Where are the working women?
Argentina's female labor participation hasn't grown in a decade - why?
A quick intro to the labor market
Families, besides from loving and supporting its members, are also profit-maximizing economic units. To keep this simple, let’s assume that families spend their time in three activities: working for a company (i.e. participating in the labor market), working in the house (domestic work), and enjoying themselves (leisure). The former is the only one that generates money, which allows the family to buy goods and services from outside the house. Thus, each family member and the family as a group have to choose how to best allocate their time so the entire unit can have the best quality of life possible.
Normally, each family member would specialize in the tasks they do best, but this can obviously be inefficient: having only one source of income can leave the family exposed to bad, unexpected outcomes (unemployment, illness, etc), plus having multiple earners allows for the purchase of time-saving appliances and/or the hiring of house workers. Each family member, as a result, will have to decide whether to work or not, mostly due to income: would they lose too much consumption and leisure from not working?. If someone thought their job would be worth it if they earned, say, 9 dollars per hour, then we would call that their reservation wage.
We define labor participation by considering whether a person has a job, or is unemployed but looking for one. Recessions and expansions can have two impacts on it. During downturns, families with a single source of income but “idle” members might lose income sources, and in consequence, other members of the family might have to step in - known as the additional worker effect. Additionally, members of the household who were planning on starting to work might become pessimistic about their outcomes - the discouraged worker effect.
A brief history of female labor participation
In a very brief summary of Goldin (1994), women have historically had very peculiar patterns of labor participation (i.e. either having a job or looking for one). In the distant past, almost everyone had to work in farming, to produce food - this meant that women (plus children) almost always worked too, unless the family was very rich. Then, with industrialization, fewer people needed to work in the fields, and the new factories meant that often a single source of income could support a spouse and multiple children - so, due to social norms and (frequently) the law, women steadily left the labor force. Around the middle of the 20th century, social expectations (and, often, the laws) changed, allowing women to both start attending higher education and pursuing careers without having to give up their families - so labor participation started steadily increasing, and eventually women would match men.
This “U shaped” curve explains Argentinian labor patterns very well - to a point. Until the 1870s, the country was primarily rural, with high activity rates for women as a result. A combination of industrialization and higher real wages (the latter, for a variety of reasons) made single-income households steadily more and more viable, so female participation steadily decreased, and hit rock bottom in the mid 1920s. Social changes during the 60s increased the number of women who joined the labor force and/or attended universities, so the labor participation rate climbed back up. The 1980s were an especially bad period economically (known as the Lost Decade, partly due to a paper of the same title by Kydland and Zarazaga), so the additional worker effect often kicked in.
In broad strokes, the 90s had a “good” half, from 1991-1994 and 1996-97, marked by output growth and real wage increases (but also higher inequality and unemployment, due to a mismanaged liberalization of the economy) and a “bad” half, including 1995 and 1998-2000 - primarily due to recessions (the first one because of an international shock, the second one caused by a series of internal issues that are beyond the scope of this post). During the first half, more educated women joined the labor force, and the good pay had many leave the sidelines. In the second half, the additional worker effect was very much in play - worsening economic conditions necessitated all hands on deck, so to speak.
The crisis hit its peak in 2002, and recovery started in the second half of the year - so by 2003 we could have expected either more participation, like in the early 90s, or less participation, because “new” workers went dropped out. Instead, we got… nothing. There haven’t been any significant changes in labor participation ever since. The economy can’t really explain this oen: the rest of the 2000s had strong growth and wage increases, and the 2010s were a stagflationary mess. While the rest of Latin America has experienced a slowdown as well, it hasn’t been this pronounced.
What happened?
The first category to examine is age. As women are educated more years (they attend higher education at higher rates than men), we would expect , they postpone their entry to the labor force. Simultaneously, older women are participating at higher rates - mostly because women who joined the labor force when they were younger are remaining in it. So maybe this phenomenon explains it? No. The two trends cancel each other out - but women in their “prime age”, 25-54, have been stagnant.
From now on, we’ll focus on the prime age group. Maybe it’s education? Women who are more educated work more frequently, so maybe the less educated women dropped out of the labor force? The last part was true - a reverse additional worker effect. And university graduates maxed out, at a staggering 90%. But the first effect hasn’t been that large, and “medium-level” educated women have seen a small increase… so we can’t explain this one that way.
And, furthermore, all of the long-term patterns that point to female participation should encourage an increase - the average number of children is down, educational attainment is higher, women get married at higher ages. And even if having children specifically lowers participation, women are having fewer of them - and almost all subsets of women are participating at lower rates regardless.
An explanation centered around an interplay of discouraged worker effects and a sort of “encouraged” worker effect ignores that, historically, the bussiness cycle hasn’t been a strong predictor of labor participation - the 90s are a good example of that. The only group for which a reversion of the encouraged worker effect could explain the participation rate are women with less than secondary education and with children, which stands in stark contrast to the stagnant outcomes of literally every single other group.
Conclusion?
In conclusion, we don’t know what’s causing this. While the data I’m using is from 2013, there have been no major changes to this pattern yet. And, notably, the labor participation rate increased during the 2018-2019 recession (an additional worker effect), and decreased during the coronavirus lockdown (but so did the participation rate for all other groups). This last event is most concerning: it seems that many women who left the labor force during 2020 are not returning to it even after they are allowed to do so.
Regardless of the specific circumstances, it seems this phenomenon is caused by a multitude of reasons. The most puzzling period is clearly 2003-2008, since it had the strongest performance in a century and still no participation increases. After the global recession of 2008-09, the economy slowly stagnated, with one year of growth followed by a downturn of similar magnitude, both with little job creation or destruction - so maybe the stagnant labor participation rate is not a surprise.
The reason why this is so troubling is that women and female-led househoulds are disproportionately poor, so lack of improvement in their participation rates could have troubling consequences for poverty headcounts in the region.
Sources:
Blau, Ferber, & Winkler “The Economics of Women, Men and Work, 7th Edition” (2014) chapters 2, 3, and 4.
Beccaria, Maurizio, & Vázquez “The Stagnation of the Female Labor Participation Rate in Argentina in the 2000s” (2017) - paywalled, and in Spanish
Really insightful! The U-shaped female labor participation curve is new to me and absolutely fascinating
Lovely article 💙💙💙