In early October 2023, the prestigious Nobel Prize in Economic Sciences was awarded to Claudia Goldin, a distinguished professor from Harvard University. She marked history as the third female laureate for the economics prize and the first woman to win an unshared economics prize. As an economic researcher in a closely allied field, I fully appreciate the significance of Claudia’s work and I would like to share it with you in this blog post.
Although the proportion of women in paid work has tripled in the past century, a significant gender gap still persists in the labor market. Women usually earn less than men, even within the same occupation, which could discourage them from pursuing a career. This is unfortunate because the labor and expertise of qualified women are wasted. Claudia Goldin has demonstrated factors that have historically influenced female labor supply and demand, and has provided solutions to address the remaining gender disparities in the 21st century.
Goldin’s focus on economic history led her to divide the twentieth century into three phases of evolutionary change. During phase I, there was a significant difference in the employment rates of adult and married women and unmarried women by the beginning of the twentieth century, despite technological progress and growth in the service sectors that brought in more demand for female labor. This was because most women were expected to exit the labor market upon marriage and not return until their children grew up. The labor supply and demand were low due to expectations from both employers and women themselves. As a result, women in phase I did not invest in their education because they knew that later opportunities would not come to fruition.
Transitioning into phase II, a surge in high school attendance and graduation rates opened doors for many young women to find a decent job. The hours that adult and married women could work outside the home increased substantially due to the rapid diffusion of the electric household. These shifts demonstrated to employers that women were profitable to employ, leading to an enormous increase in adult and married women’s labor force participation. Nevertheless, societal expectations prevented women from staying in the workforce for an extended period and a prolonged career.
The paradigm shifted towards the close of the 1960s in phase III. Along with the resurgence of feminism that encouraged women to think independently, the contraceptive innovation, which is known as the pill, was introduced. By combining the spatial and temporal differences in accessing the pills in the US and using economic approaches, Goldin found that the pill allowed young women to plan their careers ahead of planning for families, which in turn made them more attractive to employers. Goldin discovered that the introduction of the pill delayed marriage and childbirth, giving them new incentives to invest in their education and careers and continue on to professional and graduate schools. The earnings of women rose relative to those of men, and the earnings gap between women and men has become significantly smaller since the 1980s.
Forwarding to the 21st century, we can see that the gender gaps in earnings remain in developed countries, even when women are often more educated than men. Goldin’s extensive evidence highlights the key role of parenthood in this narrative. Alongside her co-authors, she found that while the initial gender gaps in earnings are minimal, the arrival of the first child precipitates a sharp decline in women’s earnings, which then leads to a much slower growth relative to men. Motherhood significantly contributes to the pronounced gender earnings and participation gaps, especially in demanding professions like law, medicine, and executive leadership, where continuous availability is crucial. Because women often take greater responsibility than men for childcare, their lower hours translate to lower earnings and lower labor force participation.
Goldin’s work combines history data and economic approaches, and unveils some crucial determinants for gender disparities in the labor market. People and policymakers who would like to compensate these differences must understand the reason why they still exist after the various societal developments in the past century. With the understanding of Goldin’s research, the investments in information and education, or legislation that intends to remove institutional barriers for women, could make more pronounced advancements. For instance, initiatives like Canada’s Foreign Caregiver Program may offer a viable pathway for women to re-enter the labor force with flexibility after having children, thereby inching closer to bridging the persisting gender gaps in the labor market.
Illustration: © Johan Jarnestad/The Royal Swedish Academy of Sciences
