Why Are Women Leaving The Work Force?

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The unemployment rate is at an amazing low that many have celebrated. But off the political ping-pong table, some factors suggest that the labor economy is in worse shape than it would appear.

A new Gallup blog, citing a 2015 study from the Federal Reserve Bank of St. Louis.

  • A study conducted by Maximiliano Dvorkin and Hannah Shell for the Federal Reserve Bank of St. Louis found that 59.9% of women aged 15-16 and older were in the labor force in 2000. By 2010, that figure fell to 58.6%, and at the end of 2015, it was even lower, at 56.7%.
  • Retiring female baby boomers account for a percentage of the shrinking labor force, as does the increasing number of young women enrolling in college. But these demographics don’t tell the whole story. Dvorkin and Shell also discovered a decrease in labor force participation among women in their “prime age” — between 25 and 54. The U.S. used to have one of the highest labor force participation rates among women in this age group, but now it has one of the lowest rates compared with eight developed countries in the study.

Apparently no one knows why this has been happening. Incarceration rates aren’t high enough to explain it and a shift to self-employment wouldn’t count as a departure from the labor force. Retirement could be one aspect.

However, the biggest decline wasn’t among women 25 to 54, but among women 15/16 to 24, where the 2014 rate was down around 55 percent. Increased involvement in higher education would be one reason. According to the National Center for Educational Statistics, 42.8 percent of women aged 18 to 24 years were enrolled in a two-year or four-year institution. In 2000, 38.4 percent were enrolled, and students are considered not in the labor force, which would reduce the labor force participation rate. That’s compared to men in the same age bracket. In 2000, 32.6 percent were enrolled. By 2014, the number was 37.3 percent — some growth, but far less than women.

So, millennials, who are 18 to 34 years old and the current largest living generation, are more inclined to head to college. That affects the status of many, which could have an outsized impact on overall labor participation rates, which have taken a significant dip since 2000, according to the following Bureau of Labor Statistics graph.

labor-participation-rate-over-time

There may be a problem with women opting out of the workforce, or perhaps not, depending on the full impact of the shift to greater participation in college education. Whatever the answer, that still leaves at least three other issues of concern.

One is education levels. Young men are less likely to head to college, putting them at a disadvantage in obtaining better paid work. That could eventually drag down the median wage. And what do we do about the more than half of the young population that doesn’t attend college? Do we have career paths for them that lead somewhere other than low-wage employment?
Fewer people working means less support for the Social Security system, which has always had current working generations paying for retirees. The popular notion of Social Security saving money for people over time has never been accurate, otherwise how would the first generations receiving benefits have been entitled to anything?
Third is the unemployment rate. We’re currently below 5 percent calculated at the U-3 official unemployment rate. But if groups aren’t in the civilian labor force, they don’t get counted. Looking at the graph above, we’ve effectively seen a nearly 5 percent drop in labor participation, a significant number of people who don’t appear in the unemployment rolls. Our unemployment level may be closer to 10 percent when you count the depressed participation rate. Now, switch to the U-6 alternative unemployment rate, which includes people marginally attached to the labor force and yet still counted as part of it, those working only part-time against their will for economic reasons, and the people that would normally be seen as unemployed. The current rate is 9.2 percent. Add the 5 percent from the reduced participation rate and you have 14.2 percent.
The dynamics of employment would appear to be significantly worse than we assume, and that doesn’t address what percentage of jobs added over the last number of years are low-wage. Depending on the influence of schooling on participation rates and the resulting presumed higher lifetime wages on average, this could potentially have an impact on income inequality and societal stability.

by Eric Sherman c/o Forbes

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