Women alone are driving a recovery in workforce participation
Aug 19th 2017 | WASHINGTON, DC
IF THERE were a list of common complaints about America’s economy, the fact that too few people work would be near the top. Though unemployment is low—only 4.3% in July—the figure does not include those who are jobless either by choice, or because they have given up looking for work. The proportion of those aged between 25 and 54 in work is 79%—lower than in France, where the unemployment rate is more than twice as high. So it is a relief that over the past two years, as the labour market has improved, Americans aged 25 to 54 (prime-age, in the jargon) have been joining the labour force in greater numbers. What is remarkable, however, is that this turnaround has been driven almost entirely by women.
When people think about America’s hidden reserves of labour, they usually point to prime-age men, who have participated in the labour market at ever-lower rates since the 1960s. Things have been particularly bad for less educated men, who have suffered as technological progress and trade have killed off manufacturing jobs. More than one in five prime-age men with a high-school diploma does not work, compared with fewer than one in 11 men with a bachelor’s degree.
Yet in recent decades women’s employment rates have been disappointing, too. In 1990, after two decades in which women had piled into the workforce, America’s female labour-force participation was sixth-highest among 22 rich countries studied by economists Francine Blau and Lawrence Kahn in 2013. The flow of women into work slowed to a trickle by the turn of the millennium. Then it went into a very gentle decline. Because other countries continued to see gains, by 2010 America had slipped to 17th in Ms Blau and Mr Kahn’s rankings. They pointed to America’s failure to implement the family-friendly policies followed elsewhere.
Nonetheless, the top end of the labour market is increasingly promising for women. Even in 2010, America’s working women were about as likely to be managers as men; elsewhere, they were only half as likely. They were also more likely than men to be professionals. Women are now a majority among new college graduates, make up more than half of law students, and are equally represented among freshmen at medical schools. Women in their late 20s and early 30s are responsible for nearly 40% of labour-force growth since prime-age participation bottomed out in August 2015.
Yet when Whitney Mancuso and John Robertson of the Federal Reserve Bank of Atlanta recently crunched the numbers, they found the recent surge in participation had been driven by unskilled women. According to their analysis, about a fifth of the growth in female prime-age participation over the past year is explained by shifting patterns of age and education. Strip those demographic changes out of the trend, and higher participation by women without college degrees explains fully 97% of what remains.
It is easy to explain why participation is booming among less educated workers. They tend to be the first to suffer from recessions and the last to benefit from recoveries, and the labour market has only recently entered its final stages of convalescence after the financial crisis. Median earnings are now growing by over 4% annually among full-time employees with only a high-school diploma, compared with 2.9% for those with a bachelor’s degree. What is far less clear, however, is why women alone are responsible for the turnaround.
Isabel Sawhill, of the Brookings Institution, a think-tank, offers one explanation: low-skilled job openings have been concentrated in service industries that do not attract men. Meanwhile, traditionally male jobs, for example in construction, have been harder to come by. Sure enough, there is a correlation between the number of women an industry employs, as a percentage of its workforce, and how many non-managerial jobs it has recently created. Particularly striking is the education-and-health-services sector, where women make up three-quarters of the workforce. It accounts for more than 25% of net new non-managerial jobs in the private sector over the past year. Most of these roles are in health and social care, which is booming as the population ages.
Yet plenty of men are working in low-skilled jobs that do not involve traditional “man’s work”. The leisure and hospitality industry, for example, has an almost equal gender split. It has added 287,000 non-managerial jobs in the past year, and wages are up by a healthy 3.5%. This suggests that the full explanation is more subtle than men not wanting certain types of work. It may include a simple piece of economics. Researchers think that women’s labour-market choices depend more on wages than men’s do. This makes sense when women are their household’s secondary earner. As a result, recent wage growth may have tempted more women than men into the workforce. However, the gap in sensitivity to wages has dropped dramatically in recent decades. And in any case, this argument cannot explain the size of the disparity between genders.
Whatever the cause, the evidence is that plenty of unskilled women on the edges of the labour force can be tempted in. Meanwhile, a large number of men seem cut off from the modern economy altogether. These are not just former manufacturing workers, but youngsters too. The participation rate of men aged 25-34 is only a touch above its record low; for similarly aged women, it is as high as it was at the start of 2001. One theory for why young men are increasingly averse to working, proposed by Erik Hurst, an economist, and his co-authors in a recent working paper, is the pull of modern video games. Policymakers still have their work cut out helping women into the labour force. Recent trends have not changed the fact that, in most age groups, many more men than women work. But society also needs to think about a growing group of men for whom work does not seem to be a worthwhile aim, however much the economy booms.