During the pandemic, women have taken the brunt of the damage to the labor force, whether in the form of losing their jobs or working triple-duty at home with child care and education on top of their work obligations.
Real wage differentials between men and women during the pandemic have turned into a chasm, with the gap increasing by more than 19% at the depths of the economic disruption. The labor force participation rate of women 20 and older has declined to 57.4% from the pre-pandemic rate of 59.2%.
Overall, 1.8 million fewer women were working in the labor force in May than in February 2020. In fact, one of the major barriers to re-entry to the workforce for women is the confluence of schools not being completely reopened and limited child care options. This condition is not sustainable.
This article is the first in a series of analyses on women in (and out of) the labor force. While there has been progress toward gender (and racial) equality, the peculiar nature of the pandemic resulted in some backtracking. A variety of labor market indicators point to the need for systemic change in the labor force. One of the more pressing policy challenges in the post-pandemic economy will be to reverse those setbacks.
Earnings of wage and salary workers
It’s no secret that women earn less than men. According to the median weekly earnings of wage and salary workers in real (constant dollar) terms, this is the unfortunate reality of the American labor market.
In the last quarter of 2020, real wages and salaries of men had dropped by 3.8% and by 4.9% for women.
Over a half century ago, one might have heard arguments that a preponderance of men working in higher-paid production industries and women working in lower-paid occupations like secretaries or teachers or hospitality workers is the reason for the gap. But that is not the case today.
Yes, there have been advances in closing the earnings gap in occupations that pay wages and salaries. In 1980, real wages and salaries (earnings in inflation-adjusted terms) for men were nearly 1.6 times that of women.
But as manufacturing jobs began to disappear and as the service sector became dominant, that ratio dropped toward a new equilibrium centered on wages for men that are 1.2 times that for women.
Then the pandemic hit. In the last quarter of 2020, real wages and salaries of men had dropped by 3.8% compared to the last quarter of 2019. The real wages of women dropped by 4.9%.
There are a host of reasons for the larger drop in women’s wages, including retaining men with higher seniority than women during the economic shutdown, the resurgence of manufacturing and the dormancy of service-sector industries during 2020.
But there are reasons not to give up on the push on gender equality. (The lack of progress for African Americans speaks to a host of reasons outside of this discussion.) Though the ratio of men’s-to-women’s wages seems to have hit a roadblock after progressing from 1980 to 2005, that might be more dependent on family obligations that tend to fall more on women than men.
If there are lingering occupational preferences on the part of both employees and employers, that should become a thing of the past as the workplace adapts to the requirements of the new economy.
Labor force participation rate
There were several trends affecting the labor force participation rate among men and women before the pandemic.
Although 90% of men—those 20 and older—were active workers or were actively seeking employment in 1950, that ratio had dropped to 75% by the onset of the Great Recession. Women’s role in the labor force was a mirror image, increasing from a participation rate of 31% in 1950 to a peak of 61% in 2008 as both employment opportunities and family roles were changing.
While 90% of men were active workers or were actively seeking employment in 1950, that ratio had dropped to 75% by the Great Recession.
The Great Recession arguably prompted another shift in structure. By 2010, baby boomers began to leave the labor force, and were ready to do the 1960s all over again. By 2019, the labor force participation rate for men had declined to 71% while only 59% of women remained in the labor force.
By April 2020, the pandemic had reduced the number of men 20 and above in the labor force by 3 million (or 3.6%) relative to 12 months earlier, and the labor force participation rate to 65.6%. There were 2.6 million (or 3.5%) fewer women in the labor force, for a participation rate of 56.3%.
From last September to February, women were leaving the labor force at a faster rate than men. Reports were that more women were staying home to care for their children, which might have a lot to do with existing wage and salary disparities, as well as the reassertion of traditional family roles in the absence of affordable child care services.
As the hospitality sector opens up, we could expect women to rejoin the labor force at increased rates.
The non-employed rate
The headline unemployment rate counts only those workers who are actively looking for employment, which is an accepted measure of tightness in the labor market during normal periods of the business cycle. Nonetheless, there are people who become disenchanted with wage levels or discouraged by the lack of local employment opportunities and stop looking for work.
Combining those discouraged workers with those who are actively looking for a job, we can calculate a “non-employed rate.” As our analysis shows, the non-employed rates for men and women in their prime working years of 25 to 54 jumped during the pandemic, with twice as many women estimated to be not looking for work.
At the end of 2019, 6.5 million men in their prime working years were estimated to be not looking for work. By May this year, we estimate that 7.2 million prime-age men had opted out of the labor force, an increase of more than 690,000 and making for a non-employed rate of 17%.
At the end of 2019, 14.3 million prime-working age women were estimated to be not looking for work. By this May, we estimate that 15.2 million prime-age women had opted out of the labor force, an increase of more than 850,000 and making for a non-employed rate of 29%.
We can attribute the gap in the non-employed rate among men and women to the lack of child care alternatives for women and to the lag in service sector employment (compared to employment in the production industries).
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.