Women be working

The state of women’s labor market inclusion across the globe.

Aug 03, 2021

I have written somewhat in depth posts about female labor participation (in Latin America), the wage gap between men and women, and why women left and joined the labor force so check those out if you’re interested too!

The state of affairs

There seem to be two main facts of women’s labor market outcomes across the world. First, that labor participation doesn’t have a very linear relation with development: while developed countries have relatively high participation, and middle income countries have far fewer women in the workplace, very poor countries also have sky high participation - in many cases higher than the OECD itself. Secondly, there appears to be a big differential between the earnings of men and women, which has an even more erratic behavior: it is low for poor countries, but also low (incredibly so, in fact) for developing nations, and higher for developed countries.

There isn’t really much of a trend in unemployment, but in general developing countries have much higher female than male unemployment rates, and both decrease as development increases. The gap is not easy to generalize about because male and female unemployment are highly context-specific. But, as a general rule, developed countries have low-ish unemployment rates for both men and women, developing countries have normal unemployment rates for men and very high rates for women, and very poor countries have similar rates for both - either very low or very high.

Labor participation’s downs and ups

I have written a more detailed post that focuses mostly on rich countries in the past, so feel free to check it out for a more thorough explanation of the phenomena at play.

Looking at women’s labor participation across different levels of GDP per capita can be very similar to looking at them across time for single countries; after all, developed countries weren’t always as developed as they currently are. This means that looking at currently developed countries in earlier stages of development can provide plenty of insights into the way the labor markets of developing nations work. The focus will be in currently rich, developed nations and their historic trajectory, which have higher quality data, and generally in the United States, on which a ton of scholarship on this subject has been written.

Female labor participation and log GDP per capita. From Olivetti (2014).

In the distant past, basically everyone had to work constantly, primarily in agriculture. In the late 1800s, for instance, people worked upwards of 3000 hours in the richest countries - or roughly 60 to 70 hours a week (over 12 hours per day), for virtually all of the year. We don’t have many reliable estimates for earlier periods, but those incredibly long work hours seem to have started in the early 19th century, and people before the Industrial Revolution worked less time, primarily due to fewer work days in the year. In both the early industrial era and earlier periods, women tended to be in the labor force at very high rates, due to men (frequently in agricultural employment) needing as many hands on deck as possible.

As countries got richer due to industrialization, fewer working hours were needed to support a family, and the value of married women working outside the house declined relative to the value of housework. In consequence, female labor participation goes down in the transition from low income to middle income - men’s wages are high enough that women can stay home, which is usually encouraged by social norms.

But then a problem appeared, without even considering cultural changes. More educated women can make higher salaries, which is an incentive for them to join the workforce. But also, as incomes grow, needs multiply, and especially needs for home goods - which tend to make housework more productive. Both of these factors pull in the same direction, so economically speaking, developing countries start seeing more and more incentives for women to return to the workforce.

Thus, female labor participation can be said to have an U-shape, because it first decreases as incomes rise from very low to neither low or high, and then increases again when income starts increasing at the middle level. Empirically, this seems to be verified both across countries and within them.

Share of employment by sector and log GDP per capita, developed nations 1890-2005. From Olivetti (2014).

Additionally, as countries develop, they go through what’s known as structural transformation: a shift of the economy from agriculture to manufacturing to services. Depending on when and how each country transitions, the demand for female labor at any stage can be higher or lower. For example, countries that used the plough for agriculture, instead of hoes (the former requires lots of physical strenght, the latter not so much), had less female participation in the labor force at every stage of their development, with consequences remaining today. Or, in many cases, industrialization may require physical strenght, or it may require fine motor skills, which biases the sector in favor of one gender over another. Plus, countries that develop later tend to already have higher female education rates that more comparatively developed nations did at the same stages of development in the past, due to the heightened impact of international aid and the changing priorities of governments

As a result, labor participation is very high in developed countries, as expected, and it’s very low in developing countries. But it’s also sky-high in some of the poorest countries on Earth: the DRC, Papua New Guinea, Congo, Mozambique. Extremely poor countries like Uganda or Zimbabwe have higher female participation than the male participation of an OECD country. In fact, the poorest nations on Earth have 80% of either gender chugging along in the workforce, and big divergences are only present in middle income countries.

Plus, it seems that in low income countries participation is higher among married women, but lower in middle income countries, and poor women are always more likely to participate. This seems to point towards social norms being strong inhibitors, except when everyone needs to pull their weight for survival. Having children has a small but negative effect, not generally significant, but lacking means of care decreases participation significantly.

Gender wage gap, why

As stated above, there is a difference between the earnings of men and women, known as the gender pay gap. I have, also as stated above, written a more in-depth post exclusively about it on this substack before. I will go through it more quickly, mainly to explore how things work in different countries and not as much for a theory-heavy explanation of international wage gaps.

A part of the problem is clearly caused by discrimination and social norms, which are pretty hard to explain or measure, but seem to play a somewhat relevant role: many countries have prohibitions against women holding certain occupations, and social biases may prevent women from joining the workforce in the first place. It would seem that unobservables like personality can’t actually explain the difference: while women have different ability in, say, mathematics, or are less predisposed to bargaining for wages or requesting more “prestigious” tasks, these are obviously not happening in a vacuum, and are clearly influenced by social norms and the environment. In fact, women tend to underperform in STEM and related fields because teachers and parents don’t put much of an interest in teaching them in the first place, and the gap in performance is different across ages and locations.

Gender gap in productivity with and without controlling for access to inputs. From the World Development Report (2012).

