Women hardest hit, say Warren and Reich. They're wrong.

Why are women entering the workforce? If we listen to the arguments of Democratic Sen. Elizabeth Warren of Massachusetts and former labor secretary Robert Reich, we get one big reason: inequality. The earnings of the average American male have stagnated since the 1970s, the self-styled populists argue, as the gap between the rich and everyone else has grown. Since earnings have allegedly stagnated, it’s no longer possible to sustain a household on only one income, and thus women have had to enter the workforce to pick up the slack. Reich outlined this argument in his documentary Inequality for All, and Warren first did so in her book The Two-Income Trap.


Such an argument has some truths, and many faults. Linking stagnant male earnings resulting from inequality to the rise in women in the workforce ignores that the total compensation of males (not solely wages) has not stagnated. The only way you can arrive at the conclusion that male earnings have stagnated is by measuring inflation with the consumer price index (which has a tendency to overstate inflation), and by excluding benefits.

To give some background information, the labor force participation rate among women increased from 44 percent in 1972 to 58 percent in 2012. While there was a net increase in labor force participation during that time, the increased participation among women was slightly offset by declining participation from men. Male labor force participation declined from 79 percent participation in 1972 to 70 percent in 2012.


Warren and Reich also overlook that female LFP has been on the rise since the late 1940s, and actually began declining after peaking in April 2000. There is evidence on the micro level that a wife’s earnings change depending on the earnings of her husband. For instance, one study in the 1970s (around the time women began entering the workforce at a faster pace) linked a 10 percent increase in the earnings of a husband to a 1.7 percent reduction in hours worked of the wife.

Many cultural and economic changes over the past half-century have contributed to rising labor force participation rate among women.



Changing Attitudes

Before diving into the various economic reasons for the rise in women in the workforce, it’s important to remember that attitudes toward working women have become more and more favorable. In the 1940s, 60 percent of Americans thought that women whose husbands made enough income to support their family should not be allowed to hold jobs. In 2011, Pew reported that 75 percent of Americans now reject the view that women should “return to their traditional roles in society,” and “most believe that both husband and wife should contribute to the family income.”

The Structure of the Economy has Changed

At one time, America’s economy had a healthy and growing manufacturing sector. While good for the economy as a whole, many such jobs were physically demanding, which is why they were predominantly performed by men. In the economy of the 1950s, 60 percent of Americans were employed in the service sector, while that figure in 2000 stood at 80 percent. This shift has opened up new job opportunities for women.

A growing number of jobs today are also part-time, rather than full-time, and women are much more likely to work part-time jobs, while men are more likely to work full-time. In 2012, there were twice as many women employed part-time as men (26 percent vs 13 percent).



Divorce

How does divorce lead to more women participating in the labor force? Put simply, a now-divorced housewife can no longer afford to be a housewife. Additionally, the threat of a divorce makes it more likely for women to work as a sort of “insurance” measure against the financial strain a divorce imposes.

Divorce as a variable only explains the rise in female LFP for certain parts of our timeline. Divorce rates from the 1970s to early 2000s never fell below double the rates of the 1950s and 60s. In the late 2000s however, divorce rates have begun to fall.

Growing Access to Contraceptives

There is considerable evidence that access to contraceptives, the pill in particular, increased female labor force participation and hours worked. As one study in the Quarterly Journal of Economics calculated, “The estimates suggest that access to the pill before age 21 reduced the likelihood of becoming a mother before age 22 by 14 to 18 percent and increased the extent of 26 to 30 year old women’s labor-force participation by approximately 8 percent. At the intensive margin, women with early access worked at least 68 more annual hours at ages 26 to 30.”

The pill was first approved for use as a contraceptive in 1960, a decade before Warren and Reich begin their measurements. However, not every woman used the pill as it became available, so it didn’t have a large impact on female LFP right away. Only 1.2 million American women were on the pill in 1962, but this ballooned to more than ten million by the 1980s. Thus, the pill’s effect of increasing female LFP is more evident from the eighties and beyond.

Women have More Time to Work


The growing availability of home appliances have freed up women’s time. Paul Krugman and Robin Wells argued this point in the second edition of their Macroeconomics textbook. As they write:

…an important driving force [behind women joining the labor force] was the invention and growing availability of home appliances, especially washing machines. Before these appliances became available, housework was an extremely laborious task – much more so than a full-time job. In 1945, government researchers clocked a farm wife as she did the weekly wash by hand; she spent 4 hours washing clothes and 4 ½ hours ironing, and she walked more than a mile. Then she was equipped with a washing machine; the same wash took 41 minutes, ironing was reduced to 1 ¾ hours, and the distance walked was reduced by 90 percent.

While the particular study is from the mid 1940s, it’s relevant because home appliances have become more and more available in recent years.

Women are Becoming More Educated

As early as 1978, women earned more associate’s degrees then men. By 1982, women earned more bachelor’s degrees then men. In 1987, women earned more master’s degrees then men, and more recently in 2006, women earned more doctoral degrees then men.

Overall, the percentage of women earning college degrees has increased from 11 percent of all women aged 25-64 in 1970, to 37 percent of women in 2011. During the same time frame, the percentage of women who didn’t graduate high school dropped drastically, from 34 percent to 7 percent.

This is relevant because the more educated one is, the more likely one is to enter the labor force. Women are even more likely than men to get a job right out of college than recent male graduates. Since higher education means higher wages, more education among women increases the opportunity cost of their not participating in the labor force.

Conclusions

The Reich and Warren thesis may hold true in some circumstances where a family cannot get by on one income. However, this can hardly be said to be the sole cause of the rise of women in the labor force, as we know there are much more influential variables at play. The culture has changed; the economy has changed structurally; marriage has changed; pregnancy can be better planned; and women have more time on their hands while being better educated. Look at a country like Sweden, which for many recent years has had the most equal distribution of income in the world. From 1970 to 2008, the labor force participation rate of Swedish women increased by more than eleven percentage points, from 50 to 61.2. In other words, the most equal country on the planet experienced trends similar to those in the United States during the same time frame, and has a female LFP rate higher than any in U.S. history. In light of that fact, inequality can be dispelled as a variable in rising female labor force participation rates.

— Matt Palumbo is the author of The Conscience of a Young Conservative and In Defense of Classical Liberalism.