done much to induce a greater sharing of childcare responsibilities between men and women, there is no denying, in the United States and elsewhere, that women still bear much of this burden. If in a larger sense childcare is a joy and not a burden, it nonetheless closes down options for work outside the home unless the wages earned by the responsible parent can more than compensate for the cost of childcare. Until recently wages in this economy failed to meet that need, prompting many women to opt out of the picture. Between 2007 and 2016, for example, the Labor Department calculates that average hourly wages in the United States grew a mere 2.3% a year, while the average cost of childcare rose 3.3%, almost half again faster. Though the wage picture elsewhere in the world was no more robust than in the United States, the social welfare schemes pursued in those countries kept the cost of childcare lower, either through subsidies or paid leave or combination of these and other means. That, no doubt, made the difference.

In the last few years, however, the picture in this economy has changed. As economic growth has brought unemployment rates below 4% of the workforce, businesses now face a shortage of workers, especially trained workers. Accordingly, wages have accelerated. After sluggish growth for years, average hourly wages during the last two years accelerated to an almost a 3.0% annual rate of increase, and in the 12 months through this past October, they rose more than 3.0%. For many women that has tipped the cost-benefit analysis enough to bring them back to paid work, full-time for some, part-time for others. No doubt this wage consideration accounts for much of the recent and dramatic participation change among women in this country. Since businesses still focus a growing need for skilled labor, the wage picture and the participation trend of the last few years seem set to continue for the foreseeable future, at least as long as the current economic expansion persists.

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