Heather Boushey, Executive Director and Chief Economist, Washington Center for Equitable Growth, testifying before the  U.S. Senate Budget Committee  on “Expanding Economic Opportunity for Women and Families”

Enabling Women to Succeed Builds Strong Families and a Growing Economy

I would like to thank Chairman Murray, Ranking Member Sessions, and the rest of the Committee for inviting me here today to testify.

My name is Heather Boushey and I am Executive Director and Chief Economist of the Washington Center for Equitable Growth. The Center is a new project devoted to understanding what grows our economy, with a particular emphasis on understanding whether and how rising levels of economic inequality affect economic growth and stability.

It is an honor to be invited here today to discuss how working women are critical for economic growth, and how federal policy can further advance women’s economic progress. My testimony today highlights the many aspects of our economy where gender inequality and economic inequality go hand in hand—to the detriment of many families and our nation’s economy—and also where economic inequality among women threatens family well-being and economic growth. Government policies can address these gaps in order to help women succeed, so our economy can succeed.

There are three takeaways from my testimony:

• Women, their families, and the economy have greatly benefited from women’s entry into the labor force.
• Yet there are barriers to women’s work that manifest themselves differently across the income distribution, which means that not all women realize their full economic potential.
• There are a variety of ways that federal policy can encourage women’s labor force participation, among them tax credits and early childhood education programs, which provide critical support for low-income workers and working families. Federal policies such as pay equity and flexible work-family policies can grow our economy by encouraging greater labor force participation among women and increasing women’s contributions to family income.

Women’s employment is critical for families and the economy

Women’s entry into the labor force is one of the most important transformations to our labor force in recent decades. Between 1970 and 2000, the share of women in the labor force steadily increased, from 43.3 percent to 59.9 percent.[i] Today, most women work full time. Before the Great Recession in 2007, the share of women who worked 35 hours or more per week was 75.3 percent.[ii]

Women’s movement into the labor force also transformed how they spend their days, which is increasingly important for families’ economic wellbeing.  About two-thirds of mothers are family breadwinners—those bringing home all of the family’s earnings or at least as much as their partners—or co-breadwinners—those bringing home at least one-quarter of their families’ earnings.[iii] Between 1967 and 2007, the most recent economic peak, the share of mothers who were breadwinners or co-breadwinners rose from 27.7 percent to 62.8 percent, and has increased slightly since then as the economic recession wore on.[iv] (See Figure 1.)

Figure 1. Share of mothers who are breadwinners or co-breadwinners, 1967 to 2010

Figure source: Sarah Jane Glynn, The New Breadwinners: 2010 Update (Washington, DC: Center for American Progress, 2012).

Women’s increased work is important for family incomes and for economic growth. In a paper we released last month, my colleagues Eileen Appelbaum, John Schmitt and I find that between 1979 and 2012, our nation’s gross domestic product increased by almost 11 percent due to women’s changed employment patterns.[v] This translates to about $1.7 trillion in output in today’s dollars. We find that women’s economic contribution is roughly equivalent to U.S. spending on Social Security, Medicare, and Medicaid in 2012.[vi]

Continuing women’s economic progress

Over the past four decades, women have made great economic gains, but more can be done to help women realize their full economic potential. Gender inequality in the workforce still persists between men and women. Additionally, while some women have made great gains in the workforce, too many women are being left behind.

Between 1960 and 2000, women’s labor force participation steadily grew and the gender pay gap steadily shrank. But progress has stalled for more than a decade. The share of women in the labor force has not significantly increased since 2000, hovering a bit below 60 percent.[vii] Similarly, in 2012 the female-to-male earnings ratio remained at about 77 percent, the same as in 2002.[viii]

To be sure, some women have pulled ahead and experienced increases in incomes despite the recent slow-down in women’s entry in the workforce. But not all women have experienced these gains. Between 2000 and 2007, for example, higher-wage women saw their real wages increase by four times the amount of women with poorly paid jobs.[ix]

One reason is that while some women have made progress entering into professional or male-dominated occupations, many women continue to work in female-dominated occupations that still pay low wages. In 2012, 43.6 percent of women worked in just 20 types of jobs, among them secretary, nurse, teacher, and salesperson. (See Table 1.)

