Claudia Goldin’s Nobel Prize in Economics highlights gender inequity in the labour market

 

“There are still large differences between women and men in terms of what they do, how they’re remunerated and so on. And the question is, why is this the case? And that’s what the work is about.”

- Claudia Goldin

Claudia Goldin became the third woman, after Elinor Ostrom and Esther Duflo to win the Nobel Memorial Prize in Economic Sciences, and the first woman to be an individual winner. This takes the percentage of women awardees (in Economics) up from 2.17% to 3.23%, which is nearly a 50% increase. But that is the not the only reason we should be celebrating the win of the 77 year old economic historian and labour economist from Harvard University. We should be celebrating because Claudia Goldin was awarded the Prize for “having advanced our understanding of women’s labour market outcomes’.

Globally, labour force participation of women is about 50% while that of men is closer to 80%. Even when women work, they are often paid less than men performing an equivalent job. Claudia Goldin’s research examines the source of these gender differences and throws up insights into the role of women in the labour market.

Historical data shows patterns of inequity in labour markets

By looking at available historical data, it was assumed that female participation in the labour force started going up in the 20th century and it was assumed that there was a positive co-relation between economic growth and female participation in the workplace. By studying the historical data in greater detail, Goldin concluded that the participation of women in the work force was grossly underreported, especially for married women where the occupation was simply captured as ‘wife’. She also found that when workplaces shifted from home/ near home to a factory after the Industrial Revolution, the participation of women in the labour force went down drastically, and it started picking up only after the rise of the service industry.

By studying the female participation in the labour market for different cohorts, Goldin confirmed what was already known- that even if women entered the labour market, they dropped out after marriage and childbirth. Her research, however, threw up an additional insight- when women tried to re-enter the labour market after their children were grown up, their options were restricted by the educational choices they had made 2 decades ago. This was a vicious cycle, because the educational decisions had been taken at a time when women did not expect to continue working after marriage and childbirth, and the fact that they were have desirable educational qualifications later proved to be an impediment to their participation in the labour force market.

The power of contraceptive pills in improving participation of women in the workplace

From the 1960s onwards, the relatively easier availability of contraceptive pills ensured that women were able to delay marriage and childbirth, which ensured that more women entered the workforce, particularly in fields like medicine, law and economics which involved an extended professional training. However, despite the entry of professionally qualified women the wage gap between men and women remained. Goldin looked at data from a range of sources, and found that the gender pay gap could not be explained by factors like age, education or productivity. Her research showed what we now take as common knowledge- that employees with long and uninterrupted careers tend to get higher wages, and that salaries are often decided based on the perception of how long a particular employee will work with the firm. Goldin’s research clearly showed that, in the United States, the difference in income starts out being fairly small, but that both earnings and rate of growth of earnings fall after women have their first child.

Goldin’s work both highlights causes of inequity and offers a framework for solutions

It is largely because of the pioneering work of Claudia Goldin that we are able to understand the demands of the contemporary labour markets. When employees are expected to be constantly available and flexible to the demands of the employer, women who have greater responsibilities at home lose out on both career progression and earnings.

Goldin provided the background against which policymakers can try to create legislation to remove/ reduce these institutional barriers. It is because of her work that we now know that educational attainment alone doesn’t do much to reduce the earning gap- what is of greater importance is the opportunity to plan and finance a return to the labour force after having children, or to have greater flexibility at work.

By awarding the Nobel Prize to Claudia Goldin, and acknowledging her work on ‘advancing our understanding of women’s labour market outcomes’, the Royal Swedish Academy of Sciences has put the gender inequity in the labour market in the spotlight. This should, hopefully, start more conversations on what policy makers and corporates can do to ensure that women’s labour is acknowledged and rewarded.