2023 Nobel Prize Lecture: Women's Labor Market Outcomes

[00:00:00]my name is Peter Frederickson I have the great honor of introducing this year's price lecture most high-income countries witnessed spectacular increases in women's labor force participation during the 20th century in countries such as Sweden and the US this is one of the most remarkable economic and social changes we have seen during the past 100 years along with the increase in participation came a massive rise in educational attainment women are now more educated than men yet their incomes are lower across the OCD countries women earn on average 13% less than men what factors explain the variation in women's labor market outcomes over time and across countries what are the sources of remaining gender gaps in the labor market today answering questions such as these is of fundamental importance for economic Prosperity if women don't have the same opportunities as men labor and skills are not used efficiently as you all know the 23 2023 prize in the economic Sciences was awarded to Claudia golden the price motivation reads for having Advanced our understanding of women's labor market outcomes now cloria golden is an economic historian as well as a labor Economist in fact she has combined both of these skills to make two broad and groundbreaking contributions first using the careful and creative data work of an economic historian she provided novel facts about women's outcomes in the labor market second by combining these facts with a coherent economic framework she identified causes of change as well as the main sources of the remaining gender gaps today CIA golden was born in 1946 in New York and she grew up in the Bronx she obtained her PhD in 1972 from the University of Chicago academically she has Noble ancestry she was supervised by Robert Fogle the 199 free economics laurate and Fogle in turn had been supervised by Simon kusnetz the 1971 laurate cloria golden came to Harvard in 1990 where she became the first woman to be offered tenure at the economics Department she remains at Harvard to this day ladies and gentlemen it's my pleasure to introduce Professor Claudia golden the title of our price lecture is an evolving economic Force please [Applause] Claudia so women are now at the center of the world's economies but not just because they're engaged in pay employment more than ever before and most of the Nations that you see in dark blue have female employment to population ratios that exceed 75% although some nations are still very low women are also at the center of the world's economies because they are the vast majority of college students in every oecd nation and they are also at the center because of the Hidden care work they do all the world over and also because they largely determine the birth rate but women were not always at the center and they didn't always control their Fates and they don't today in many parts of the world women shifted their Locus of Market oriented work across time and in somewhat nonlinear ways when the goods producing market and the home were nearly one women were often employed for pay or profit even when they had young children but as work moved out of the home out of the family firm and out of the farm into the wider Market of larger Enterprises women's measured economic activity decreased they remained at home while the men went off to work but women eventually increased their role in the market economy and in paid work and this happened as their earnings Rose relative to the cost of household goods of all types therefore the market role of women has tended to be u-shaped across the long history of a nation and across Nations and cross-section and this finding has been analyzed by numerous researchers both in cross-section and with country fixed effects it is even clear in the most recent data on the employment of population ratio for Prime AG women relative to GMP per capita across 165 Nations the subsequent move of women from the home to the market the upward portion of the U is often styed by social stigma and traditions regarding their paid employment and that is still the case in many parts of the world that's India since industrial work has historically been more onerous than office work social stigma often develops around the employment of married women in those activities possibly to incentivize men the man who allows his wife to work in dangerous Pursuits is chastened as slothful and indolent the stigma ser deserves to increase what economists term the estimated income effect that is the negative impact of income unemployment and it tends to reduce the estimated substitution effect the positive effect of relative wages on employment since with stigma women's employment is less sensitive to their own wage but more sensitive to the family income stigma was reduced as women's jobs became less onerous and done by more educated women education levels greatly Rose in early 20th century us and employment expanded in offices and in professional jobs rising from just 20% of all employed women in 1900 doubling to 40% just 20 years later in 1920 both factors led young women to enter the labor force and remain employed for a short time even after they married thus the rising portion of the U which we see here for two groups by race began to unfurl the woman who was employed at 20 years old and then exited to have children was more likely to re-enter when her children were a bit older and especially if labor demand greatly increased as it did in the US during the 1940s and 50s the upward portion of the U was thereby set in motion real wages Rose relative to the opportunity cost of household production female labor force participation rates in turn greatly increased because there was less stigma income effects were lower and substitution effects were greater but then after many decades of increased participation and evolutionary change something momentous occurred no longer did young women want to be employed only to provide for themselves and their families young women could see that their mothers and aunts and older women had been employed for substantial periods but without much career progression they had entered the labor force without a longrun plan the younger generation vowed to have one in the late 1960s and early 1970s that group experienced what I have termed a quiet Revolution that's distinct from that noisier revolution in the US at at the time then that noisier Revolution brought about a movement that led to greatly expanded legal rights of women in employment in education in family in