Table 1. Top 20 occupations for women and men, 2012

Women across the wage distribution need more access to work-family policies in order to better balance the dual demands of work and home. Polices such as paid sick days, paid family leave, and schedule flexibility would fill an important inequality gap for workers, especially women. This basket of work-family policies would allow both women and men to remain in the labor force while dealing with life’s emergencies.

The United States is an outlier among other developed nations in not offering work-family policies to workers.[x] Nor have employers in our country stepped in to provide these benefits. In 2013, only 61 percent of workers had employer-provided paid sick days.[xi] An even smaller share of workers—only 12 percent—had access to employer-provided paid leave, which can be used to recover from an illness or care for a family member.[xii]

Despite playing a larger role as family breadwinners, women today continue to be more likely than men to provide care to their families. The lack of family friendly policies make it harder for women to stay employed and provide financially for their families. Women who have to quit their jobs in order to provide care harm their future earnings potential. The U.S. Census Bureau found that new mothers who have access to paid maternity leave are more likely to return to their previous employer. About 98 percent of those who return to the same employer do so at their previous pay level or higher. Conversely, less than 70 percent of women who change employers after giving birth earn the same level of pay or higher.[xiii]

Work-family policies are critical for the strength and size of our labor force. In a 2013 study by Cornell University economists Francine D. Blau and Lawrence M. Kahn, the authors argue that likely one reason why the United States fell from the sixth-highest female labor-force participation rate among 22 Organisation for Economic Co-operation and Development countries in 1990 to the 17th-highest rate in 2010 was because it failed to keep up with other nations and adopt family-friendly policies.[xiv]

Although most workers do not have access to these important policies, low-wage workers disproportionately lack access to policies to balance work and care. Employers often view policies such as paid leave or paid sick days as perks for higher-paid workers. Too often workers who need these benefits the most—such as low- and middle-wage, young, and less-educated workers—do not have access to them. Workers whose wages are in the lowest 25 percent of average wages are approximately four times less likely to have access to paid family and medical leave than those in the highest 25 percent.[xv]

The lack of benefits for women earning the least in our economy is unhealthy for their families, the labor force, and the economy. Poorly paid jobs that do not provide these work-family benefits often offer nonstandard work or varying schedules, which often result in high employee turnover.[xvi] There is more we can do to boost women’s economic progress, and thereby boost the strength of the entire economy.

Federal policy can help working women succeed

Federal policies can encourage women’s work and increase family income. Specifically, these six policies are tailored to achieve the results we need for our families and our economy:

• The Earned Income Tax Credit, Child Tax Credit, and Child and Dependent Care Tax Credit
• The 21^st Century Work Tax Act
• Broader and less expensive access to child care and early childhood education programs
• Work-family policies, such as family and medical leave insurance, as proposed in the Family and Medical Insurance Leave Act
• Pay equity
• Raising the minimum wage

Let’s examine each of these policies briefly in more detail.

Tax credits

With most working women playing the dual roles of breadwinner and caregiver, tax credits can help increase the financial security of American families. The Earned Income Tax Credit is a fully refundable tax credit for low-income working families. The credit is larger for those with dependent children.[xvii] The Earned Income Tax Credit is an effective anti-poverty policy that encourages work, especially among low-income single mothers.[xviii] In 2012, this tax credit lifted 6.5 million people out of poverty, according to the Center on Budget and Policy Priorities.[xix]

Additionally, there are two other tax credits that help most working families—rather than just low-income families—offset the cost of raising children. The Child Tax Credit refunds families up to $1,000 per year, per eligible child.[xx] The Child and Dependent Care Tax Credit refunds families a percentage of total child-care costs, usually 20 percent to 35 percent.[xxi] The percentage of expenses refunded to families decreases as income rises. However, unlike the Earned Income Tax Credit or Child Tax Credit, this tax credit is not refundable, which means that only families who owe income taxes can benefit from the credit.[xxii]

