Breathe
By Diana Serros
Despite the political, economic and financial uncertainty following the escalation of the conflict in the Middle East, there is welcome news in the economic sphere. For the third time in the last 54 years the Swedish Central Bank Prize in Economic Sciences in memory of Alfred Nobel was awarded to a woman, Dr. Claudia Goldin[1]. The Harvard University professor was honored for her advances in understanding women's participation in the labor market, as well as for providing clarity on women's wage dynamics over at least two centuries.
Until before Dr. Goldin's contributions-in the 1980s and 1990s-the economic consensus assumed the existence of a positive relationship between economic growth and women's participation in the labor market. That is, it was believed that with higher rates of economic growth, female participation in the labor market also increased. However, following the collection-and even correction-of data on female labor force participation in the United States over the past 200 years, Dr. Goldin disproved this relationship, arguing that women's historical labor force participation could be described as a U-shaped curve.
In other words, from the mid-19th century until the 1920s, the participation of women in the labor market-particularly married women-had shown a downward trend from approximately 60% to about 5%. However, after 1930 this trend was reversed and, slowly, women's participation in the labor market began to rise, reaching just under 60% in the last decade.
Dr. Goldin explained this phenomenon by explaining that, contrary to economic consensus and popular belief, female labor in the pre-industrial period was rather the norm: women performed physically demanding tasks comparable to those performed by men, since the consumption and production of goods and services took place within the family and in the community itself. However, towards the end of the 19th century and up to the 1920s, working conditions became significantly harsher, culminating in strict legislation that limited both the number of hours worked and women's participation in activities considered risky. From then on, women's work was limited to housework and childcare. In addition, the legislation and moralistic ideas of the time encouraged the concept that men should earn higher wages, since they were responsible for the family's sustenance. However, after major disruptions in the labor market as a result of the Great Depression and World War II, the proportion of women in paid work increased significantly to just under 60% in the last decade. This increase was a direct consequence of the introduction of the birth control pill, technological advances, the impetus of feminist ideology and laws, stimuli in women's education and health, and the migration of economies into tertiary (or service) activities. In this regard, Goldin pointed out that, although women had slowly but successfully entered the labor market, women's wages were significantly different from those of their male counterparts. According to Goldin, this gender wage dynamic could be explained by two factors: 1) the interruption of paid work after the birth of the first child and 2) after migration to tertiary activities, which tended to benefit employees with high 24/7 availability and long, uninterrupted careers.
Undoubtedly, in Mexico-and in the world-much remains to be done. If women do not have the same opportunities to participate in the labor market, or participate under unequal conditions, the allocation of human capital in the economy becomes inefficient. In other words, it is economically inefficient for jobs not to go to the most qualified person and, if wages differ for doing the same work, women may be discouraged from working and having a career. In this sense and according to studies by McKinsey & Company "the labor participation rate of women in Mexico continues to be one of the lowest in Latin America" (Bolio, Ibarra, Garza, Rentería, & De Urioste, 2022). In addition, this report shows that only one in 10 women reach general management positions (C-suite).
This report also shows that the wage gap between men and women in Mexico is, unfortunately, brutal. In the entry-level ranks, women earn approximately 7% less than men. However, at management levels, the difference is about 17%. These figures are consistent with Dr. Goldin's findings, as women not only find it more difficult to reach top positions, but also report lower salaries.
In sum, Dr. Goldin's results are highly significant because, on the one hand, they explain the deficiencies in female participation in the labor market and, on the other hand, they highlight the social impact of female labor, the shortcomings in the design of incentives to reduce the gender wage gap, the importance of support among women and the lack of public policies to promote women's participation in the labor market-especially in developing countries.
[1] Previously, this award was received by Dr. Elinor Ostrom (2009) and Dr. Esther Duflo (2019) for their research on the overexploitation of collective natural resources and for their contributions to the analysis and fight against global poverty, respectively. However, both shared the award with male collaborators.
Works cited
Bolio, E., Ibarra, V., Garza, G., Rentería, M., & De Urioste, L. (August 2022). Women Matter Mexico 2022. Retrieved from https://womenmattermx.com/
Professional profile
*Master in Finance and Bachelor in Economics from Instituto Tecnológico y de Estudios Superiores de Monterrey with more than 13 years of experience in macroeconomic and market analysis, investment management, quantitative methods and risk management.
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