Women's Labor Force Participation: Trends, Models, and Comparative Analysis

Chapter 7 Women at Work • LFP • definition • trends • Model of LFP • Comparative statics & evidence

Labor Force Participation (LFP) • labor force • age 16+ = employed + unemployed unemployed = persons actively seeking work

NOT in the labor force • children • disabled • retired • housewives/househusbands • full time students

LFP rate = labor force civilian noninst. population 16+ • Bureau of Labor Statistics

Men Women

LFP trends • by sex • falling slightly for men • earlier retirement • rising substantially for women • by age • falls off substantially by 55

by race • LFP for black women is higher than white women • LFP for black men is lower than white men

by family status • big increase in LFP for married women • especially those with children • over 50% of women w/ small children are in the LF

by education • LFP higher for men & women as level of education rises • especially for women

FLFP over the life cycle • Women born around 1900 • women left LF at marriage and never returned • by the 1905-1935 birth cohort • women leave LF at marriage but return later

Modeling FLFP • focus on women • big changes over time • still substantial variation

Model of time use for a woman • time spent one of 3 ways: • market work (M) • housework (H) • leisure (L) • so total time (T) must equal: M + H + L

income • her wage (w) • nonearned income (V) • welfare • investment income • husbands income

her utility is a function of • consumption of goods (C) • household production (G) • leisure (L) • U = U(C,G,L)

tradeoff • more hours worked, • more $ to buy stuff, • but less time for leisure, household production

marginal value of time (MVT) • additional utility from additional time spent on M, H, or L • MVTM, MVTH , MVTL • MVT falls as M, H, L rise • law of diminishing marginal utility • law of diminishing marginal returns

The choice • maximize utility • subject to constraints • time • T = M + H + L • income • pC = wM + V • p is price

household production • G = G(H, Z) • (Z is household technology)

endogenous variables (choose) • M, H, L • exogenous variables • w, p, V, Z

How to choose • start with H, L • at the margin • one hour at a time • compare MVTs • choose highest MVT for that hour • equalize MVT across uses: • MVTH = MVTL

why equalize MVT? • because if not, • shift use of hour from low MVT to high MVT… • total utility would rise • so H*, L* are chosen so that • MVTH = MVTL = MVT*

choice of M (M*) • if M* = 0 • woman in not in LF • if M* > 0 • woman is in the LF

When will M* = 0? • i.e. not in LF • when MVTM (1) is below MVT* • lose utility by working

if MVTM (1) > MVT* • shift some hours to work until • MVTH = MVTL = MVTM

Comparative statics • husband’s income • woman’s wage • children • household productivity

analysis • how factors change MVT and LFP over time • time series analysis • how difference across groups in MVT lead to different LFP at a point in time • cross-sectional analysis

Husband’s income • for women, nonearned income (V) • if husbands income is high, • C is high, & • marginal utility from C is low • so marginal utility from wife working is low • value of additional C is low

so if husband’s income is higher, • MVTM (1) for wife is lower • wife is less likely to work

cross –section analysis • this explains higher LFP of Black women relative to White women • Black husbands likely have lower incomes • MVTM for Black women is higher than that of White women

time-series analysis • men’s real wages have risen steadily up to 1975 • our model predicts that this would cause married FLFP to FALL • so other factors must be at work

note • idea that married women have been pushed into LF b/c husbands income too small • not true for most of 20th century • only an issue in past 25-30 years

Women’s wages • higher wage • higher MVTM • can buy more stuff with each hour of work • higher MVTM • women more likely to work

time series • large increase in women’s wages over 20th century • cross section • higher level of education associated with higher LFP

Children • family size increase MVTH • more household to be done • result • shifts time from L and M into H • LFP less likely

Household productivty • % of U.S. households w/ a washing machine • 1925: 15% • today: 80% • and it’s a better machine

20th century time savers: • dishwasher • vacuum • microwave • refrigerator

impact of technology • made women more productive in HH, • but also makes long hours on household production unnecessary • in total • first hours of H highly valued • additional hours much less valued

shift some hours spent on housework to either • leisure • work • increase in LFP

Evidence overall • pre WWII • husband’s income was largest influence on LFP of married women • post WWII • women’s wages rates became more important

Women's Labor Force Participation: Trends, Models, and Comparative Analysis