How Do We Measure Women’s Inequality in the Workplace?

Recently, there has been a lot of buzz about the underrepresentation of women in certain professional settings (CEOs, STEM, venture capital, entrepreneurship).  As a society, we want to ensure that institutional barriers (stemming from both policy and culture) do not prevent capable women who want to from entering these realms.  However, the removal of all barriers will not result in equal representation.  So we have two options: be prepared to accept some underrepresentation in the statistics or ignore the statistics in favor of other assessments of equality.

Equal representation is certainly a poor benchmark. A recent Inc. article revolved around the question, “[If] women comprise 50 percent of the population, why don’t they launch half of the country’s new companies?”  The short answer: “For reasons related to the fact that men don’t give birth to half  of the country’s new babies.”  I know this sounds glib, but it reflects the economic theory of comparative advantage as well as the principle of individual freedom of choice, and it explains certain patterns of underrepresentation of women in the workforce.

 According to the Bureau of Labor Statistics (BLS), women make up only 46% of the labor-force (those who have a job or want one), and 47% of employed individuals.  To an economist, women’s under-participation in the labor market is perfectly reasonable.  Individuals choosing whether or not to seek employment balance the benefits—wages and personal fulfillment—against the costs—what will I have to give up or stop doing if I work at a company instead of staying home?

 While home production is not included in GDP, activities done by non-professional workers (ones who aren’t paid for their output) create social value in addition to the value they provide to those individual’s families.  It is estimated that the value of home production in the US was 26% of GDP in 2010—that’s 3.8 trillion dollars of value added to the 14.6 trillion dollars of GDP generated in the market.  The choice to stay home can be both individually beneficial and socially optimal—i.e. good for the economy.

 So it makes sense for some people to not work, but why are these people disproportionately women?  While some home production activities can be done equally well by men and women, men are imperfect substitutes for women in other activities.*  For example: men and women, on average, should be equally able to do laundry or change a diaper; men cannot breastfeed, but they can bottle-feed; men cannot gestate a child.  Because women have a comparative advantage in home production, it makes sense for them to spend less of their time working outside the home than men do.

This argument plays out in the BLS data, not only in terms of labor-force participation (compare women’s 58% to men’s 70%), but also in hours worked—women make up only 43% of individuals working full-time (at least 35 hours per week).

How much of the statistics reflect individuals making optimal decisions vs. how much is due to barriers women face in the market?  It is impossible to know for sure.  Using statistical outcomes in an attempt to measure equality of opportunity is, therefore, not very effective.

For the sake of argument, let’s use women’s representation in full-time employment (43%) as a benchmark.  Global Entrepreneurship Monitor reports statistics on new business ownership—percentage of the population ages 18-64 who own a business less than 3.5 years old—and nascent entrepreneurship—percentage of the population ages 18-64 who are currently setting up a business that hasn’t made money yet.  In 2012 in the US 41% of entrepreneurs (individuals falling into one of these two categories) were women.  When compared to equal representation, it seems we have quite a ways to go.  But compared to the full-time employment benchmark, we are doing pretty well.

 Yes, women are underrepresented in many professional occupations; they are also overrepresented in home production.  What are we saying when we judge those statistics negatively?

Productivity is raised when 1) an individual’s activities better match with his or her talents and 2) and individual’s activities align with his or her passions driving him or her to work harder.  While we absolutely should eliminate the barriers that prevent talented and passionate people from pursuing the work they are best matched with, we should also acknowledge that this unencumbered match may not be completely representative in every activity.

 There are women (and men!) who find full-time parenthood very gratifying, just as there are women (and men) who are passionate about starting a company.  I, for one, would not tell someone who loves what they do, whether that person is a stay-at-home mom or a male entrepreneur, to quit for the sake of statistics.

 

*Here is a great academic paper on women’s labor and family choices given that men are imperfect substitutes for them at home.

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