Federal Reserve Chair Janet L. Yellen has prescribed an unusual remedy for the United States' aging, low-growth economy: harness the under-tapped pool of female talent.
Yellen, the first woman to run the country’s central bank, said the lack of family-friendly work policies stifles women’s participation in the labor force and ultimately stalls growth.
“A number of factors appear to be holding women back,” she said last week at a conference celebrating the admission of women to Brown University more than a century ago, “including the difficulty women currently have in trying to combine their careers with other aspects of their lives, including caregiving.”
The remarks broke the norm for a leader who typically sticks to monetary policy, prompting praise on Twitter from liberal lawmakers.
“Supporting women in the workforce isn’t just a ‘women’s issue’ – it’s an economic issue,” Sen. Kamala D. Harris (D-Calif.) tweeted Monday in reference to Yellen’s speech.
"First woman to head @federal reserve says
#equalpay, #paidfamilyleave, #childcare will lift women & economy,” wrote Rep. Nydia M. Velázquez (D-N.Y.).
Not everyone lauded her step into the labor realm, however.
George Selgin, director of the Center for Monetary and Financial Alternatives at the libertarian Cato Institute, said he’d rather see the Fed chair focus on monetary policy. Yellen’s speech on boosting working women, he added, seemed to be a “sideshow.”
“It’s as if you see somebody whose job it is to cut the grass,” he said, “and they’re going out and giving a lecture on how to trim some bushes.”
The U.S. gross domestic product grew at a rate of more than 3 percent for the bulk of the 1980s and 1990s, but it has slowed since the recession. The GDP growth rate was just 0.7 percent for the first three months of this year.
Yellen argued that the United States was missing a growth opportunity by failing to adequately address the needs of female workers. As of today, 57 percent of women work outside the home, compared with 69.2 percent of men.
“One recent study estimates that increasing the female participation rate to that of men,” Yellen said, “would raise our gross domestic product by 5 percent.”
Research shows that women today still shoulder the majority of domestic responsibilities (cooking, cleaning, taking care of the kids), even when they financially support their households. But compared with the rest of the developed world, the United States furnishes little support to these working parents.
The United States remains the only industrialized nation not to guarantee new moms and dads a single day of paid time off. And child care continues to be an expense that competes in many places with the mortgage payment, surpassing the cost of public college tuition in two-thirds of states.
Economist Heidi Hartmann, founder of the Institute for Women’s Policy Research, said that’s one reason U.S. women have fallen behind their counterparts across the world. European and Asian nations generally offer more paid leave and subsidized child care.
“The extent to which we don’t talk about gender is the extent to which we don’t have a complete picture of how the economy works,” Hartmann said.
She added that Yellen’s comments make sense for her position. “When you consider the job of the Fed is economic growth, then it’s perfectly logical to be speaking about unemployed people,” Hartmann said. “Women’s employment is low, compared to similar women in other countries.”
In 1990, she noted, the United States boasted the sixth-highest female labor participation rate among 22 OECD member countries, trailing only Sweden, Norway, Finland, Denmark and Canada. By 2010, the country slid to 17th. Britain, Spain and Germany, for example, jumped ahead after expanding support for new parents, including subsidized child care and paid family leave.
A 2013 study from Cornell University economists estimates that as much as 30 percent of this status loss can be explained by the dearth of family-friendly policies in the United States.
American women, meanwhile, still earn 79 cents for every dollar paid to men, Yellen pointed out.
“The gap in earnings between men and women has narrowed substantially, but progress has slowed lately,” she said. “Even when we compare men and women in the same or similar occupations who appear nearly identical in background and experience, a gap of about 10 percent typically remains.”
If these disparities persist, she said, “we will squander the potential of many of our citizens and incur a substantial loss to the productive capacity of our economy.”
Abby McCloskey, former policy adviser to Energy Secretary Rick Perry, said she applauded Yellen’s decision to highlight challenges that women disproportionately face in the labor force.
“The nature of work and families have changed dramatically over the last 50 years — especially for women — yet our labor policies have largely stayed the same,” McCloskey said. “The result is a big disconnect between what working parents need and what is provided.”
Aparna Mathur, a resident scholar in economics at the right-leaning American Enterprise Institute, said that because women tend to take on more household duties than men, they’re more likely to make career sacrifices. They might swap higher wages for more flexibility, she said.
“Historically, much of the discussion surrounding labor force participation has focused on men,” Mathur said. “I think similar, if not more, attention needs to be given to women’s labor force participation and the factors driving the stagnation there.”