A Flexible Work Force: Opportunities for Women

J U N E O ' N E I L L

Baruch College, New York, NY 10010

I. Introduction

Perhaps the most radical change in the labor force over the post-World War II period has been the feminization of the workplace. In 1947, women made up 28 percent of all employees; in 1988, it was 45 percent. The trend is continuing. During 1988, total employment in the United States rose by 2.5 million, and women accounted for 61 percent of the increase.

II. More Young Women Working

Feminization of the workplace can be traced partly to a decline in the labor force par- ticipation of men as the retirement age fell. But more important was the dramatic rise in the participation of women. In 1948, one-third of women worked outside the home; in 1988, 57 percent of women were in the work force. This increase was par- ticularly striking in the 25-44 age group, the group associated with childbearing and child rearing. Historically, women in this group have not been in the labor force. In 1948, about one-third of them were working outside the home, but almost 75 percent were employed by 1988.

One reason for the change is the decline in the fertility rate. In addition, women with small children interrupted their careers less and less, and many went back to work shortly after the birth of a child. By 1986, half of all married women with an infant one year or younger were in the labor force, doubling their participation rate since 1970. These are major changes.

There have also been significant changes in wages. During the 1980s, the wage gap between men and women narrowed considerably, making obsolete the old button from the 1970s that read "60 cents out of every dollar." Women's average full-time weekly earnings in 1988 equaled 70 percent of men's earnings. But full-time women tend to work 9 or 10 percent fewer hours than full-time men. When that figure is adjusted for differences in hours categorized as full-time, the proportion is about 77 percent, a significant change from 1969 when the ratio of women's earnings to men's was about 69 percent.

During World War II, the earnings ratio did not change, even though women's participation in the work force rose. There were several reasons for this, one of them

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being the increase itself. As more women worked at older ages, the work experience of the average working woman fell during some periods. Experience is an important factor in earnings, and if it were possible to compare earnings of men and women of equal experience from that time we might find that the wage gap was narrowing.

III. Different Wages, Different Roles The current 77 percent ratio reflects a significant gap, but it should not be taken as a measure of inequity. Women and men still differ with respect to skill and other fac- tors that affect earnings. They have different roles in the home, differences that affect career orientation, work experience, and occupational choice.

There has been considerable convergence in the economic roles of women and men, showing up as smaller wage differences among younger cohorts. Comparing those in the 25-34 year age group, the ratio is in the 80's for the 25-34 year age cohort. But it is lower among older cohorts, reflecting greater differences in the career orientations of older women.

There has also been convergence over time between men and women in the workplace as both earnings and occupations have become more alike. Women now work for longer periods of time and take shorter interruptions in their careers. But as long as women assume primary responsibility for rearing children and earing for the home, a wage gap will remain.

Labor market discrimination against women may still exist, although overt bar- tiers are illegal and have been largely removed. Subtle forms of discrimination remain. Workers may still resent a woman boss; promotion of women to managerial ranks may be more difficult; and clients, patients, and customers may still harbor views that women are not quite so competent as men. These subtle discriminations have undoubtedly declined, but they are far less susceptible to government interven- tion, laws, and regulations than overt acts are.

The extent to which subtle discrimination contributes to the wage gap is not known, and measurement is difficult. It is often difficult to distinguish between choice and discrimination. If a woman is not promoted, for example, it may be because she cannot (or chooses not to) move to another part of the country. If she is married and has children, it may be inconvenient for her family to move. It would be difficult statistically to distinguish that from a case of discrimination.

IV. Changing by Choice, Not by Fiat

The important point is that women have made dramatic gains in the work force, par- ticularly during the 1980s. Not only are more women working, but they are also working more continuously. They are going to college at the same rate as men and are entering professional fields and occupations that were formerly for males only. Moreover, these changes were not initiated by government. President Reagan has never been accused of promoting women's legislation, and activist groups frequently

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cite declines in social services and in the implementation of affirmative action during his administration. Furthermore, the United States has never adopted the kind of job security legislation that is popular in European countries.

The gains women have made have been prompted by women's own choices and facilitated by private and competitive markets. Employers saw a source of labor and made accommodations to offer part-time work, flexible job arrangements, and other changes in the structure of jobs, making it possible for women to combine home responsibilities and work. Ironically, although women have made as much, and likely more, progress in the United States without the protective or pro-work legislation often found in European countries, there is now a major effort on the part of some activist women's groups to pass such legislation.

Politicians have discovered the large voting bloc that working women represent, and they are seeking legislation that appeals to them. At first blush, some of these policy changes do sound appealing. But on closer examination, it becomes clear that many of them would have negative consequences for business, for taxpayers, and for women. For example, consider three policies that are currently being debated: mandatory maternal leave, subsidized child care, and comparable worth.

Mandatory Maternal Leave. Unpaid, but mandatory maternity (and sometimes paternity) leave requires firms to allow a leave of a given duration with a guarantee that the woman can return to her old job or to one just like it. There is nothing wrong with a firm providing maternity leave as a benefit, if the firm and its employees vol- untarily find it desirable. The problem arises when maternity leave is made manda- tory for all firms. The cost of providing the benefit differs considerably across companies, and most of the proposed legislation recognizes differences in costs by one characteristic: size of firm. Smaller firms (the size cutoff varies from bill to bill) are usually exempted. But factors such as turnover, the nature of shifts, and the size of departments also affect costs, and these vary considerably from firm to firm.

In the absence of legislation, firms with lower leave costs are the ones that are likely to provide it. Women who prefer such a benefit will seek employment in these businesses. Many firms provide maternal leave or will negotiate maternity leaves with female employees as the situation arises. It is not in the firm's interest to part company with an employee who has a significant amount of training and tenure. Most firms will attempt to save their investment in the employees and accommodate them. But if legislation is imposed on firms that have high costs of providing leaves, those firms will be reluctant to employ women who are of childbearing age. Thus, maternity leave legislation seems likely to harm many women who are trying to establish themselves in new jobs.