credit and in judicial matters the inklings of a quiet Revolution can first be seen when these women were girls they took more math and science courses to prepare for college they had Rising expectations of their future employment and they responded by increasing their college going and switching their Majors to more lucrative career oriented fails by 1982 more females and males graduated college in the US today women are 58% of those obtaining a ba degree in the US and more young women than men attended col know in every single oecd nation in recent years as you can see the prime drivers in the story that I've just told were set in Motion in the early 20th century they were carried through history by cohorts of women social and economic change is often slow to progress because it requires a succession of generations one reason for the low birth rates in southern Europe and in parts of Asia is that rapid economic and educational change often results in generational and gendered conflicts as you can see countries in which women do far more unpaid household work and that's measured in hours per day than do men have a lower total fertility rate most of the long-term changes that I have mentioned were sparked by Major technological changes those that led to a shift from agriculture to Industry those that increase the economic returns to education and those that altered household production and expanded markets in general these were big changes such as electricity diffusion such as the growth of large scale firms but there was another critical Innovation that was really small as Tiny as a pill and in fact it was the pill it was the birth control pill a female controlled reliable form of birth control but to be fully effective in driving social change it needed a shift in institutions during its first decade or more the dissemination of the pill in the US was governed by state laws and in other countries by their laws and those laws regulated its use by unmarried women but by the late 1960s and early 1970s change occurred and young single women even on college campuses had legally gained access to this form of birth control by 1970 the median age at first marriage for women uh for recent graduates of women born in the late 1940s was younger than 23 because of the pill the age at first marriage began to soar and 6 years later it was 25 the additional breathing space before marriage and child birth gave college graduate women time to enter law business and medical schools maybe even start a PhD although in this time and of age starting a PhD takes a very long time sorry to say professional uh Professional School enrollment of women climbed rapidly uh and that's this this is the age of first marriage over here Professional School uh climbed rapidly after 1970 uh college graduate women shifted uh from being teachers and nurses and Librarians to being doctors and lawyers and professors and managers and the shift was from planning for family and then a good job to to Desiring a career and a family The increased female labor force was an evolutionary change but the change in the expectations of women in their Horizon in their sense of identity in their new found ability to better control their Destinies were revolutionary changes I've thus far explained how the female labor force expanded and how the upward portion of the U unfurled but I have not yet said anything about the Intensive margin of hours and about women's earnings relative to men as employment levels for women Rose from the 1950s to around 1980 women's earnings relative to men's actually did not change on average and that was due in part because their participation rates increased so much women were pulled into the labor force whose job experiences were somewhat distant and and that put downward pressure on the earnings of the average working woman relative to the average working man but around 1980 differences began to narrow as and they narrowed considerably as increased women's participation rates produce real gains in the job experience of the average female worker in addition women's colleag en role greatly expanded the increase of women's earnings relative to men's in the 1980s in the 1990s in the US was spectacular the banner of 59 cents on the dollar turned into a banner of 65 cents on the dollar and then to 75 cents on the dollar and now to 83 cents on the dollar but even though the banners were Rewritten many times over the metric that was being used was never fully up to the task let's see why the question that often gets raised is the following what accounts for the remaining Gap in earnings now that so many the determinance of earnings are the same for men and women that is to to the extent that earnings in competitive labor markets are determined by pre-labor market characteristics such as Education and Training as well as those pre-job such as experience in previous positions and if these characteristics are almost the same bisex what remains well of course a lot of factors remain but not all by gender many Clues exist that are going to reveal an answer the first clue is that the gender gap in earnings for college graduates became larger than the aggregate around 1990 when the earnings distribution for college graduates began to greatly widen another clue is that women's earnings Rel relative to those of comparable men largely decrease across their working lives relative earnings of women begin close to parity but then they decrease with age yet another critically important clue is that female hours and earnings plummet with the birth of a child and that is true even in Sweden and still more Clues concern which occupations have large and which have small differences in earnings between men and women given a set of standard observables it's important to realize that the majority of earnings differences by occupation are within rather than across occupations given a large number around 500 occupations so let's explore the within occupation differences I have categorized occupations by sector whether they're in health whether they're in business whether they're in Tech whether they're in science and then a grab bag other category and this is mainly for college educated individuals in medium to high wage occupations and I have estimated residual sex ratios of annual earnings and they are graphed here each of these dots is a separate occupation and they're graphed here against male annual income which is on the horizontal axis going from about 60,000 to about 200,000 and in addition the ratio of annual earnings bxs which is on the vertical axis