What’s Sidelining Women?

Oct. 21, 2021

Tom Barkin

President, Federal Reserve Bank of Richmond

Engage Summit 2021
.
Washington, D.C.

Highlights:

• The idea of "same storm, different boats" has rarely been more evident. That makes this recovery a good and necessary time to discuss how to bolster women's economic security.
• Of the roughly 100 million adults out of the labor force, almost 60 percent are women. For many, opting out of work is the right decision, but there are others who would prefer to work if not for barriers in their way.
• The pandemic exposed barriers that have a more significant impact on those with more fragile economic security: family care, mismatches, incentives and health.
• All across the country, employers are looking for workers and asking how they can engage them. That makes this a unique opportunity to tackle the barriers keeping women out of the labor force.

For most of us, the word that defines the past 19 months is "uncertainty." Remember last March, we were asking: How does COVID-19 spread? How long can our economy be shut down? Will we ever find an effective treatment or vaccine? And the uncertainty persists today: Will there be a new variant? When will supply chain disruptions clear?

Such extended uncertainty is exhausting, even for those of us with good, stable jobs. And women working in low-wage, high-personal contact roles and those caring for young children have even more questions: Will my employer survive? How will I stay safe at work? Who is going to take care of my kids if they're quarantined from school? The idea of "same storm, different boats" has rarely been more evident. That makes this recovery a good and necessary time to discuss how to bolster women's economic security - how to shore up those boats.

Today I want to focus on a decision that plays an important role in women's economic security: participating in the labor market. Before I go further, I should note that the views I express are my own and not necessarily those of my colleagues on the Federal Open Market Committee (FOMC) or in the Federal Reserve System. Of the roughly 100 million adults out of the labor force, almost 60 percent are women.¹ Some are students, some are retired, some live with a disability, and some prefer being home with their kids or parents. For many, opting out of work is the right decision for that moment in their lives. But there are others who would prefer to work if not for barriers in their way and for whom work would provide financial stability now and into retirement.

We've seen a lot of progress in women's labor force participation since the mid-20th century. It's risen across all ages, races, ethnicities, marital statuses and education levels. And the increase has been a boon for our country. It contributed to economic growth and rising household incomes and offset long-term declines in men's participation.

But the dramatic increase since the 60s has not been an uninterrupted climb, and it's not guaranteed to continue. In fact, between 1997 and 2015, the participation rate for prime-age women in the United States dropped almost 3 percentage points. Women with a high school degree or less saw the largest drop. It took a historic economic expansion and tight labor market to reverse that decline. By late 2019, participation had returned to 1997 levels. But this rise in participation didn't mean that all the barriers had been addressed. Nothing made that more clear than the pandemic.

In just two months, from February to April 2020, we erased the gains we'd seen in women's labor force participation since 2015. Unlike the Great Recession, which primarily affected male-dominated sectors such as manufacturing and construction, the COVID-19 recession disrupted the majority-female service sector. More than 12 million jobs held by women disappeared, and we saw a corresponding decline in participation as many women didn't seek new employment. This was especially the case for women with very young children; despite being only 10 percent of the pre-pandemic workforce, they accounted for nearly 25 percent of the COVID-19 employment decline.²

We have made progress since last April. However, not all women have recovered equally. Women with a bachelor's degree have seen a strong recovery - one stronger than men with the same level of education. In contrast, women with lower levels of education lag not only college-educated women, but also their male peers. For women with only a high school diploma, the remaining gap relative to the February 2020 participation rate is more than double that of peer men. Minority women also lag their male peers.

The pandemic exposed barriers that have a more significant impact on those with more fragile economic security - those with less sturdy boats. In my conversations, I hear about four key barriers: family care, mismatches, incentives and health.

Let's look first at family care. The majority of primary caregivers are women, and the pandemic has spotlighted the challenges they face. School closures forced some to stay home. Nursing home outbreaks shifted the focus for those with aging parents. And all of this came in the middle of child care affordability and availability challenges that predated the pandemic and only worsened with lockdowns.

