Gender differences in the labour market

Dr Mohammad Dulal Miah

The writer works at the College of Banking and Financial Studies

The Noble Prize in Economics 2023 was awarded to Professor Claudia Goldin for her breakthrough work about the women's labour market.

She is the third female economist to be awarded this prestigious award following Elinor Ostrom (2009) and Esther Duflo (2019) jointly with Abhijit Banerjee and Michael Kremer (2019).

As an economic historian, Prof Goldin explores the existing participation and income gap between male and female workers and their causes.

In particular, she analyses data spanning two centuries to understand the changes in the gender gap in labour force participation and wage gap throughout the centuries.

About half of the working-age female workers and 80 per cent of the male workers are active in the paid-job market globally.

Low participation of the female labour force results in a sub-optimal use of valuable human resources. Not only the participation rate but also the pay discrimination between male and female workers is also significant.

Prof Goldin shows that before the rise of industrialisation in the 19th century, the participation of the female labour in the national labour force was noteworthy, which declined during the phase of industrialisation.

However, the female labour force participation rate increased subsequently when the service sector dominated the economy.

It implies that the female labour force participation rate increased during the agrarian phase of the economy, declined during the dawn of industrialisation, and increased again in the post-industrial phase.

This reflects a U-shaped curve of women's participation in the labour force. From this perspective, the Nobel laureate economist explains that since economic growth followed a steady upward trend over the last two centuries, the previously thought positive association between women’s participation in the labour market and economic growth suffers from empirical validity.

Not only the gap between male and female participation but also the difference between married and unmarried women taking part in the job market was also significant at the beginning of the twentieth century.

Prof Goldin estimates that 20 per cent of unmarried women accepted paid work compared to only 5 per cent of married women.

The high employment rate during the agrarian phase of society can be attributed to the opportunity of working from home in such sectors as family-owned small farms, cottage industries, home-based production such as textiles and dairy farms, boardinghouse keepers, etc. Such works were not officially recorded by the census.

As a result, women's representation in the labour force was substantially deflated. Analysis based on the deflated data has failed to provide a true picture of the female workforce in the early modern history of the USA.

The reasons for the subsequent decline, as identified by the Nobel laureate, underlie the laws and social norms.

She showed that in the early twentieth century, women were expected to work for a short span of time before marriage and quit their jobs after marriage.

Another important factor is the choice of education. For instance, those young kids who made their choice of education in the mid-19th century entered the labour market much later.

Notably, their choice of education was shaped by the prevailing economic environment which was dominated by agriculture and small farming.

They also saw a short career of female workers caused by marriage and childbirth. This has discouraged households from investing in female education sufficiently. When these kids grew up and entered the job market, they experienced a rapid change in the work environment.

A structural transformation of the economy, from agrarian to industrialisation, took place. This has made the female workforce unsuitable to work efficiently in the industry.

Prof Goldin identifies some factors that can be attributed to the subsequent rise of the female labour force, especially when the service sector dominates the economy.

First, the changes in societal norms meant that those who were off work owing to childbirth and taking care of family could return to work once their children were grown up. Secondly, technological innovation played a pivotal role in increasing female participation.

Prof Goldin showed that pay discrimination, the difference in pay between male and female workers after accounting for observable differences such as age, productivity, and education, rose commensurably with the growth of the service sector in the twentieth century.

It goes beyond saying that the works of Prof Goldin would influence relevant policies. In particular, laws and regulations pertaining to the labour market would definitely benefit from her work.

At the same time, investment in education and information would receive increased attention from policymakers and practitioners. The enormous influence of her work in policymaking earned her the prestigious Nobel Prize in Economics.