What’s up with women leaving the labor force ?

Last week, we were fast out of the blocks posting about the drop in the labor force participation rate: How to make 11% unemployment look like 8.1% 

The essential points raised:

  • Since President Obama was inaugurated, the U.S. working age population has increased by roughly 8 million people.
  • During that same period the U.S. labor force – folks either holding or looking for jobs – stayed roughly constant at about 154 million.
  • So, it arithmetically follows that the labor force participation rate declined … from about 66% to 63.5%

Here’s the money chart from last week’s post:


* * * * *
The long view

Some analysts have seized on the fact that  324,000 Women Dropped Out of Labor Force in Last Two Months.

Are women really leaving the labor force in droves? ?

Let’s start with the long view:

Back in 1960, women’s labor force participation rate was below 40%.

Over the next 40 years, it bumped up about a point a year, hitting 60% in 2000.

The demographics are well known.  More women chose to pursue careers and some families needed 2-wage earners in the family in order to make financial ends meet.


* * * * *
The Shorter View

But, the long view masks what’s been happening the past couple of years.

Let’s shorten the time frame back to only 1990, and increase the granularity of the charting scale.

During the Clinton Era, women’s labor force participation rates continued to climb at the historical rate and reached a historical peak a bit above 60%

The participation rate fell back slightly during the eight Bush years … from 60% to about 59.5%

During the 3+ years since Obama’s inauguration, the women’s labor force participation rate dropped 2 points from 59.5 to 57.5%



* * * * *

So, what’s going on?

Pundits are serving up a few explanations:

1. The labor market has absorbed the historically pent up supply of women wanting to work and able to find jobs.

2. Some women have discovered what many me have know for centuries – work often isn’t as fulfilling and rewarding as it’s made out to be.

3. Some women have done the math and figured out that compensation levels are sometimes inadequate to fully cover the costs of work clothes, commuting, child care, etc.

4. As government benefits have increased, some women at the lower rungs of the economic ladder have concluded that they’re better off not employed than to take a low paying job. 

Regarding the last pint, according to the WSJ, in some high-benefit states women need to earn $30,000 or more to compensate for the benefits they lose if they get a job.

Considering that a full-time minimum wage job only pays about $20,000  [ 2,000 hours times $10} …  at least part of the explanation for declining labor force participation rates may be purely rational economics …

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