The gains in women’s labor force participation must continue

At the same time, technological developments mean that many jobs previously done by women are being replaced by tools or machines often used by men. Home-produced goods become less profitable compared to many factory-produced goods. The jobs that do increase are those in factories and large companies. Some of these new jobs may still be in agriculture, but many of them are outside the family home and many are in manufacturing.

Goldin also says there is often a stigma attached to married women who do manual labor in industries such as construction, mining and transportation. “The stigma is a simple message,” she says. “Only a husband who is lazy, slothful and completely neglectful of his family would allow his wife to do such work.” The result of this is that women eventually withdraw from domestic work and give up non-domestic work.

As the economy continues to develop, the education level of the population increases, but mainly among men to begin with. This increases women’s incomes but not productivity – compared to men’s – further reducing women’s labor force participation. Here we come to the bottom of the U-curve.

But as women’s access to education improves at later stages of economic development, they become more attractive to join the workforce. This is because secondary education in particular equips women to work in the growing share of office jobs. And these office jobs generally don’t come with the same social stigma attached to women.

At the same time, incomes continue to rise across the board, making working (compared to staying at home) more attractive. This is called the ‘substitution effect’: because people can earn more income for each hour worked, they are encouraged to work more hours.

At this point, the substitution effect becomes stronger than the income effect, in part because office jobs do not bear the costs of stigma for women. As a result, women’s labor force participation is starting to rise again towards the top of the U-curve.

Goldin says increasing labor force participation is important because evidence suggests that as women’s work moves outside the home and family, women tend to gain more freedom to make decisions and participate, politically, socially and even at home.

Although each country experiences the U-shaped curve differently and within different time frames, it gives us insight into factors that drive women to enter the labor market.

One of these is the option to work flexibly. Working from home no longer has to mean that you only work for a family business. Before COVID hit, the proportion of women in work (the employment rate) hovered around 60 to 61 percent in Australia for a few years, compared to about 71 percent for men.

But women’s employment rates peaked at 63.1 percent in November 2023, and have hovered around 63 percent over the past 12 months (while staying about the same for men).

Working from home is especially beneficial for mothers. There is evidence from the US that a 10 percent increase in working from home is associated with an almost 1 percent increase in maternal labor force participation.

“Only a husband who is lazy, slothful and completely neglectful of his family would allow his wife to do such work.”

Claudia Goldin, Nobel laureate in economics, describes the social stigma surrounding women who do manual labor

Being able to work flexible hours, or log in to a laptop from the living room, makes combining unpaid jobs, such as childcare, with paid work more accessible.

The growth of parental leave in Australia has helped shift some parenting responsibilities to men. But women still took about 88 percent of primary care leave in 2020. That’s probably partly a reflection of the lingering stigma surrounding men taking parental leave, but companies have a big role to play too.

Only 63 percent of employers offered employer-funded paid parental leave in 2022, and only a third of employers offered it equally to men and women. That has to change if we want to give women equal opportunities to get and stay in work.

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For now, the fact remains that women are more likely to be the primary caregivers. Until we see a social and workplace shift where men and women share this responsibility more equally, childcare costs must come down.

Not everyone will want to use childcare, and some are already dependent on friends and family. But making childcare affordable must be a priority.

Finally, we need to break down other financial barriers, some of which are not easily visible. Ultimately, the decision to work, especially for women with children, comes down to the pay. Remember the substitution effect: if you can earn more, you are more likely to be motivated to work.

As late as 1966, many employers, including the Commonwealth Public Service, did not want to employ married women on a permanent basis, and expected redundancy if an existing female employee married. While we don’t have such explicit barriers for women today, there are still policies that make it a costly choice for women to work.

In a household with a partner, family tax benefits often decrease when a woman decides to work. Because women are often the lower-earning partner in a heterosexual partnership, it is usually the woman who works fewer hours or decides not to work. This is a major obstacle for women with families to get started.

We have made great progress in women’s employment, but we need to set more targets and maintain the gains from recent developments, including flexible working, if we want to stay at the top of the U-curve.

Ross Gittins is on leave.

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