Gender wage inequality in the United States: Causes and solutions to improve family well-being and economic growth

Posted on by Maria Monroe

Overview

Disparities between men’s and women’s wages in the United States hinders economic growth by constraining family incomes and spending power. When comparing average full-time year-round incomes of men to those of women, research indicates that women make only 80.5 percent of men’s wages, a gap that is even larger when accounting for race. In the long run, these disparities heighten the risks of financial stress and inadequate retirement savings at times of economic shocks. While a majority of women suffer from unequal wages, the persistence of gender wage inequality heavily affects low-income and single-income families in addition to families of color.

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Gender wage inequality in the United States: Causes and solutions to improve family well-being and economic growth

In a 2018 report for the Washington Center for Equitable Growth, “Gender wage inequality: What we know and how we can fix it,” sociologist Sarah Jane Glynn breaks the contributing factors to gender wage inequality into two groups:

  • Supply-side explanations, which are those related to workers’ differences in human capital investments and include variances in education, race, and choice of occupation. Due to their observable nature, large U.S. Census Bureau surveys can be used to explain the impact that each of these factors has on overall wage inequality. Glynn uses a study by economists Francine D. Blau and Lawrence M. Kahn of Cornell University that studies how these factors contribute to gender wage differences between 1980 and 2010, allowing them to track the changing dynamics contributing to gender wage inequality.1
  • Demand-side explanations, which take into account societal and structural forces that are beyond women’s control and are often associated with gender norms, discrimination, and stereotypes. These factors can be internalized by women and lead them to make educational and occupational decisions that, in turn, show up as supply-side factors. Demand-side explanations reduce women’s earnings by shaping how we value women’s work and characteristics associated with women such as care-work occupations. Subsequent research by Blau and Kahn shows how occupations are paid less by sheer virtue of the share of women in them, and not related to the human capital of the average worker or the productivity of the jobs.

This factsheet presents a snapshot of each of these findings and then presents a variety of policy solutions, among them legislation at the federal level, examples of state and municipal laws that could be replicated in other areas of the country and by the federal government, and federal agency rules and regulations that could be implemented or expanded.

“Unequal pay between men and women drags down the growth of the U.S. economy.”
—Sarah Jane Glynn, “Gender wage inequality: What we know and how we can fix it.”

Supply-side causes of the U.S. gender wage gap

Glynn breaks down the supply-side explanations for gender wage inequality into six groups: work experience, industry and occupation, unionization, education, race, and region. For each group, all of the statistics of gender wage inequality and policies to amend this inequality were pulled from Glynn’s report and Blau and Kahn’s paper.

Work experience

  • Years of work experience contributes to 14 percent of gender wage inequality and is responsible for roughly $112.7 billion in wage differences between men and women.
  • While female labor force participation has increased in the past four decades, women still have fewer years of work experience compared to their male counterparts because women continue to provide the majority of unpaid care to children, elders, and ill family members.

Policies supporting workers’ access to paid family care hold the potential to increase wages and allow more women to stay connected to the workforce, thus reducing the work-experience gap between men and women. Here are five potential policy solutions.

Potential policy recommendation 1: Child Care for Working Families Act
The Child Care for Working Families Act, introduced by Sen. Patty Murray (D-WA) and Rep. Bobby Scott (D-VA), gives guaranteed childcare assistance to families earning up to 150 percent of their state’s median income. In addition, it limits families’ childcare spending to 7 percent of household income and promises improved wages for childcare providers. This policy, which would be paid for by employee and employer payroll contributions, has the potential to create 2.3 million new jobs and increase childcare providers’ wages by 26 percent.2

Potential policy recommendation 2: FAMILY Act
The FAMILY Act, introduced by Sen. Kirsten Gillibrand (D-NY) and Rep. Rosa DeLauro (D-CT), outlines a national, gender-neutral social insurance program that would fund two-thirds of a parent’s wage for up to 12 weeks of paid leave. The program, which will be paid for by employee and employer payroll contributions, sets qualifications and eligibility conditions that will be determined by language of the Family and Medical Leave Act of 1993. Research indicates that a national paid leave program boosts women’s wages by 7 percent.3

Potential policy recommendation 3: The Trump administration’s proposed plan
The Trump administration proposed a plan to create a federal paid parental leave program, administered through states’ unemployment insurance systems, that provides parents up to six weeks of paid leave. While this idea grants new parents the ability to take time off without any employment consequences, it would deduct from their Social Security retirement income, thus leaving parents at risk of financial insecurity when their retirement approaches. Unemployment insurance systems are already extremely underfunded and would struggle to implement such a program. In addition, this plan prioritizes parental leave for a new child, thus ignoring family caregiving needs.4

