The United States used to be a leader in women working. In 1985, America was second only to Sweden in the proportion of prime age women with jobs or actively seeking paid employment. Now, the United States has fallen to the back of the pack, according to a new report this week from the International Monetary Fund.
The United States plateaued for women's participation in the workforce while other advanced economies in Europe, Australia, Canada and Japan caught up and surged ahead in the past three decades. The IMF says the United States isn't doing enough to help working women, and it will hurt the country's economy in the coming years.
In 1985, 70 percent of American women ages 25 to 54 were in the labor force (meaning they had a job or were actively searching). Today 74 percent of American women in that key age group known as “prime age” are in the labor force, a modest change, compared with what other nations have experienced.
Australia went from 57 percent of prime-age women working in 1985 to 77 percent now. Germany jumped from 59 percent to 83 percent over that same time frame, and France, which was just a nudge below the United States in 1985 with 68 percent of prime-age women in its labor force, is now at 83 percent — nearly 10 points better than the United States.
Sweden is still the world leader among advanced economies, with 88.5 percent of prime-age women working.
“The striking difference in the participation trend for U.S. women relative to the average European trend can be attributed to the more supportive policy changes in Europe,” the IMF report concluded. “Better access to childcare, longer maternity leave and greater flexibility in work arrangements are associated with higher female labor force participation.”
The United States remains the only advanced economy without government-mandated paid maternity leave, and there is widespread agreement that United States also lacks affordable child- and elder-care options, making it harder for women to work.
In a particularly alarming trend, the United States has lost ground in the past decade in the proportion of prime-age women working while most other advanced economies have made gains, the IMF noted.
“Across most advanced economies, we see a very dramatic increase in the number of women who have joined the labor force. The U.S. is an important exception to this trend. The share of prime-age women who are working or looking for work peaked around 2000 in the U.S. and has declined since then,” said economist Petia Topalova, the lead author of the IMF study “Labor Force Participation in Advanced Economies: Drivers and Prospects.”
There's a push around the world to increase women's participation in paid work. It makes companies stronger by bringing in a more diverse perspective, and it makes women more self-sufficient financially, giving them more options for their lives. Getting more women into the workforce is also good for the economy.
The United States and most other advanced nations are aging societies. Baby boomers are starting to retire, and that trend will intensify in the coming years, meaning there will be fewer workers (and their tax dollars) supporting a growing population of retirees, a situation that is likely to crimp growth. If nothing changes, the United Nations predicts the prime-age working population in 2050 in countries like the United States will support almost double the number of elderly people as they do now.
“In order to ensure you don’t have a decline in living standards, it is very important to boost participation in the labor force,” said Gian Maria Milesi-Ferretti, the IMF's deputy director of research.
One of the easiest ways to improve the scenario going forward is to get more women into the workforce. They are untapped potential in many countries. Consulting firm McKinsey said if women participated in the labor force at equal levels to men, it would boost global growth by 26 percent in 2025. “Taking bold action to increase the economic participation of women is critical for long-term prosperity,” McKinsey wrote in a 2016 report calling for gender parity in the economy.
The IMF also points out that the United States is developing a problem with male labor force participation. Among men ages 25 to 54, the United States now has the lowest labor force participation rate of any advanced economy: 88.5 percent. That's the same as Sweden's female prime-age labor force participation rate, and it's a decline from 1985, when the American male rate was 94 percent, closer to the middle of the advanced economy pack.
The United States isn't alone in seeing a decline of men in the workforce. In the past decade, nearly all advanced economies experienced a drop as prime-age men stop working or even looking for jobs. But the United States had one of the sharpest declines of all its peer countries. The IMF called it “puzzling” that American men would be so much worse off than those in Europe, Canada or Australia.
Certain sectors see the most workers who drop out: retail, manufacturing, mining and utilities. These sectors account for more than half of the dropouts, even though they employ less than a third of workers, and they are also the most likely to be hard on the body, the IMF found.
The IMF advises that the United States spend more money on retraining and aiding workers who need to transfer jobs. But even the IMF admits it doesn't fully understand why the opioid crisis has taken hold in the United States and not elsewhere, another potential factor holding men back from work.
If the United States can't reverse these trends — or let in more immigrants — it could become a crisis for the economy.
(Below is the chart from the IMF report illustrating the change in labor force participation rates from 2008 to 2016 for the 20 largest advanced economies. The United States has seen one of the worst declines in its workforce overall, a sharp decline in its male labor force participation rate and the worst decline of all 20 countries in its female labor force participation rate).