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The egg or the chicken: A new way to look at female labor force participation

Nadereh Chamlou's picture

World Bank | Arne HoelI recently heard a comment that greater female labor force participation will hike up the already high unemployment rate in the Middle East and North Africa (MENA).  The figure from Scarpetta and Pierre‘s 2003 presentation (see chart below), which I have updated, plots female participation rates against unemployment rates across OECD and MENA countries.  It indicates that some countries with low female participation are also those with high unemployment rates. 

(Click Chart to Enlarge)

Source: WDI  (2009), and updated from “Gender and Development in MENA – Women in the Public Sphere” (2004)[1]
 

One explanation for the downward slope in female labor force participation is that when unemployment is high, many workers get discouraged and leave the work force.  Men may remain in the market, but high unemployment may discourage women disproportionately more, creating exceptionally low levels of participation.    

However, the figure could also lead one to think the opposite –  that low female labor force participation may be a factor in a perennially high aggregate unemployment rate not only in the MENA countries, but also among the more economically advanced OECD countries. How so? 

Across the world, women who are young, single, divorced or widowed work for the sake of opportunity or necessity and at roughly the same rates. The International Labor Organization (ILO) estimates that this accounts for roughly a 30 percent female labor force participation rate.  Countries that have gone beyond the 30 percent mark have been able to enlist more and more married women with children into the labor market.  Over the past 60 years, women are responsible for the most continuous increase in the labor force, and mostly so with a greater share of married working women. 

If a man works and his wife remains at home, she is more likely to offer a larger share of the household goods and services:  providing her own child and/or elderly care, cleaning the house, eating out less, taking cheaper and less frequent vacations, buying fewer and lower cost clothing for herself, and possibly having less disposable income to invest in luxury items and services, such as a better house, a more expensive car, etc. 

When the wife works, most often as the household’s second earner, the family needs and can afford different sets of goods and services.  For reasons of time constraints, a working woman may have to send her children to daycare and after school classes or camps, hire cleaning help, buy more ready-made goods and depend on specialized services from the market.  These in turn would increase the demand for other providers in the economy which then can generate part or full time jobs.     

According to Scarpetta and Pierre, “Empirical evidence shows that the direction of causality in the relationship between unemployment and increases in labor supply is not straightforward.  There is evidence that it may go in either direction, depending on the country and possibly on the period considered…[in the long run] there is evidence of a weak negative association with some of the countries experiencing the largest increases in participation also showing the lowest increase (or even reduction) in the unemployment rate.” 

Hence, it is not a matter of the chicken having laid the egg, but that the egg gave life to the chicken.   Rather than worrying about women taking away jobs and driving up the unemployment rate, it could well be that with higher female labor force participation, women could well raise the demand (and efficient supply) for other jobs in the economy.  It may be useful to measure the job/economic multiplier effect on job creation when a woman works or does not work, and compare it to jobs held by men. 
 


[1] Note: AUS= Australia, AUT=Austria, BEL=Belgium, CAN=Canada, DNK=Denmark, FIN=Finland, FRA=France, DEU=Germany, IRL=Ireland, ITA=Italy, JPN=Japan, LUX=Luxembourg, NLD=Netherlands, NZL=New Zeland, NOR=Norway, PRT= Portugal, ESP=Spain, SWE=Sweden, CHE= Switzerland, TUR= Turkey, GBR= United Kingdom, USA=United States, WBG=West Bank and Gaza

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