Women are disappearing from the workforce. Here’s how to fix that.


These women broke important glass ceilings. But in the overall economy, a smaller share of women are working. (Photo courtesy Pelosi's office)

Recently, The Washington Post ran a story  about ambitious efforts in Japan to raise the percentage of women working in the economy. Relatively few women are in the labor force in Japan, partly because many drop out after giving birth to their first child. Now, the story said, top officials trying to jump-start the country's economy want to change that, in part through generous day care subsidies and other pro-family policies.

When I read that story, I said to myself, "That's Japan," notorious for two decades of slow growth and an aging population that makes for terrible demography. But then I realized: When it comes to the number of women in the workforce, the United States is hardly doing better, and by some measures is doing worse.

While the U.S. has a somewhat higher percentage of prime-age women in the labor force than Japan, the gap has been narrowing. That's because Japan has seen its share of women in the labor force grow in recent years, while the share has been declining for more than a decade in the U.S.

What's more, the U.S. does worse in terms of female labor force participation than most developed countries, and has few policies in place to change the dynamic.

Here are two charts from the Council of Economic Advisers that illustrate these trends.

laborforce

The first chart shows that the female labor force participation rate increased from the period after World War II until the late 1990s, with the sharpest increases starting in the 1970's. A wide range of factors contributed to the upswing, from higher educational attainment among women to reductions in discrimination as a result of civil rights legislation, as well as the broader availability of birth control. Public policies such as the earned-income tax credit and welfare reform helped bring more low-income women into the workforce.

But starting in the late 1990's, the participation rate began to decline, a trend that was exacerbated by the Great Recession. Economists have found that the trend is most pronounced among single women, women with no children, and highly educated women, though they haven't come up with a comprehensive explanation for why it's happening.

One theory is that our society has made it  difficult for women to work and raise children, and thus they "opt out," in the lingo, either by choice or because they cannot afford day care. But this cannot explain the whole pattern, given the large number of single women without children disappearing from the workforce.

No matter the cause, it is an important trend for policymakers to tackle, in part because women now represent such a significant part of the workforce, and in part because their decline in labor force participation is much more recent and perhaps easier to address.  For a start, women contribute an increasingly large share of earnings to a married couple's income -- 37 percent in 2011 versus 27 percent in 1970 --  and young women are more likely to graduate from college than men.

But while female participation in the labor force has been lagging lately, the trend is much less stark than what men have faced.

The percentage of prime-age men in the labor force has been declining for more than six decades, likely reflecting the disappearance of manufacturing jobs as a result of technological automation and globalization. Some also argue that the growth in Social Security disability insurance has reduced the incentive to work for many men. This chart shows the worrisome trend, also taken from the Council of Economic Advisers report.

labor3

A necessary ingredient to improve labor force participation, by both men and women, is a bustling labor market, with low unemployment and higher wages. We're making slow, very slow, progress in that regard. Policies that can accelerate the growth of the economy, and the reduction in both unemployment and shadow long-term unemployment, would help. Infrastructure spending, an overhaul of immigration laws, business tax reform and reducing government regulation would probably all be part of that mix.

But for women, the good news, or at least the hopeful news, is that government and private-sector policies could probably make a bigger difference for them than for men. Policies will have a hard time reversing the impact of technology and globalization on the male labor force. Education would certainly help, as might stronger labor and trade standards, but it's going to take a long time to meaningfully move the dial on a six-decade-long trend.

By contrast, policies that make it easier for women to have children and stay employed could make a difference. One study suggests that a lack of "family-friendly" policies like paid leave and a right to work part-time have contributed to nearly 30 percent of the decline in female labor force participation.

A national program of paid family leave would be one way to address the situation -- though only in small part. While President Obama and others in the Democratic Party say it is their goal, they have struggled to rally around a specific legislative proposal. The problem largely comes down to cost: A paid leave benefit that guaranteed a new mother, for example, 12 weeks of time off at a fraction of their salary could cost about $20 billion a year.

The handful of Democrats who have introduced legislation to offer such a benefit would finance it through an increase in payroll taxes equal to about $100 a year for someone earning $50,000 (as well as a $100 a year by that person's employer). Obama has balked at the proposal, which would violate his pledge not to raise taxes on the middle class.

Some might prefer a more progressive policy, for example paying for the cost of a national program of paid leave through additional taxes on the rich. Others say it should be left to the market and employers. (For the record, that is the situation in 47 states. Nationally, only about 12 percent of workers have access to paid family leave, with well-off workers already far more likely to benefit.)

But without greater availability of paid family leave -- let alone the types of childcare subsidies being deployed in Japan -- female labor force participation in the United States is likely to lag. And that will hurt the economy's potential.

Zachary A. Goldfarb is a staff writer covering the White House, focusing on President Obama’s economic, financial and fiscal policy.
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