The Right Women For The Job

Source: University of Akron
Published: 2017-10-12
Summary: Study shows average wages for all workers, men and women, have increased as a result of women joining the workforce.

Work in America has changed dramatically in the last century from Henry Ford's moving assembly line to automation today, but arguably the largest change is women. Women's participation in the labor force has nearly doubled from less than 34% in 1950 to 57% today (Federal Reserve Economic Data as of August, 2017).

Working women became the norm in the U.S. in 1978 when it became more common to see women in the workplace than in the home (when the female labor force participation rate crossed the 50% line). This has fundamentally changed our homes as well as our workplaces and society. University of Akron Professor Amanda Weinstein finds that this change has benefitted everyone. Average wages for all workers, men and women, have increased as a result of women joining the workforce.

Economic studies abound trying to answer what exactly caused this change. For example, they have looked at the impact household appliances like the dishwasher had on freeing up women's time in the house (and reducing the cost of working outside the home) allowing women to enter the workforce. They have also looked at, for example, the impact of gender discrimination laws increasing wages for women (and the shrinking gender wage gap) that increased the benefit of women working outside the home. Economists are continually examining the effect of the economy on women, but this male-dominated field seems to be failing to ask what impact women in turn have on the economy? How have women changed work in America?

This is the very question that Weinstein has set out to answer in her new paper, "Working Women in the City and Urban Wage Growth in the United States," published in the September issue of the Journal of Regional Science. Specifically, Weinstein examines how women's participation in the workforce has affected economic growth and productivity in cities across the U.S. Weinstein estimates that every 10% increase in female labor force participation rates increases average real wage growth in cities by approximately 5%.

What this means is that for cities like Akron, OH where Weinstein works, average real wages would be nearly 7% lower had women in Akron not increased their participation in the labor force from below the national average in 1980 to above the national average (at 60.6%) in 2010. All else equal, higher real wages are generally indicative of workers that are better off and firms that are willing to pay those higher wages to employ workers they view as more productive. Women seem to be making Akron and cities around the U.S. more productive.

Why? Weinstein says that we can't have a competitive economy and firms that can compete in global markets when we ignore or discount half the population. When businesses are able to draw upon a larger pool of labor and hire the most productive worker (man or woman), they become more competitive and productive. Weinstein further suggests that it's not just the size of the labor pool but the demographics itself and the skills that women bring to businesses. One of the best predictors of a city's long run economic success is having a highly skilled workforce and women now earn 60% of the bachelor's degrees.

Furthermore, previous research suggests that the skill level of the workforce though important for all cities is even more important for cities like Akron in the rustbelt of the Midwest, cities looking for new ideas and looking for a change that can bring them into this new global economy. Thus, women provide important perspective for cities like Akron looking to make a comeback. This is why organizations such as Detroit's Kresge Foundation and managing director Wendy Lewis Jackson work to make cities a place where women can fully participate in all aspects of life.

Weinstein further suggests that it is not just the skill level but the specific skills women bring to a firm, because they are women. Women may bring to the table certain skills and assets that firms so desperately need in this ever-changing economy, an economy that some have started calling the "she-economy." Research suggests that women make about 75% of all household consumption decisions. So if businesses want to sell their products, they'd better be thinking about the female consumer. And who better to answer what women want than women? That dishwasher that made it easier for women to work outside the home, that is now so ubiquitous that most of us can't imagine life without it, was invented by a woman (Josephine Cochrane born in Ashtabula County, Ohio) when virtually no man saw the point.

When the best person gets the job, man or woman, firms and cities can thrive.

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