Excerpts
Over the past century, the proportion of women in paid work has tripled in many high-income countries. This is one of the biggest societal and economic changes in the labour market in modern times, but significant gender differences remain. It was first in the 1980s that a researcher adopted a comprehensive approach to explaining the source of these differences. Claudia Goldin’s research has given us new and often surprising insights into women’s historical and contemporary roles in the labour market.
Globally, around half of all women are in paid employment, while the equivalent figure for men is eighty per cent. When women work, they usually earn less. Understanding how and why levels of employment and earnings differ between women and men is important for socioeconomic reasons, in both the short and long run, because the issue relates to the most efficient use of society’s resources. If women do not have the same opportunity to participate in the labour market, or they participate on unequal terms, labour and expertise are wasted. It is economically inefficient for jobs not to go to the most qualified person and, if pay differs for performing the same work, women may be disincentivised to work and have a career. By combining innovative methods in economic history with an economic approach, Goldin has demonstrated that several different factors have historically influenced – and still influence – the supply of and demand for female labour. These include women’s opportunities for combining paid work and a family, decisions relating to education and childrearing, technical innovations, laws and norms, and the structural transformation of the economy. In turn, her results have enabled a better understanding of how and why rates of employment and pay differ between women and men. To achieve these insights, Goldin looked back over two hundred years.
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The parenthood effect
We can now see that the earnings gap between women and men in high-income countries is somewhere between ten and twenty per cent, even though many of these countries have equal pay legislation and women are often more educated than men. Why is this? Goldin attempts to answer precisely this question and, among other things, succeeds in identifying one key explanation: parenthood.
By studying how differences in income between men and women changed over time, Goldin and her co-authors, Marianne Bertrand and Lawrence Katz, demonstrated in an article from 2010 that initial earnings differences are small. However, as soon as the first child arrives, the trend changes; earnings immediately fall and do not increase at the same rate for women who have a child as they do for men, even if they have the same education and profession. Studies from other countries have confirmed Goldin’s conclusion and parenthood can now almost entirely explain the income differences between women and men in high-income countries.
Goldin showed that this motherhood effect can partly be explained by the nature of contemporary labour markets, where many sectors expect employees to be constantly available and flexible in the face of the employer’s demands. Because women often take greater responsibility than men for childcare, for example, this makes career progression and earnings increases more difficult. Tasks that are hard to combine with part-time work also make it more challenging to maintain a career for the person in the household, usually the woman, who chooses to reduce their working hours. All these factors have far-reaching consequences for women’s earnings.
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