go goes from approximately 1 which is equality down to around 65 and the negative numbers are the logs of those I have found that gender gaps in earnings were generally higher in sectors like Finance banking management and other of the corporate and business occupations which are the red squares here and that they were lower generally in Tech and science occupations which are the triangles shown here except for the Deviant airline pilot the many Health fields which are the blue diamonds contain two groups those with substantial self-employment have larger gender earnings gaps than the others there therefore another clue about why there is persistent residual gender gaps in earnings concerns the large difference in earnings by sex across occupations but what accounts for that when mean hours worked by individual are included in the regression for annual earnings of full-time workers the largest elasticities are for those in Science Tech the largest elasticities of earnings with regard to hours are for business occupations and the smallest are those in Science and Tech and in health that don't have self-employment therefore earnings rise more with ours in business occupations than in others but why is that I have termed occupations for which the implicit hourly wage increases with hours or with the intensity of ours to be greedy occupations these greedy occupations have particular work characteristics as given by the BLS the Bureau of Labor Statistics onet data set and these are for example greater demand for FaceTime and client contact they are occupations for which work is highly interdependent and in which it is less able to be done alone these characteristics increase I've aggregated them across the horizontal axis in this graph toward the right and they decrease toward the left along the vertical axis once again is the residual r ratio of female to male an annual earnings the red squares remember those are the business occupations have the largest wage gaps and also the highest level of these onet characteristics and the green and yellow triangles have the smallest gaps and the lowest levels of the onet features so we can now put together the clues and understand why the gender gap in earnings widens over the life cycle of women and why it is larger for women with children and why it has been so difficult to close it's not simply an issue of family responsibilities it is also caused by the fact that the labor market offers choices that entice couples to forego coup equity and for different sex couples that means ditching gender equality along with couple Equity the greedier are some of the jobs the more likely a couple with care responsibilities will opt to have one member of the couple take the greedy job and one take the more flexible job in most different sex couples this means that the woman will take the more flexible lower paying job and the man the greedier higher paying job consider the following depiction of the relationship between earnings and hours hours on the horizontal axis earnings on the vertical axis for two jobs the job one job is flexible and that's the red line and it has a linear wage with respect to hours but the other job is not so flexible it has the blue line and it has a wage that rises with ours a couple with children or other care responsibilities can't both work at the Blue Dot the children would perish they could both work at the Red Dot but if they did they would be leaving a lot of money on the table so one works the flexible less remunerative red job and the other works the less flexible more remunerative blue job for many Highly Educated couples with children she's a professional who is also on call at home and he's a professional who is on call at the office in consequence he earns more than she does and that gives rise to a gender gap in earnings and it also produces couple INE Equity but if the flexible job could be made more productive the difference would be less and family Equity would be less costly couples could purchase it and reduce the gender gap the point is that the gender gap and pay is not simply an issue of workplace discrimination and not simply one of biased supervisors workplace biases and disparities exist to be sure but even if the labor market were unbiased in all manners a gender gap would still exist in pay and would be substantial one part of the solution is to lower the cost of flexibility the simplest way is to create effective substitutes between workers and this has been done in various occupations that use it effectively to pass information and handoff clients teams of substitutes could be created as they have been in Pediatrics anesthesiology veterinary medicine personal banking many tech jobs Pharmacy and Primary Care Medicine one silver lining to the dark times that we have lived through in the pandemic is that we've learned to use technology to work from home and we've also used technology to do handshakes and conferences remotely separated by kilometers miles and oceans wfh as long as it does not become work from hell I see it it has somewhere has made the flexible job more productive remote business interactions have made the greedy job more flexible remote work has benefited caregivers especially women in conclusion I have described an evolving economic force in the period of the rising portion of the year women came out from the Shadows of the home to work in the market and make their families and themselves better off they then went the distance as their employment elongated through their lifetimes to have more meaningful work and even real careers differences in productive characteristics between them and their male counterparts were greatly reduced but the last mile the last chapter the Final Act in the gender gap Saga cannot be written until couples share more and until the world of work makes that a less costly thing to do when different sex couples give up couple Equity they they increase gender inequality when couples increase couple Equity they advaned gender equality I am proud to have been depicted as a detective by the Royal Swedish Academy of Sciences but I could never have been an effective detective without the help of others I think thank Jacob Miner and Gary Becker and Esther boserup and Richard easterland for providing many very big ideas and I also thank my co-authors and others including three of my guests for helping me add the evidence the stories and the history and I thank my amazing dog Pica also depicted by the Royal Swedish Academy and I thank the committee and I thank all of you thank you [Applause]