Potential policy recommendation 4: The Schedules That Work Act
The Schedules That Work Act, written by Sen. Elizabeth Warren (D-MA) and Rep. Rosa DeLauro (D-CT), puts forth protocols—such as requiring clear scheduling expectations from the start of employment—that allow workers to request flexibility from their employers, while protecting workers from financial retaliation or employment discrimination. This policy will allow workers to manage family care needs without risking their income and financial stability.5

Potential policy recommendation 5: State-specific paid family leave policies
Five states—California, New Jersey, Rhode Island, New York, and Washington state—and the District of Columbia have instituted paid family leave laws, though Washington state and D.C. will not activate the law until January 1, 2020. Studies conducted by Jean Kimmel of Western Michigan University and Catalina Amuedo-Dorantes of San Diego State University found that access to parental leave correlated with a 7 percent increase in women’s earnings and shrank motherhood wage inequality by two-thirds. Research on California’s paid family leave system found it has increased mothers’ work hours by 10 percent to 17 percent.6

Industry and occupation

  • The differences in gender segregation among industries and occupations accounts for 50.5 percent, or $403.6 billion, of gender wage inequality.
  • Of that 50.5 percent, 17.6 percent of this is due to the differences in industries and 32.9 percent is due to differences in occupations in which women and men are typically employed.
  • It’s not just that women are overrepresented in lower-paying service-providing industries—wages tend to be lower in occupations that are women-dominated, and there is evidence that there is a causal mechanism at play—but also that an influx of women into an occupation lowers wages.
  • Within occupations, women tend to be clustered at the lower end of the wage distribution. Women make up 52.8 percent of legal positions, for example, but only 37.4 percent of lawyers are women, whereas the other 62.6 percent are paralegals, legal assistants, and other legal support positions—all of which have lower wages than lawyers.

Policies that increase wages in industries and occupations that women are currently overrepresented in, as well as policies that enhance access to high-paying jobs in traditionally male-dominated industries, would address some of the pay gap caused by occupational segregation. Here are three potential policy solutions.

Potential policy recommendation 1: Funding for programs such as Women in Apprenticeship and Nontraditional Occupations
The federal Women in Apprenticeships and Nontraditional Occupations program provides resources to diversify the gender distribution of apprenticeship programs, which tend to be male-dominated. Funding for it should remain in order to maintain current apprenticeship programs and create new programs to decrease the gender differences. In 2017, the U.S. Department of Labor announced a $1.9 million investment to “recruit, train, and retain women in high-skill occupations” in a way to increase diversity within the manufacturing, technology, energy, and construction industries. The Trump administration canceled many of these contracts and pledges shortly after President Donald Trump took office. The 2018 and 2019 federal budgets eliminated this grant program funding, which would hurt the administration’s own goal of creating 5 million new apprenticeships over the span of 5 years.7

Potential policy recommendation 2: Expand the National Science Foundation’s ADVANCE grant-making program
Expanding the NSF’s ADVANCE grant-making program to provide competitive grants to univerisities to brainstorm proceeses that promote gender equity in STEM fields, which are highly male-dominated, would increase the representation of women in such fields and encourage pay equity between men and women.

Potential policy recommendation 3: Fully implement the Obama administration’s overtime rule
Full implementation of the Department of Labor’s already promulgated overtime-expansion rule, which would increase the minimum salary for workers exempt from overtime standards to $47,476, would address some of the gender wage gap because the majority of affected workers are women: One-quarter of all mothers and almost 33 percent of single working mothers have salaries at this level. Implementation at the federal level has been stalled by lawsuits by 21 states and more than 55 business groups, but some states have taken action. California, for example, set the threshold to $45,760 for salaried workers, and their wages are linked to the minimum wage, thus the two wages grow in accordance with one another.8

Unionization

  • Blau and Kahn found that union participation has reduced gender wage inequality by 1.3 percent, leading to $10.4 billion in increased earnings for women. This is partly due to women’s overrepresentation in public-sector employment, which is more heavily unionized.9
  • Collective bargaining agreements raise wages and create industrywide standard wage policies, which reduce the possibility of wage discrimination and thus have been particularly beneficial to all women and men of color. Women whose contracts were covered by unions saw a 9.2 percent increase in wages compared to those not covered by unions. These benefits were experienced at an even greater magnitude by women working in service industries, in which unionization led to women earning 87 percent more in total compensation, compared to nonunion women workers.
  • Recent declines in union participation have the potential to hurt wage equality because fewer workers will be covered by unions, and unions will lack funds and resources required for collective bargaining.

