Female vs Male Behavior in the Labor Market
Page Overview | Income and Substitution Effects | Female vs Male Behavior in the Labor Market | Opportunity Cost of Leisure Time | Works Used
Female vs Male Behavior in the Labor Market
Gender and economics are not immutable naturally occurring phenomena but rather are socially constructed, according to one of the prominent feminist economists today, Marianne Ferber.
The following discussion may not be applauded by the majority of the class, having in mind its male predominance. But the authors believe that women's different behavior in the labor market deserves a little bit of attention, after listening throughout our undergradute career as Economics students about the behavior of "economic man".
The vast majority of the empirical literature in labor economics talks exclusively about the economic man. (Blank, 166) What is even worse, is that this is usually not made clear in the title or in the discussion itself. These researchers oversimplify their results by excluding women from the sample. We believe that this is wrong not because of strong femisnist convictions but because not including women actually leads to substantial statistical deviations. This is especially true in developed countries such as the USA where the number of full-time female workers has been steadily increasing,and represents today a big share of the national working force. The excuse of researchers who ignore the different behavior of women in the labor market, such as the fact that the data is not tractable, is unacceptable. We are going to present the conclusions of some feminist economists who chose to analyze the often incomplete data rather than taking males as representatives of everyone. As Rebecca Blank says in her economic work, man and person are not synonymous, and economic man does not explain labor behavior nationwide. Also, she is making the distinction between “paid work” and “unpaid activities”, which are not leisure. Unpaid activities refer to the work a woman has to do in her household, which was traditionally done by women.
Interestingly enough, some economists even refer to children as work, or leisure. Shelly Lunberg refers to them as an important jointly-consumed commoditiy for husbands and wives.
But traditions are not what they used to be. In the last two decades, women have steadily been moving towards economic independency. They have become more educated, and their share of the national labor force has also increased. This is mainly reflected not in decisions to work more but in the wage elasticity of the labor supply curve, which namely reflects the degree women react to changes in the labor market.
Elasticity, Income and Subsitution Effect for the Labor Supply Curves: Men vs Women
Elasticities show us the combined effect of the income and substitution effects. They give us a clearer image of the labor market and the reactions of individuals to social, demographic, and economic changes. Elasticity should be a valuable knowledge for policy makers , too, helping them to understand how men and women respond to different patterns.
Other economists such as Jonathan Schwabish from the Center for Policy Research at the Syracuse University conclude that the tendency is towards convergence of the wage elasticities of men and women. Societal norms have changed and women can more easily enter the labor force and thus respond to the labor market changes more and more like men. On the other hand, men can also change their responses to the changes in the labor market such that their elasticities reflect more those of women. Or maybe it is just a combination fo the two trends acting together. (Schwabish)
Economists have conducted numerous studies in their attempt to determine the actual shape of the labor supply curve. We have analyzed a considerable amount of cross-sectional data on hours of work, wages, income, and gender to estimate the labor supply curve and the underlying income and substitution effect.
For adult men,nearly all studies find the supply curve as negatively sloped, though some research (Hall; Kalacheck and Raines) has proven that for low wages, it is actually positively sloped with the tendency to become negatively sloped when the wage rates increases. This means that for men the income effect (which is negative) is greater (in modal values) than the substitution effect. The most recent estimate of the men’s labor supply elasticity we found is -0.04 %, implying that if wages increase 10 %, this will lead to a 0.4% decrease of hours of labor supplied. The income effect from higher wages is estimated to be -0.13%, and the substituion effect 0.09% (the combined effect gives us the elasticity 0.04%). We should not overstate the importance of the dominance of the income effect for men, though, because it has very small numerical values. Thus, if a man is working 150 hours per month, the 10 % increase of his wage would cause him decrease his labor supplied only by half an hour for the month. For one year, he will work 6 hours less. That definitely is not a big amount of leisure gained.
Of course, we should not generalize and put people under the same denominator because reactions to changes in wages are dependent on many exogenous to our model variables.
