MARKETS ARE A WOMAN’S BEST FRIEND

There was a time when household responsibilities were clearly defined as men bringing home the bacon and women tending to children and housework. Those days are long gone. Dual income families represent 63% of Canadian households. Since 1980, the number of women earning more than their spouses has tripled, with 1.3 million women acting as the primary breadwinner among 4.6 million couples in 2005. In other words, women out-earn men in 28% of Canadian families, quite a step-up from the 1980s when this ratio was only 15%. With each generation, women have improved their educational attainment and job experience. They have increasingly infiltrated traditionally male-dominated occupations. Why then, in spite of these labour market advancements, do women’s wages still trail the earnings of men?

Part of the shortfall in women’s wages can be explained by differences in productivity, occupational choice and experience. Yet, studies typically find a 5-15% gap in female hourly wages that cannot be explained by such factors alone. The gender gap tends to be smallest in situations where employers face a higher degree of competition for labour – a situation that will become more prevalent as Canada’s prime working age population shrinks. By 2024, the workforce between the ages of 25-44 will start to contract. Unless hours worked or productivity rise, employment and economic growth will be constrained. Enter women, who will make up more than half of the prime working age population. Although stay-at-home mothers offer significant contributions to the home, economy and society at large, this group of women is not the focus of this research report. Rather, we argue that the prospects have never looked better for those women who want to participate in the labour market.

Women are exceeding men in university enrollment and are clustering within service-oriented jobs. Both characteristics will reap an economic return as globalization and aging populations keep domestic economic growth centered on highly skilled service production. Employers will become increasingly reliant on women to fill the skill shortages. For those who want to participate in the labour force, markets will become a woman’s best friend.

The rise of women in the workforce

Recent generations have witnessed a dramatic transformation in Canada’s labour market. The number of people working relative to the population aged 15 and over has increased nearly 6 percentage points since the mid-1970s to a record 63% this year. And who’s to credit for this? Women. Female participation rates across key age cohorts have risen. The prime working age group (25-44) has jumped to nearly 82% compared to only half of women participating in the job market three decades ago. Labour force entry among women in the 45-64 age group has been equally impressive. With strong labour demand and women providing the labour supply markets most need, participation rates among men have gone in the other direction, falling between 3-5 percentage points in all age cohorts over the past three decades. Although the increase in female participation and employment has been a global phenomenon, Canada’s performance has been so good relative to other OECD countries that only Nordic and Swiss women are more likely to be in employment.

Looking into the future, there is reason to believe participation rates among all women will rise further, especially among those aged 45-64. This latter group currently has a participation rate of only 68%, compared to 82% among those aged 25-44. Since the mid-1980s, however, the gap between these two age brackets has steadily narrowed, with participation among the older group rising at a faster rate than the younger group. This trend towards convergence should continue since the economics have improved for women to stay in the labour force over a longer period of their lifetime.

With each new generation, women are supplanting the experience of their mothers by increasing the amount of lifetime years they are dedicating to the job market. Successive generations have benefited from the breakdown of gender biases. In addition, women are bearing fewer children and postponing that decision to a later age in life, which facilitates getting an education and entering the labour force. The decision to have fewer children also allows women to spend more time in the labour market and reduces the costs associated with extended or frequent exits, as well as childcare. All of these influences are causing successive generations of women to reap greater financial and professional benefits from the workplace and this is leading to longer lifetime attachments to the labour force. Odds are that a 30-year-old in the labour market today will still choose to be on employer payrolls at the age of 50.

Education is the great equalizer

Education is perhaps the most influential factor to higher and longer labour market participation. And, in many respects, increased female education becomes a self-perpetuating cycle. Studies show that if the family household head is university educated, the probability increases that male or female children will go to university, however, the marginal effects are always higher for female children.

The share of university degrees granted to women has been rising steadily over the years, with women granted the majority of Bachelor (BA) and Master (MA) degrees. In fact, the divergence with men is quite striking at the BA level. In 2004, 62% of BA degrees went to females. At the doctorate level, women represented a smaller share of graduates (44%) in 2004, but the trend has been rising with great speed. Only a decade earlier, the female share of doctorate degrees was more than 10 percentage points lower.

Why do women represent a greater share of university graduates than men? We believe the explanation is twofold. Men occupy a greater portion of jobs in the goods industry, which tends to offer high earnings at relatively lower levels of education. But perhaps more importantly, women have figured out that it pays to have a university degree. The financial return for women with a post-secondary degree is considerably greater than that for men. In 1977, women with a university degree earned $1.88 for each dollar earned by women with only high school education. The equivalent for men was $1.63. By 2003, the university earnings premium for women had risen to $2.73, but to only $2.13 for men. Expressed differently, between the years 1977 and 1992, getting a university degree rather than stopping at the high school level resulted in an earnings premium that was 16% higher for women than men. From 1993 to 2003, this premium gapped further to 22%. The same conclusion emerges from studies of rates of return to university education where the estimates cluster in a 12-17% range for men but 16-20% range for women.

A shrinking labour force and ongoing pressures from globalization will serve to increase demand for highly educated and skilled workers in the years to come, further widening the wage premium from education. Human Resources and Skills Development Canada estimated that in 2003, 55.8% of all occupations required a high-skilled worker and only two types of skills were forecasted to experience an increase in demand from now until 2013: occupations requiring a university degree or managerial capabilities. The high prevalence of women in universities has set the wheels in motion for them to bridge the future needs of employers. Education will be the great equalizer that will allow women to capitalize financially and professionally on this impending economic transition.

While women will continue to enter once-male-dominated occupations, the main areas of future employment for women will likely continue to be the traditional service fields of education, humanities, social sciences, and health. The gap in the number of degrees held by women relative to men is particularly large in these areas. For instance, 16% of women with a university degree specialized in education, more than twice the number of men. Indeed, many education experts worry about the virtual disappearance of men teachers, especially at the primary level. A similarly large divergence exists in the health discipline, evidenced by the increasing feminization of employment in this area. Women hold nearly 83% of the jobs in health and social assistance, up from 76% in the mid-1970s.

Women are making inroads into traditionally male-dominated fields. Since 1980, employment in the non-traditional women occupations of management and professionals has risen by 93% (nearly triple the rate of men), while employment in secretarial and administrative positions has declined 6.5%. There is already evidence that the shift by women into these traditionally male-dominated fields is bearing fruit, especially among married women where 60% of female primary earners in the household are employed in managerial and professional occupations.

In professional disciplines where women display a traditionally low representation – architecture & engineering – progress is still evident. For instance, women represented just 25% of architecture & engineering BA degrees in 2004, but this is up from just 17% in 1992. In fact, the share of females in this field has risen at all levels of educational attainment, be it BA, MA or doctorate.

Beata Caranci, Director of Economic Forecasting
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