What about the notion that women are less productive than men? It’s just not true. Firstly, because it seems incredibly unlikely that differences of the magnitudes required happen naturally. Secondly, because the differences observed disappear when considering that female-led firms tend to have less capital and less access to inputs and resources, especially in developing nations. In Africa, the median firm started by women has 2.5 times less inital capital than a firm started by men, in the private sector, and informal sector firms started by women have 5 times less capital than formal sector ones. Similar relationships are found regarding employment.

The first factor to consider is labor participation, to explain away a seemingly paradoxical finding. While in the US women earn roughly 80% of what a man earns, on an hourly basis, women in Colombia make nearly 99.66% of what their male counterparts earn. This pattern repeats across countries: “middle income” countries have some of the lowest wage gaps around, even lower than highly developed and progressive nations. The reason for this appears to be selection into employment: in developing countries, women very frequently don’t hold jobs at all, so the ones who do work tend to be higher up the income ladder. Adjusting for participation (i.e. by adding up all the women with zero income, who by definition have a 100% pay gap), the rosy Colombian picture changes: the average woman, not just the ones who work, actually makes less than half as much as a man.

Chart showing that closing gender gaps in schooling doesn't close the gap in labor force participation — Change in gender gap in years of education and change in gender gap in labor participation. From Jakiela & Hares (2019)

The second factor to consider is education. For a variety of reasons, the more educated a person is, the more that person earns. Despite this, education is not a great variable for explaining the earnings gap: in many places that have one, women are actually more educated than men, generally because they’re less likely to abandon their studies early for work - even in traditional societies like India. Only Laos seems to have a significant education-wage gap relationship. Regardless, women are more educated than ever before, and are gaining educational attainment at higher rates than ever. This means that educational divides will narrow, but the path will not be smooth: most of this kind of divisions tend to be resolved erratically. But in general, education improves labor participation across the globe (consistent with the U-curve explanation), so more education for women seems like a uniformly good development.

Share of type of workers by region. From the World Development Report (2012).

Thirdly, there’s choice of career. In the US at least, a woman’s choice of career tends to only explain about a third of the earnings gap, with the rest being explained by constant factors within each sector. Women tend to be overrepresented in the worst-paying jobs: agriculture and services, unpaid workers, the informal sector, and wage workers (versus the self employed). And female-led operations in each sector tend to be smaller than men’s, plus there seems to be strong segregation of tasks. Women make up a majority of communal service professionals and more than 40% of all employees in retail, restaurants, and agricultural workers.

But as countries develop, economic segregation changes. Differences within industries explain the bulk of the difference - for example, men who work in retail still make more than basically identical women who work in retail. As GDP per capita increases, women move from agriculture to either unpaid work or the informal economy, and then tend to just be pooled in bad or part-time positions in developed nations. And across levels of development, firms led by women have less resources than firms led by men - generally because women are “necessity entrepreneurs”, because their firms are concentrated in female-led sectors, and because female-led firms are disproportionately in the informal economy.

Correlation between hours of unpaid care work or ratio of male to female hours of unpaid care work and female labor participation. From Gaelle, Pensado, & Nowacka (2014).

Plus, women tend to work fewer hours than men, even at the same jobs. Is it because women are “lazy”? No. It’s because, across the world, housework disproportionately falls on women. For example, in the richest countries women spend twice as much as men doing unpaid care work ( i.e. looking after children or elderly relatives); in the poorest ones, they spend three times the amount, and up to eight or ten times in certain parts of the globe. As a result, women disproportionately choose part-time job, which pay less, or positions with more flexibility in working hours, which tend to pay less per hour.

Finally, there doesn’t actually appear to be a difference in the earnings of men and women within professions when the women haven’t had children. Even in Denmark, one of the most progressive countries in the world, where women’s earnings after having their first child drop abruptly and never recover compared to everyone else - because women tend to take different jobs after having children, but also because they usually take far longer breaks than fathers, which results in less experience at any given time.

In developing nations, women tend to be disempowered enormously, with very limited power over household decisions, even involving their own income, have limited decision-making over major household events, and tend not to own the family’s main assets. In rich nations, these problems don’t really present themselves, but women tend to be very underrepresented in high-paying, powerful positions, and overrepresented in low-paying ones. Women make up less than a majority of the top 10% of income groups in developed countries, and make up only a fifth of the of the top 1%. In both cases, access to positions of power and influence is severely constrained precisely as a result of the economic factors mentioned above.

Conclusion

The panorama for women in developing countries is not great but is also improving. Greater access to education and economic development in poor nations is bound to eventually produce improvements in outcomes generally. Cultural norms are a tougher nut to crack, but it seems countries have less rigid gender roles as countries develop, perhaps endogenously with a leading role played by education.

Nevertheless, policymakers can still make the transition easier, and improve outcomes at every level. Anti-discrimination rules are obviously a no-brainer, but insufficient. Investments in education, especially the kind that doesn’t discourage children of either gender of pursuing a certain career path, are also evidently beneficial.

Given the constraints faced by women’s domestic work, investments in childcare and things like paid maternity and paternity leave could make a big difference, and so would tackling occupational segregation and creating quality jobs in the sectors women are disproportionately employed in. Ultimately, big changes to the workplace that promote work-family balance and discourage incentivizing longer and longer hours, or to make work hours more flexible in general. In general, promoting working less and investing more in children are self-evidently good policies. Longer work hours are less productive, and more productive hours mean less hours. This also correlates heavily with the facts sketched on hours of work necessary for survival.