Understanding Women’s Labour Market Participation: Claudia Goldin’s Nobel Prize
Claudia Goldin, this year’s Nobel laureate in Economics, has contributed significantly to research on the issue of women’s participation in labour markets. Presenting her work at the Marshall Lecture at Cambridge in 2001-02, her research is primarily on the economics of gender, focusing on persistent gender wage gaps, the role of education in addressing gender pay differentials, and the influence of motherhood on careers.
In order to correct past misrepresentations of women’s labour force participation, Claudia Goldin adopts a thorough empirical approach, looking back on data further than previous researchers. She has created new databases from a variety of sources, including census data, industry statistics, and historical time-use surveys. Her papers have upended established myths and present a more realistic picture of women’s participation in the workforce. Novel methodologies, such as the examination of more than 10,000 female heads of households in Philadelphia throughout the 18th century, have reshaped the historical account of women’s involvement in the labour market. Using cohort-based methodology and longitudinal data, Goldin has also examined how changing social expectations affect people’s decisions on schooling and employment.
As a part of her empirical strategy for investigating historical gender wage disparities, Goldin collated a wealth of data from various repositories to generate the first comprehensive data series on the wage differential between men and women over a 200-year period. The approach she took included examining the transition from piecework to monthly salary structures. Goldin regressed wage on explanatory variables, such as productivity, education, and age; by calculating residuals, she estimated gender pay premia/differentials and identified instances of pay discrimination or pay differences that cannot be explained by observable characteristics.
Two important aspects of women’s employment are shown by Goldin’s research. Firstly, she has uncovered a historical trend in labour force participation that is characterised by a faint “U-shaped curve”. This is influenced by a number of variables, including rising educational levels, changing social norms, and the development of contraception. Secondly, Goldin’s work draws attention to the persistent pay disparity that exists between men and women even after controlling for factors including education and experience in similar roles; motherhood is thought to be the primary cause of these gender pay inequalities.
Over the past 50 years, while there is an association between women’s labour market participation and economic growth, this relationship is not necessarily causal and may be spurious. While it seems that as the economy has expanded, women’s participation in the labour force has also grown, Goldin’s analysis suggests that this correlation might be a proxy for the contemporaneous/ concurrent developments of increased education, evolving societal expectations, and the introduction of contraception. Goldin’s analysis of historical patterns presents an alternative narrative, showing a U-shaped curve in women’s labour market involvement of the US over a 200-year period.
Women had less opportunities because of the Industrial Revolution, which is frequently linked to economic growth. The idea that economic expansion invariably results in a rise in the employment of women is refuted by Claudia Goldin’s research. The Industrial Revolution made it harder for married women to balance work and family responsibilities by centralising manufacturing and shifting away from the traditional agrarian economies; as a result, the number of married women in the labour force decreased.
According to Goldin’s research, institutions play an essential part when it comes to determining the proportion of employed women. Therefore, the development of institutions played (and play) a key role in the gender pay gap’s progressive elimination, which included the 1930s eventual removal of “marriage bars” that had prevented married women from working certain jobs. By using a cohort-based method, Goldin is able to demonstrate the positive effects of changing cultural standards and expectations on women’s education over time, as well as the positive feedback these changes have on the growth of employment prospects.
Goldin’s research also considered the contribution of contraception to women’s career choices. The introduction of the contraceptive pill in the late 1960s was a watershed, with women becoming able to take clearer career decisions and have control over their family planning.
Yet, Goldin’s examination of the earnings gap and the parenthood effect adds a layer of complexity to our understanding of gender disparities in income. Even after controlling for education (indeed, in most developed nations, women are now on average more educated than their male counterparts) and experience in the same job role when equal pay is law, a pay differential of ~10-20% persists.
Goldin shows that the gender pay gap begins on a relatively equal footing, diverging into greater disparity following the birth of the first child for working mothers. At higher levels of education, gender earnings ratios are closer to parity than for the less educated, although the parenthood effect is stronger, leading to greater disparities in later years.
Many studies argue that parenthood effects now entirely explain gender differentials in pay, especially given labour markets today expect worker flexibility at the employer’s requirement: if childcare is not externally employed, often mothers rather than fathers will self-select into being the primary care giver, making the maintenance of a career more difficult, and leading to longer-term consequences on pay and participation.
Understanding the historical causes of changes to women’s labour market participation suggests that economic growth alone is not going to close gender pay gaps. Instead, the continued investment in education for women and the reduction of institutional barriers to work for women (which may be more relevant in developing nations undergoing institutional development) will support women in labour market participation.
For policymakers, where women labour market participation is already equivalent to that of men, there should be more policy attention on gender pay differentials and managing the parenthood effect. It was said earlier that at higher educational levels the disparities in pay are smaller for the youth and so expanding education will also work towards reducing the disparities in pay, coupled with increased participation.
Interestingly, adopting a child seems to yield the same empirical results as the parenthood effect, and then the implications for Goldin’s research suggest more help to working parents. The literature shows childcare subsidies may not induce labour market participation. However, further promotion of family planning and examination of the ways for the labour market to accommodate working parents might assist in narrowing the gender pay gap.
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