In the past year and a half, we've seen some institutions make adjustments. Institutions invested in on-site proctoring programs to enable parents to work. Employers are implementing new benefits like emergency child care. We are also seeing conversations emerge about the longer-run challenges in the child care industry, such as labor shortages and slim margins despite prices many families can't afford.

We can take some inspiration from abroad. While our prime-age women's labor force participation has declined over the past 20 years, Canada's has increased. Research from the San Francisco Fed points to parental leave policies in the two countries as a key differentiator. The same research highlights flexible work arrangements as a driver of increased women's participation in other industrialized countries.

This brings me to the second barrier: mismatches. Let me talk about two: skills and expectations.

Even prior to the pandemic, we had a shortage of workers with the training and skills necessary to staff trucking fleets, manufacturing operations, nursing shifts, technology companies and construction crews. But now these shortages are even more acute as demand for these sectors booms. Many of those jobs have historically been held by men. Women who lost their jobs during the pandemic may not have the training and certifications needed to access work in these sectors. Even nursing training is constrained, making it hard to switch into that field.

Organizations dedicated to helping women break further into male-dominated fields will be key. We will need to fully leverage our community colleges, and their partnerships with local employers. We are seeing communities invest in whole life support. For example, in Manassas, Virginia, local leaders used CARES Act funding to offer eligible city residents up to $5,000 for program costs and wraparound services, such as child care, to help them secure retraining.

Expectations are becoming an issue too. Increasingly, we are seeing misalignment between the jobs available and the jobs workers want. Potential employees expect higher workplace flexibility, compensation and benefits. At the same time, the pandemic emphasized the downsides of jobs in the disproportionally-female services occupations, such as low pay, poor benefits, unpredictable schedules, unattractive work environments and instability.

The expectation mismatch becomes apparent in the debate about remote work. Women with access to remote-friendly jobs may want to continue working in a flexible environment that allows for things like school drop-offs and pickups, or reduces the time spent commuting or preparing for the workplace.

The third barrier is incentives. Our benefits system can provide critical support for women in need. But it can also make formal participation in the workforce a costly choice. A small boost in earned income can cause an individual to lose meaningful benefits. That's referred to as a "benefits cliff," and it can push women out of the workforce or toward the shadow economy.

We see this with health insurance, as moms consider jobs that put their kids' CHIP benefits at risk. We see it with disability insurance, which makes individuals forfeit lifelong benefits to engage in the workforce. And we see it in the tax code. We tax the first dollar earned by the second earner at the same rate as the last dollar earned by the primary earner. Combined with the cost of child care and other work-related expenses, a family's monthly take-home pay may be higher without a second labor market participant.

I won't prescribe specific policy changes - that's for legislatures - but at the Richmond Fed, we have invested in distributing a tool that helps organizations understand the dynamics of the cliff in their geography. We hope it will help nonprofits and employers better understand how benefits impact families' financial calculus.

The final barrier is health. This often comes up in conversations about why men may be on the sidelines, but it's a key barrier for millions of women, too. More than 1 in 5 prime-age individuals out of the labor force report a disability, and women make up almost half of this group (47.8%).³ On top of this, because women are more likely to be primary caregivers, the health of their loved ones also plays a part.

Of course, the pandemic exacerbated health challenges. Women whose jobs could not be done remotely - especially those in poor health, over the age of 65, or caring for vulnerable loved ones - faced difficult decisions about whether to continue working. And it didn't help that the services sector and part-time work offer much less health insurance than the economy as a whole. Getting the virus under control will be a big part of tackling the health barrier in the near term.

In the longer term, women may be healthier and live longer on average, but they may need to work longer, too. To allow them to do so, we need to re-examine the jobs available, as Japan has done. Can we redesign jobs to accommodate older workers, with shorter shifts and lower physical demands?

In closing, I will just say that given the unique labor market we find ourselves in, this conversation about connecting women with employment is not just happening here at this summit. It's happening all across the country as employers, looking for workers, ask themselves who is on the sidelines and how they can engage them. That makes this a unique opportunity to tackle the barriers keeping women out of the labor force. I look forward to the discussions today.

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