What Happened To Women’s Rising Participation in the Workforce?

The Issue:

For decades, the share of women who are employed was steadily rising in the United States, contributing to economic growth and serving as a countervailing force to a slow decline in the share employed among men. In recent years however, the upward trend among women has reversed: Labor force participation among U.S. women fell by 3.5 percentage points between 2000 and 2016. What makes the drop more puzzling is that the United States is unique among advanced economies in experiencing a decline in women's labor force participation.

The decline in women's labor force participation in the United States stands in stark contrast to the experience of other developed economies.

The Facts:

• The increase in the share of women in the workforce over the second half of the 20th century was enough to offset the declining labor force participation rate of men, which has been steadily falling for more than 60 years. The percentage of women ages 16 and up that are either in the workforce, or are actively looking for work, increased substantially in the United States — rising from 37 percent in 1962 to 61 percent by the year 2000 (see here for our detailed report). In contrast, the share of men ages 16 and up, who are either working or actively searching for work fell substantially during that period, from 81 percent in 1962 to 74 percent in 2000.
• Women's increased entry into the work force contributed to rising family incomes and greater economic growth. If women’s participation and hours worked had remained at their 1970 levels, the U.S. economy would have been $2 trillion, or 13.5 percent smaller, according to a 2013 estimate by the Council of Economic Advisers. The increase in labor force participation of women has not been limited to a particular level of education, age group, or ethnicity. Indeed, compared to the 1960s, American women today across the age spectrum, across all races and ethnicities, and regardless of marital status or education level, participate in the labor market at significantly higher rates.
• However, after reaching a peak of 60.7 percent in 2000, the share of women participating in the labor force fell to 57.2 percent by 2016—meaning that 4.6 million fewer women are in the labor force. The experience has varied for women of different age groups. Lower participation among women under the age of 54 is mainly responsible for the decline. Sharp declines among younger women between the ages of 16 and 24 may be driven by increased school enrollment, a positive development to the extent that it will enhance their professional careers in the future. However, the decreased participation among women in their prime working ages between 25 and 54 gives greater cause for concern. Staying out of the labor market during these peak earning years can be particularly costly for a worker's career. Between 2000 and 2016 labor force participation for women in prime working ages fell by 4.2 percent, from 78 to 74 percent. In contrast, participation among women over 55 has been fairly stable over the past decade — although it has ceased to increase, it has not declined in recent years.
• The largest decline in labor force participation has been among women with lower levels of education. Among prime-age women with a high-school diploma or less, labor force participation fell from a peak of 71 percent in 2000 to 62 percent in 2016, effectively wiping out their participation gains since the 1980s (see chart). Women with some college education or an associate's degree also saw a marked decline, falling from 81 percent in 2000 to 76 percent in 2016. In contrast, the participation rates for women with a college degree fell by only 2 percentage points and for women with a graduate degree fell by less than half of a percentage point during the same period. Declining demand for low-skilled labor seems likely to be a part of the explanation, as prime-age men with lower levels of education have also seen the greatest decreases in their labor force participation over time. The relative wages of low-skilled workers have been steadily declining since the 1980s, reducing the relative benefits of participating in the labor market.
• Why has the long-term increase in labor force participation among U.S. women reversed? The decline in women's labor force participation in the United States stands in stark contrast to the experience of other developed economies. France, Canada, the United Kingdom, and Japan, among others, have continued to see an increasing share of women in their prime working ages participate in the labor force (see top chart). The divergence suggests a role for labor-market institutions, as all of these countries have faced similar forces of technological change and globalization. Although the U.S. labor market is among the most flexible relative to other countries in the Organization for Economic Co-operation and Development (OECD), it is also among the least supportive in terms of unemployment benefits and active labor-market policies, including job search assistance and training. Additionally, the United States is the only developed nation without paid maternity leave, and lags far behind other nations in family-friendly policies (see this EconoFact memo).