Sunday, November 18, 2007

Workforce and wages

This appears to indicate that I actually underestimated the negative effect of increased female labor force participation on wages, although I suspect that in extrapolating their research to the present, they haven't accounted for the concomitant reduction in 55+ male employment that took place post-1960:

A cardinal rule of economics is that increases in the labor supply yield decreases in wages, an empirical reality rarely acknowledged when the discussion turns to the influx of women into the workforce. Yet a study by economists at the Massachusetts Institute of Technology, the U.S. Military Academy, and the National Bureau of Research has quantified that the “Rosie the Riveter” phenomenon of the 1940s—a decade that the researchers say registered the largest proportional rise in female labor force of the twentieth century—ended up depressing the wages of men, and especially the 85 percent of whom were high school graduates, at mid-century....

One of those effects is the relative decline in wages across the board for women as well as men. The researchers demonstrate that a 10 percent increase in female employment relative to male labor yields a 7 to 8 percent decline in female wages and a 3 to 5 percent decline in male wages.... If these same factors are still in play, then the additional growth in the female labor supply since 1960 has not helped the wage situation and explains why supporting a family on just one income has become increasingly difficult.

(Source: Daron Acemoglu, David H. Autor, and David Lyle, “Women, War, and Wages: The Effect of Female Labor Supply on the Wage Structure at Midcentury,” Journal of Political Economy 112 [2002]: 497-551.)

The significant phrase is "relative to male labor", as the percentage of men working has dropped to 76 percent, while the number of teenagers working has plummeted from nearly 60 percent in 1979 to 44 percent in 2006. Anyhow, it's interesting that people are finally beginning to pay some attention to the basic economics of the issue. I expect more than a few people on both sides of the feminist aisle are going to be very upset when the period from 1970 to the present is studied.

Feminists will be upset because it will make feminism look like a disaster for women. Working, married non-feminists will be upset because they'll realize that they are essentially working for nothing. Men won't like it either, since they'll realize that they're getting paid less for the same work that their fathers did.

It's interesting how everyone understands that immigrants cause labor prices to fall, but most people don't grasp that a substantial increase in domestic work force participation, by any group, has the same effect.


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