Rarely are inflection points in the history of an economy or a nation observed in real time. Profound change is often only identified long after it has occurred. The December U.S. employment report provided a hint that the U.S. labor market, economy and the basic organization structure of the relationship between work and the individual has reached an inflection point.
The emerging female majority in the labor force is unlikely to be content with a glacial pace of change.
Women now outnumber men in the workforce by 50.04 percent to 49.96 percent. There are 109,000 more women than men in the American workforce, excluding agricultural jobs. In our estimation, this foreshadows a significant period of change in wages, benefits and the way in which work is organized inside firms of all sizes.
Middle market insight
Is the middle market at risk of missing the opportunity in this demographic shift? Special questions in the fourth quarter 2019 RSM US Middle Market Business Index uncovered that only 27% of executives indicated that their organization supports gender-equality causes and 46% reported that they are focused on women’s issues and empowerment as part of their diversity and inclusion efforts. Without a stronger focus on women, the middle market will miss out on all of the benefits driven by this shift in the workforce and the diverse perspectives it brings to business.
A long time coming
American labor market dynamics are tilting in the direction of women. Forward-looking CEOs and corporate boards should anticipate greater demands for change in the workplace, particularly around wage disparity. The data visualization below illustrates the long-term changes in the domestic workforce. Notice how the changes that began in the early 1960s, then accelerated in the 1990s, have finally come to fruition in 2020.
To provide some context about the significance of this change, consider that in 1965 there were 10.8 million women working in private service-providing jobs. Today that number has exploded to 58.3 million, with women holding about 54% of all service-providing jobs. Even in traditionally male-dominated goods-production industries, female employment increased by 2.4% versus 0.4% for men.
The U.S. prime aged labor force participation rate of women 25 to 54 stands at a cyclical high of 76.5%. Given that the fastest areas of growth within the domestic labor force are services—health care, education and business services—the present-day 20% average pay gap between men and women in the workplace is unsustainable.
Change is here
Cyclical labor dynamics strongly imply that women now have the initiative in traditional employment. Medium and large-size firms will need to quickly change the way they recruit, retain and provide work flexibility to accommodate the emerging demographic majority within the labor force. Moreover, there needs to be an equalization of wages in the near term. This cannot happen fast enough.
The new demographic shift will demand a greater focus on family-friendly policies and benefits, and flexibility will become table stakes as women continue to bear their traditional burden of child- and elder-care. It won’t be enough, however, for companies to simply offer these benefits; employees must see that their careers won’t be penalized for taking advantage of them to help meet their work and personal demands.
Even the most forward-looking managers and policymakers typically demand tangible evidence of change. That change is now evident in the hard data provided by the U.S. Labor Department and can be used as a benchmark to measure equality and inequality in the labor force and the economy.
Diversity, inclusion and equality are noble and achievable goals. Given the demographic changes under way in the economy, best illustrated by changes in employment data, firms need to rapidly adapt and evolve to accommodate those goals and operationalize them within the firm.
The emerging majority in the labor force is unlikely to be content with a glacial pace of change; they will likely just get on with it, while reinterpreting the pantheon of wages, workplace and the economy.