The cost estimates for this legislation count only the health insurance costs that firms would be required to provide during periods of maternity leave. But firms obviously have costs other than health insurance including the use of temporary employees who may not be as productive as the absent worker(s), lost work, or work

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that simply is not done. Even more costly is extending leaves for the care of sick children or for the care of ill and elderly parents.

In sum, mandatory maternity leave is not particularly needed. Markets are already taking care of it. Federal mandates would have only negative effects.

Child-Care Subsidies. Subsidized child care is often supported by the argument that children are a public good and child care should be provided just as education is. There is, however, a significant difference between education and child care. Educa- tion has a public component because of the need for educated citizens. Once children are born, it is in everyone's interest that they obtain basic education and skills. But child-care subsidies provided to working women are a subsidy for working women, which is not necessarily a public good.

Whether or not a woman should work has been largely a family decision in the United States, and a strong argument can be made that the government should remain neutral on the issue. Employers, however, might be favorably disposed to a govern- ment subsidy for child care, for it would lower the costs of work for women and increase the labor supply. So, apart from the ideological objection, a certain type of child-care subsidy would be relatively benign and probably would be favored by employers.

The form in which the government provides a child-care subsidy is important. In some countries, government provides day care, and to receive this benefit a child must be taken to a day-care center operated by the government. Our experiences with public education might give us pause about extending that idea to day-care. Obvi- ously, women and families have different preferences about the care they wish for their children. So, the provision of a subsidy only in the form of day care is not desir- able either for efficiency or as the ultimate benefit accruing to working women.

Another proposal actually mandates that firms provide child care on the premises. That is patently ridiculous. Few businesses are suited to running day-care centers. Child care would also be a benefit for some employees and not for others. The costs that would be imposed on firms and on the economy would be substantial. If it were agreed that we ought to have child care and that there ought to be a govern- ment subsidy, the most appealing form with the least costs to society would be a voucher system or tax credit, which preserves freedom of choice for the parent.

Comparable Worth. "Comparable worth" is shorthand for "equal pay for jobs of comparable worth." Under this kind of legislation, firms would be required to set wages for different occupations to reflect differences in the "worth" of the jobs. Worth is usually defined in terms of four characteristics: skill, effort, responsibility, and working conditions. These proposals are potentially far more disruptive than either maternity leave or child-care subsidies. It may not seem radical to relate wage differences to such characteristics as skill and working conditions, and economists have long argued that occupational wage differentials in competitive labor markets

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reflect such factors. The controversy arises because of the process by which the jobs are valued under a comparable-worth system.

Proponents of comparable worth reject the market assignment of worth, claim- ing that markets reflect biases against occupations traditionally held by women. Comparable worth advocates believe there is a pervasive tendency to undervalue work performed by women, so that occupations in which there are many women tend to be underpaid so that women are "exploited." That is, pay in these occupations does not reflect the actual productivity of women workers or the contribution of their work to the revenue of the firm.

Most economists reject this argument. Individuals are not being discriminated; an entire occupation is. Occupations that traditionally employ women are performed in hundreds of thousands of businesses in different industries in different parts of the country. Given the large number of firms involved, it would be impossible for employers to collude. And if they are not able to collude, competition will keep firms from underpaying an occupation. Consider librarians. If librarians are contributing a lot to the firm but the firm is underpaying the occupation, then another firm will pay them a little more. Both the employee and the firm will do well. In a competitive economy, it is hard to imagine how anyone could exploit entire occupations.

Under comparable worth legislation, jobs are typically evaluated by a political or bureaucratic process rather than by the market. Committees of consultants and representatives of the employer, the union, women's groups, and others determine the value of jobs. Proponents claim that value can be determined scientifically. If prices for products were set this way, chaos would result. If we had teams that attempted to determine which foods were most nutritious and set prices by such cri- teria, the outcome would be ridiculous. Soybeans would be far more expensive than chocolate, and there would be shortages of chocolates and gluts of soybeans. The Soviet economic system is an excellent case study of the results obtained when the political process is used to set prices and wages: Resources are allocated very ineffi- ciently. The same thing would happen in labor markets in the United States.

Support for comparable worth legislation has gained some ground. About half of the states have adopted some type of comparable worth legislation, conducted some type of study,-or considered it. A number of states have actually implemented guidelines, but only in the public sector. Government can get away with adopting comparable worth policies, because government tends to have more administered wages and is insulated from competition. But eventually taxes may have to rise, and government will also face the consequences. The effects just take longer to appear.

The predicted results of comparable worth policies occurred in Washington state. As a result of a comparable worth study, all of the jobs in state government were evaluated and received points. The study was somewhat biased toward women's occupations, but the occupation "nurse" ended up with more points than any other, more than "computer systems analysts," for example, who typically get paid more in private markets.

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Studying employee files and changes in employment, I found that as a result of adjusting wages based on comparable worth the Washington state government restricted employment in the occupations that received the largest comparable worth adjustments and increased employment in the uncovered occupations.

Such a wage structure makes little sense from a market point of view. Occupa- tions that were heavily female received higher increases through the point system, but these increases were not consistent with factors such as education and work experience. As a result, the monetary return to education and tenure decreased. The Washington state experience reveals that if comparable worth were implemented generally it would not be advantageous for the national economy.

V. Conclusion

For a society that may be faced with fewer rapid increases in the work force than we have known during the "baby boom" years, various kinds of restrictions on the use of labor certainly would not help. Deterrents on labor can only hurt.