Economics Essays – Feminization Labour Market

Feminization Labour Market

1.0 Introduction

This essay is to analyze whether an increase in feminization in the labour market exists and what implications feminization has on the market in developing countries. In addition, the paper will analyze different school of thoughts by scholars. Erturk and Cagatay (1995) have argued that both low and high income countries exhibit higher ratios of female employment to male employment. In addition the authors have stated that feminization has three distinct but related processes in the labor market.

Firstly, the term ‘feminization’ is sometimes used to mean a rise in female labor force participation. Another connotation of the term ‘feminization’ refers to the replacement of male workers with female workers for cheaper labor in various production processes. Finally, ‘feminization’ is also referred as the expansion of employment opportunities with jobs that characteristically have ‘female’ traits. Internationally, there are wide variations not only in the overall level of female labor force participation, but also – and even more so – in the dynamics of such participation at different points over the life cycle. {Killingsworth and Heckman, 1986).

2.0 Implications of Feminization

Women’s participation in the labor force over the last three decades has increased steadily but has also brought with it a continued debate on the implications of female participation in the labour market. Economists have been able to identify a U-shaped curve for feminization showing an increase in income levels. Although the pattern of female labor force participation is different among all countries, researchers have been able to find evidence to support a U-shaped curve between the level of economic development and female labor force participation rates.

The U-shaped hypothesis states that countries with low and high levels of development, measured by per capita income, tend to generally have high female labor force participation rates whereas less developed countries generally have low levels of female labor force participation. This observation of female participation in the labor force implies that large structural changes occur with development and in particular periods. Furthermore, the effects of macro-structural changes on women were first acknowledged by Boserup (1970).

Cagatay and Ozler (1995) research has shown that structural changes leads to higher feminization through changes in the income distribution of a country. In addition, Simon Kuznets (1966) points to the idea that demographic and structural changes and the incorporation of working women into the labor force have important implications for the wage share of national income. To Kuznets, his research proved that the rise in female participation in the labor market helped to explain the long term rise in income.

To illustrate, the growing number of females in the labor force has a ‘de facto’ effect whichimplies an increase of the time devoted to market work for women. In turn, at the household level, the reduction of men’s paid working time would be partly compensated due to the increase of female labour supply. With respects to gender equal opportunity, a large portion of unpaid housework and care activities would still be performed by women, although in many countries male household production has risen (see Anxo et al, 2002).

In the liberal Anglo-Saxon welfare state regimes such as the US and UK, workers are more dependent on the labor market and alternatives to the labor market income are more limited. Empirical evidence (Rubery et al.1999, 2001, Anxo et al., 2000 and Anxo, 2004) suggests a high degree of overall labour market integration in the Anglo-Saxon model however compared to the Nordic countries there is a much lower level of female labour market integration compared to industrialized countries.

The Conservative Continental welfare state regimes such as France, Germany and the Netherlands provide a societal system with relatively lower employment rates and larger gender disparities; however, just like the Anglo-Saxon regime differences do exist amongst the countries. The dispersion in working time distribution and the gender polarization of working time is much higher in Germany and in the Netherlands compared to France.

Part of these differences may be attributed to disparities in working time regimes (Anxo & O’Reilly, 2002) and also to differences in the public provision of childcare. In France, the coverage rate of public childcare is higher and the incidence of part-time work, while children are growing remains much lower.

In industrialized countries, family formation is a positive factor on the impact on male labour supply however it has a negative impact on female labour supply in terms of participation or working time. Compared to single women working hours, the share of married/cohabitant women working standard hours is significantly lower. Studies in the interest of female participation have been grounded in pre-occupations with respects to ageing population.

The ageing of the population of a particular country will put a downward pressure on labour supply and will have negative impact for material living standards and public finances however the increase in female participation in the work force can potentially help resolve this problem (Burniaux et al., 2003). Suggestions have been made that policies aimed at helping women reconcile work and family life may be more acceptable than policies aimed at keeping older people longer in the workforce.

Many arguments have been made to justify childcare subsidies, especially in cases where the tax and benefit system has a motivation to limit female labor participation and when a wage structure inhibits the supply of affordable childcare. On a positive note however, childcare subsidies would help to reduce tax burden on mothers.

The distortion from limited wage structure may rise due to excessive compression of the wage structure, which in turn raises the wages of careers and thereby limits mothers’ access to childcare subsidies (Noel, and Daniel Trefler. 1995). In addition, it has been noted that it may not be possible to remove the cause of wage compression, and furthermore childcare subsidies may be seen as a temporary fix.

3.0 Anti Discrimination Laws

Gender discrimination definitely exists in pay and promotion opportunities which would reduce the return of females to the labor market and in-turn would suppress female labor supply. It is quite difficult to obtain empirical evidence on the existence of gender discrimination because theoretically gender differences in pay and promotion could result from gender differences in unobserved characteristics (OECD, 2002b).

Many countries have introduced gender-specific anti-discrimination laws. These laws have been effective in lowering the pay gap amongst women and men (Australia, United Kingdom, United States), and even more rapidly in countries that have a more centralized wage bargaining structures at the time of introduction of the law (Australia and United Kingdom, as opposed to the United States). Evidence shows that higher wages would indeed bring more females into the labor force but the evidence on employment effects is not completely certain.

Research shows that comparable worth policies in Australia, and for government employees in some US states, find evidence of some modest employment losses however Manning (1996) finds no employment losses for women, despite substantial gains in relative wages due to the introduction of the UK’s Equal Pay Act of 1970 and the Sex Discrimination Act of 1975.