Tax credits can benefit both our current and our future workforce. Tax credits provide families with additional income that can be spent on children’s skill development. For example, economist Gordon B. Dahl at the University of California-San Diego and economist Lance Lochner at the University of Western Ontario find evidence that increases in family income due to the Earned Income Tax Credit increase children’s math and reading test scores.[xxiii]

The 21^st Century Worker Tax Act

The 21^st Century Worker Tax Cut Act, introduced by Chairman Murray, would help promote women’s economic progress in two ways. First, the act proposes a new tax cut that would let low- and middle-income two-earner families keep more of what they earn. The tax cut would provide a 20 percent deduction on a secondary earner’s income.[xxiv] Furthermore, it would provide an additional benefit to low-income two-earner families. The 20 percent deduction would reduce their earned income for calculating the Earned Income Tax Credit and thus provide a higher refundable benefit.[xxv]

This deduction will benefit working mothers and their families in two ways. By deducting a portion of the secondary earner’s income, the cut would encourage mothers’ workforce participation, thereby helping them to better financially support their families. And it would help low-income working mothers offset the costs of child care through an enhanced refundable Earned Income Tax Credit. This would again further encourage mothers’ workforce participation and boost family income. It is estimated that the tax cut would benefit 7.3 million working families.[xxvi]

Second, the 21^st Century Worker Act also would help support childless working women. The Act would increase the Earned Income Tax Credit for childless workers to about $1,400 in 2015.[xxvii] Furthermore, it would increase income eligibility and expand the eligibility age for childless workers so more would be eligible for this tax credit.[xxviii] It is estimated that the Act would benefit 13 million childless workers.[xxix] With women making up nearly two-thirds of minimum wage workers,[xxx] this expansion would increase the financial security of low-income women, and provide them with a better shot at the middle class.

Child care

In order to work and remain in the labor force, mothers need affordable high-quality child care. As mentioned earlier, tax credits help families manage their child care expenses, but child care remains very expensive for most families. In 2011, the average cost for a 4-year old in center-based care ranged from less than $4,000 a year to more than $15,000 a year.[xxxi] With most working women earning less than $30,000 a year, many cannot afford care or spend a large portion of their earnings on care.[xxxii]

In addition to making child care less expensive, policy should address so called “child care cliffs” for families receiving child-care assistance. In certain states, a slight increase in parent’s earnings can push them over the income threshold for child-care assistance, which can result in a sharp increase in child care expenses.[xxxiii] Unable to pay for high-quality care, working mothers could turn down a raise or ask for a pay cut to avoid going over the “cliff.”[xxxiv]

Early childhood education is one of the most important investments in our future workforce. But not all child care meets the standards to be considered an early childhood education program. It is important that policies expand access to high-quality early childhood education programs, especially to low-income children. Research finds that children who participate in early childhood education programs are more likely to do better in school, graduate and attend college, and are less likely to get involved with crime and become teenage parents.[xxxv] There are also large benefits to society. An academic study found that for every $1 invested in high-quality preschool, the U.S. economy saves $7 in future public costs due to increases in workers’ productivity, reduced remedial education costs, and reduced crime.[xxxvi]

Head Start

The Bipartisan Budget Act of 2013, also known as the Murray-Ryan Budget Agreement, made important steps toward expanding early childhood education programs to working families. The Act provided about $8.6 billion in Head Start funding and for the President’s Early Head Start-Child Care Partnerships. This amount reversed the entire sequester cut to Head Start, about a half billion more than 2013 funding.[xxxvii] In fiscal year 2014, more low-income families can utilize this comprehensive early childhood program. About 57,000 children were dropped from the program in 2013.[xxxviii]

Family and Medical Leave Insurance

Women need polices to help them balance work and family care so they can remain in the workforce and help grow our economy. Family and medical leave insurance—also known as paid leave—would provide a critical support for workers—men and women alike—allowing them to take temporary leave from work to recover form an illness or care for a loved one.

