Exercise

1. Exercise • For Country X: • Population = 100,000; • Employed = 60,000; • Unemployed = 3,000; • Not in LF = 37,000. • Answer these questions: • 1) Calculate size of LF; LFPR, and unemployment rate. • 2) Give examples of not in LF. • 3. Give reasons woman might switch from not in LF to LF. • 4) If go into recession, what expect will happen to: • A. # employed and # unemployed. • B. # not in LF.

2. Explaining  LFP Using Comparative Statics • 1. Effect of  husband’s earned income: • Like any  nonlabor income: Demand theory: will  D for all normal goods including leisure   paid work and  home production. • Will  MVTM since will  MU of purchased goods (as purchase more from husband’s increased income). • Relate to real world: • Explains race differences in LFP. • Does not explain  female LFP since husband’s Y has been  until very recently. • Contradicts notion that married women “pushed” into LF from low husband’s Y.

3. Continue with Comparative Statics • 2. Effect of  female wages: • Rising wages  opportunity costs of leisure and home production so will  both  LFP. • Remember: • MVTM = MUC = w/p: • So  wages is an  MVTM. • Relate to historical trends: • Wages  throughout 1900s but mostly from after WWII till early 1970s.

4. Continue with Comparative Statics • 3. Children and LFP: • Presence of children (young kids in particular) will increase value of time in home production ( MVTH) so will reduce paid work and leisure. • Relate to history: fewer kids so lower MVTH. • 4.  Home Productivity: • Impact is unclear—complicated. • Relate to history: much  so probably contributed to  LFP.

5. Evidence from Costa (2000) • Summarized evidence about importance of married women’s wages on their LFP. • Divides 20th century into 3 periods: • 1) 1900 – 1930: little influence of own wages; primary influence was husband’s income. • 2) Mid-century: big influence of own wages. • 3) End of century: less influence of own wage or husbands’ income as LFP became norm.

6. Female LFP Rates • Remember the big increase over time in female LFP rate: • 1950 = 34% • 2001 = 60.1% • Percentage of total US labor force that is female: • 1900: 18% were female • 1950: 30% were female • 2001: 46.6% were female • Today: more than 50% of mothers with preschool children are in paid LF.

7. To Note in Figure 3.7 • Age-LF Participation profiles for women in years 1940, 1960, 2001. • Two major features: • 1)  female LFP for all age groups up to 65 • 2) ing LFP pattern for women in childbearing years. • In 2001: still bit of peak at age 24, but then stays fairly high.

8. 6 Reasons for  Female LFP • 1. Rising real wages. • 2. es in fertility patterns. • 3. es in educational attainment. • 4. ing living standards. • 5.  job opportunities. • 6. ing social attitudes.

9. Details for the 6 Reasons • Reason #1:  real wages: for females, substitution effect is dominant, causing  LFP. • Reason #2: Fact: having young children increases value of nonmarket time. • What has ed? • (i) #kids per mother has declined. Why? • Birth control • Increased cost of having kids.

10. Continue with #2: • (ii) postponement of childbirth for many women: • 1970: 19% of first births to women aged 25+ • 2000: up to 51%. • Key: hard to establish career while also having young children. So some have kids later; some have no kids at all. • 1992 survey of female executives: 42% had no kids

11. continue • Third component of changing fertility patterns: • More women continue to work even when children are young • 1970: 30% of married women w/kids  age 6 in LF. • 1996: 63%. • One result: dramatic increase in utilization of non-maternal child care

12. Education Changes • This is reason #3: • Changes in Educ. Attainment: • Big increase in women getting 4-year college degree. • Anyone with college degree: more likely to be in paid LF; why? • Go to college because want to work • College can change expectations • W/degree:  opp. cost of leisure

13. Continue • High divorce rates tend to  education as means to economic independence. • Also: es in Field of Study: • 1971: % undergrad degrees to women: 1% engineering; 9% business. • 1998: 17% engineering; 49% business. • 50% of law students are female.

14. Reason #4: Living Standards • Theory: female LFP so that family can maintain a good standard of living, even though: • Male wage growth for college-educated workers declined in 70s and 80s; • For unskilled workers, real wages actually fell. • Remember: focusing on standard of living relative to upbringing (Easterlin’s theory).

15. Reason #5: Increased Job Opportunities • In past 50 years, “female” jobs have experienced above-average job growth. • In 2000, over 63% of working women in 6 occupations: • Administrative support • Food preparation services • Sales clerks in retail trade • Teachers • Secretaries and typists • Nurses

16. More on Reasons • Reason #6: Changing social attitudes: • If wife works, no longer conclude that husband is a failure. • More acceptance of child care.

17. All 6 Factors Related • Not possible to know what caused what. • Were the rising real wages most important? • Did more women working cause the shifting in social attitudes? • One way to disentangle different factors is to compare LFP trends across countries. • Remember int’l comparisons.