On the other hand, for women, the labor supply curve seems to be positively sloped. This would mean that when wages increase, women will work more (thus conteracting the withdrawal of working force from the market that men cause). This is not only the effect of women already working who want to work more, but it also reflects the invasion of new women willing to work, motivated by the higher wages. The labor supply elasticity for women is thus estimated to be 0.9%, which implies that women will react to the 10 % increase in wages by increasing hours of work by 9% ( the negative income effect in women’s case is around -0.2%, while the positive substitution effect is +1.1%. Notice that for women, the substitution effect is 12 times as high as the substitution effect for men! . We should also pay attention to another difference in the reactions to an increase in wages of men and women. This is that the difference is not only qualitative but also quantitative; women increase their labor supply much more than men decrease theirs.
Why Are Men and Women Always so Different???
A large percentage of working men in USA (more than 90%) work full time , so they can’t easily increase their amount of labor supplied. If they do it, they will have to actually sacrifice their leisure time. When women don’t work for money, though, they are doing other unpaid activities that should not be confused with leisure, namely household work, basic care for children, and so on. So, a rise in the market wage induces a substitution not only from leisure but also form home work, which, let’s be honest, is not the modern woman's favorite unpaid activity. Actually, it is exactly the substitution from home work to market work that accounts for the large substitution effect in women’s labor market behavior.
The Old Story of the Chicken and the Egg: Reverse Causation
Some economists also suggest the idea that there may exist a reverse causation between the overall increase in women’s wage and the increase in women’s participation in the labor force. In Journal of Human Resources, John Pencavel groups women in cohorts and carries out a thorough research about their behavior over 20 years in the end of the 20 th century (this gives the analysis an especially intriguing time dimension, taking into account the fact that these 20 years have been very dynamic for the labor market and the wage structure in particular) . What we estimate as really valuable, is that his study does start the analysis of substitution and income effects all over again. Also, variables such as age, education, marital status are no longer exogenous to the model, and their fluctuations are actually fully explained. But they are not in the scope of our project, so this is why we are going to use only the data showing how women react to the changes in wages, or maybe how the wages react to changes in women’s working value.
An interesting conclusion that the Pencavel makes is about the influence of age. When wages increase, we have already shown that women will work more. But the case for adult women could be explained in an alternative way, which sounds credible even to the non-economist. Just think about it: when a woman ages, she gains more and more experience, so she becomes more efficient in the labor market. The Neo-Keynesian wage efficiency theory would predict that this would lead to an increase in her wage. This is what actually happens.
MPL ?=> w ?=> LS ?
(graph efficiency theory, labor supply shifts to the right)
Substitution Effect: Married vs Unmarried Women
Not all women are that happy...Read on to understand why.
Marriage is a very important moment for a woman’s life. I am saying this not because of romantic inclinancies, but only because of my research in women’s behavior in the labor market.
The following graph shows that married women increase their supply of labor only after substantial increases in the real wage, while for unmarried women the substitution effect has big nominal values even for slight changes in the wage:
Moreover, married women need higher wage to motivate them to enter the labor market at all:
- The employment-population ratio is an indicator of the percentage of working women in a given population.
It seems that married women react much less to changes in the wage because of several reasons:
- they have much more ‘home work” to do, so they don’t have leisure that could be substituted for paid work
- they are busy to take care of their husbands' problems, their minds are occupied with more issues than before, and last but not least- presumably, they are in love, and this makes them less sensible to any changes in the wage rate, as well as less able to take intelligent decisions (such as to work more when you can get more money)
- they have (presumably) a source of stable income- their husbands
Though these explanations might sound really naïve, the economic research of John Pencavel actually confirms my hypotheses. He concludes that unmarried women's supply curve is much more elastic than the married women now. This is just another indicator of the flexibility that they have, socially and economically.
This is so because economics is a social science, and as much as we are prone to forget this when we are making aggregate conclusions, society is built of millions of individuals. And the science that explains individuals’ behavior in the best way is no other but psychology.