4.0 Parental Leave

Another form of childcare support most governments provide to parents is maternity leave, parental leave, and childcare leave. This support by governments increases female participation by helping women to bring together work and family life. The job security for women also strengthens the continuity of their attachment to the labour market, although negative effects on hiring cannot be excluded. Ruhm (1998) finds evidence that paid parental leave has an effect on increased employment rates in nine OECD countries.

The negative effect of taking a long parental leave for an extended period of time may also decrease labor market skills, and also damage future career paths and earnings. Strong evidence exists that long parental leaves make it more difficult for women to return to the labour market. The problem is escalated when the parental leave is not accompanied by a job-guarantee, and the mothers are low-skilled workers.

Ruhm (1998) and OECD (2002a) also have further evidence that shows extended parental leaves has a negative impact on the salary of returning mothers. A recent Danish study reports reveals a catch-up of mothers’ salary to those of childless women, as they compensate for their lack of human capital accumulation (Gupta and Smith, 2002).

5.0 Education and Cultural Attitudes

Other important factors that determine female labor force participation includes female education, well-functioning labour markets (which translate into low unemployment), and cultural attitudes. Public policies supporting female education can have a large impact on female participation which in-turn contributes to the rise in female participation and includes new household technologies which have given more freedom to allow women greater time spent in the labor market, and the improvement in working conditions in terms of status and work hours.

It should also be noted that the education choice of a woman may depend to a large extent on her future career prospects and in addition to the policies that would help her easily bring together work and family life balance. Once these policies are more developed, women will want to invest further in their education in order to strengthen their prospects in the labor market and also increasing their potential earnings in the labour market.

Socio-cultural factors also play an important role in shaping women’s labour force participation choices. The assumption is that a population which shares a given territory and speaks the same language has a common culture, (Hofstede, 2003) an array of policy and institutional constructions, including family policy, labour policy, training policy, etc. (Bernardi, 1999; Chaponniere. 2000; Del Boca and Pasqua. 2002; OECD. 2004). A woman’s decision in the labor force is also determined by cultural considerations because each and every individual is part of a social and cultural system that influences choices and behaviour (Fleury et al., 1997; Buhler. 2001).

6.0 Theories of Feminization

Another theory feminization which exists refers to the substitution of male employment for female employment. There are two versions of the substitution hypothesis which exists and is broadly termed as ‘cyclical’ substitution and ‘secular’ substitution. The latter suggests that the gender composition of the labour force depends primarily on the business cycle that the economy is faced with. During downturns, men are mostly replaced by women as a cost-cutting measure which in-turn leads to greater male employment in when the economy improves.

The secular substitution hypothesis refers to a long term cyclical increase in female participation within the labor force. These are not wholly incompatible theories but it is possible that the rate of increase in female employment slows dramatically during economic downturns. Standing (1989, 1077-95; 1999, 583-602) is an example of ‘secular’ substitution which has argued that structural adjustment and macroeconomic policies have brought about periods of competition and firms are driven to continuously lower labor costs in attempts to remain competitive. In this situation, women are substituted for men mainly because they have a lower reservation wage and because of limited participation by women in unions. (Blau1996)

The idea that demographic and structural changes and bringing working women into the labor force does indeed have important implications for the wage share of national income amongst all countries. (Simon Kuznets 1966, 529)

7.0 Conclusion

A high female participation rate is desirable for many different reasons. In most countries, preferences for female participation especially among couples with young children are much higher than actual female participation rates. Limiting female participation can lead to market failures and policy distortions which in-turn can lead to a higher level of welfare. The issue of female participation also brings about concerns with respects to gender equity, poverty, and child well-being.

Gender equity and poverty reduction (particularly in the case of marital separation) provide grounds to promote an increase in female participation (Kamerman et al., 2003). Cagatay and Ozler (1995, 1883-94) also show that structural adjustment to wages leads to greater feminization through changes in the income distribution in a particular country.

There is an idea that demographic, structural changes and the incorporation of working women into the labor force have important implications for the wage distribution of national income within a country. Large wage discrepancies remain between actual and preferred employment patterns, pointing to a large potential for increasing female labour participation.

The tax system also imposes excessive distortions on the labour supply decisions of married women relative to those of men and single women. Optimal taxation implies that the total deadweight loss of the tax system is reduced if marginal tax rates are lower for those individuals whose labour supply is more elastic and, thus, more sensitive to marginal tax rates (Boskin and Sheshinski, 1983). This would imply to tax married women and mothers less than men and single women.

There has been some empirical research at the micro-level on the implications of the various changes brought in the era of deregulation on male-female wage differentials (Berik, Rodgers,Yana van der Meulen, and Zveglich 2004, 237-54) and more research could bring about a strong relationship between these changes. Feminist economists have identified a u-shaped curve for feminization with increasing income levels (Erturk and Cagatay 1995, 1969-77) and Erturk and Cagatay argue that both low and high income countries exhibit higher ratios of female to male employment, but for different reasons.

Female participation may also be affected by other policies, albeit indirectly in some instances. Firstly, labor market policies affect the participation decision of women through their impact on the unemployment rate. On the one hand, a high female unemployment rate tends to discourage female participation in the labor force; however, a high male unemployment rate may increase female participation, as women join the labour market in order to compensate for the loss of family revenue due to their husband’s unemployment which can also be termed as the added worker effect.

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