The Family and Medical Insurance Leave Act of 2013, also known as the FAMILY Act, would relieve the financial burden of taking unpaid time off, providing paid leave for nearly every U.S. worker.[xxxix] Introduced by Representative Rosa DeLauro and Senator Kirsten Gillibrand, the FAMILY Act draws on what we have learned from states that have family leave insurance and from other federal benefit programs.

Today, only three states provide paid leave to their workers: California, New Jersey, and Rhode Island.[xl] These three states provide years of useful experience to other states interested in providing paid leave to their workers. To encourage states to offer paid leave programs, the President’s Fiscal Year 2015 budget requests a $5 million State Paid Leave Fund.[xli]

Paid leave makes it easier for women to work and have higher lifetime earnings. Research by economist Christopher J. Ruhm at the University of Virginia and researcher Jackqueline L. Teague find that paid parental leave policies are associated with higher employment-to-population ratios and decreased unemployment for all workers.[xlii] Ruhm and Teague also find that moderate leaves—10 weeks to 25 weeks—are associated with higher labor-force participation rates for women.[xliii]

By remaining in the labor force, women are able to earn more during their careers, increasing families’ financial security.[xliv] Furthermore, there is evidence that these work-family policies could also help close the wage gap between workers who provide care and those who do not.[xlv]

Pay equity

The pay gap today persists for all women. On average, working women only make 77 cents for every dollar earned by men.[xlvi] This gap means that women make $11,084 less than men per year in median earnings.[xlvii] If women were paid the same amount as their male counterparts, their additional earnings could help improve their families’ financial security as well as provide additional tax revenue to the government.

Making sure that women receive equal pay for equal work not only affects their lifetime earnings but also strengthens the economy. The Institute for Women’s Policy Research finds that if women had received pay equal to their male counterparts in 2012, the U.S. economy would have produced $447.6 billion in additional income.[xlviii] This is equal to 2.9 percent of 2012 gross domestic product, or about equal to the entire economy of the state of Virginia.[xlix]

The President’s Fiscal Year 2015 budget requests $1.1 million to help eliminate pay discrimination among federal contractors. The funds would be used by the Office of Federal Contract Compliance Programs to strengthen enforcement efforts.[l]

Minimum wage

Raising the minimum wage is critical for closing the wage gap. Low-wage workers are disproportionately women. Nearly two-thirds of minimum wage workers are women.[li]

Raising the minimum wage would provide many women—who represent 49.2 percent of total U.S. employment[lii]—with the economic security they need to succeed. According to calculations from the Economic Policy Institute, approximately 28 million workers would see a raise if the minimum wage were raised to $10.10 by July 2016.[liii] Fifty-five percent of the affected workers would be women. This share varies by state, and is as high as 63.3 percent in Mississippi.[liv]

Conclusion

Women’s employment is critical to their families and to our nation’s economy. Federal policy can do more to help women realize their full economic potential no matter where they are on the income ladder.

The Murray-Ryan Budget agreement has helped promote women’s economic progress in the workforce, but there will be more work to do after the deal expires.

We need to preserve tax credits such as the Earned Income Tax Credit and funding for early childhood education programs such as Head Start. Women are more likely to be low-wage workers, which means they and their families are more vulnerable to spending cuts. Passing the 21^st Century Worker Tax Cut Act would provide two critical tax credits to low-wage working women, helping increase their earnings and give them a better shot at entering the middle class.

In addition, ensuring pay equity and providing work-family supports such as the FAMILY Act to all working women will further their economic progress. Closing the wage gap and raising the minimum wage boosts women’s earnings and could generate additional tax revenue. Work-family policies help breadwinner mothers remain in the labor force and better financially provide for their families.

As a critical driver of economic growth, women need polices that expand workforce opportunities. Yet to help all women succeed, polices must acknowledge that barriers to women’s work manifest themselves differently across the income distribution.  To echo House Minority Leader Nancy Pelosi, “when [all] women succeed, America succeeds.”[lv]

Endnotes