Policies that protect and strengthen collective bargaining rights can improve gender pay equity by raising overall wages and setting standard wages based on occupation rather than gender. Here are two potential policy solutions.

“Comprehensive labor-law reform legislation should create meaningful penalties for employers who violate the NLRA so that there is a greater disincentive for bad employer behavior.”
—Sarah Jane Glynn, “Gender wage inequality: What we know and how we can fix it.”

Potential policy recommendation 1: The Workplace Action for a Growing Economy (WAGE) Act
The WAGE Act, introduced in Congress by Sen. Patty Murray (D-WA) and Rep. Bobby Scott (D-VA), creates new protections for workers attempting to unionize, including making it an individual right to join a union, which would allow workers not covered by the National Labor Relations Act to organize. It would also impose stricter punishments for employers who violate the NLRA by firing or punishing workers engaged in union organizing.10

Potential policy recommendation 2: Collective bargaining for freelance economy workers
Between 54 million and 68 million Americans work in the freelance economy, according to the McKinsey Global Institute, yet they are not protected by the NLRA due to their classification as independent contractors.11 States and cities are taking initiatives to create fair labor standards for those working in the freelance economy. In 2015, Seattle’s city council passed a rule that grants drivers for Uber Technologies, Inc. and Lyft, Inc. the ability to unionize, though it was being appealed at the time of this writing. In 2016, New York state’s Department of Labor ruled that these drivers are employees rather than independent contractors, allowing them to qualify for greater worker protections and benefits.12

Education

  • Gender wage inequality was narrowed by 5.9 percent as a result of women’s increased educational attainment, accounting for a $47.2 billion increase in women’s earnings.
  • Legislative and social changes—such as the 1972 Title IX provision of the Education Amendments in the U.S. Code of Laws, greater access to birth control, and delayed marriage timelines—increased women’s educational attainment.
  • Despite women earning the majority of postsecondary degrees, the fields of study that they pursue compared to those men pursue lead to lower-wage jobs. Men are more likely than women to major in engineering and computer and information sciences, whereas women are more likely to study education, humanities, or the social sciences.
  • “Nontraditional” undergraduates, defined as older students, married students, and/or students with children, face a particular challenge because while both sexes in this category are equally likely to have delayed entry to postsecondary education and to work while in school, women are significantly more likely to be caring for dependents while attending school.

Policies to make college affordable and help nontraditional undergraduates would facilitate higher completion rates of postsecondary education. In addition, policies that increase the number of women pursuing degrees in fields historically dominated by men would increase the chances that women would be employed in higher-paying fields after graduation. Here are three potential policy solutions.

Potential policy recommendation 1: The INSPIRE Women Act and other legislation to increase the representation of women in STEM fields
Legislation such as Inspiring the Next Space Pioneers, Innovators, Researchers, and Explorers, or INSPIRE Women Act, passed in February 2017, as well as Sen. Catherine Cortez Mastro (D-NV) and Rep. Jackie Rosen (D-NV)’s Code Like a Girl Act and Sen. Mazie Hirono (D-HI) and Rep. Carolyn Maloney (D-NY)’s Women and Minorities in STEM Booster Act of 2017, are all examples of legislation intended to increase the representation of women in fields where they are currently underrepresented.13

Potential policy recommendation 2: Increase college affordability
Expansion of the federal Pell Grants program would make college more affordable for students, as they do not have to be repaid. In addition, many states and cities are initiating various programs aimed at making community colleges tuition free for low-income students. Tennessee, Oregon, Rhode Island, and San Francisco already allow residents who qualify as low income to attend community college for free. In addition, beginning in 2017, all City University of New York and State University of New York two- and four-year universities will allow students from households making less than $125,000 annually to attend tuition free.14

Potential policy recommendation 3: On-campus childcare for student parents
The number of student parents enrolled in two- and four-year universities has been on the rise. To keep these students enrolled through graduation, states are investing in on-campus childcare centers for students and faculty. In California, Hawaii, Idaho, Illinois, Nevada, New York, Rhode Island, Utah, and Washington state, 70 percent of all public universities have campus childcare available for students. The investment in on-campus childcare can result in positive returns of a better-educated workforce, higher wages, and greater innovation.15

Race

  • Race “explains” 4.3 percent of gender wage inequality, according to Blau and Kahn’s model, which translates to $34.4 billion in wage differences for women of color.
  • Racial wage inequality exacerbates gender wage inequalities, and the effect of race persists even after controlling for education, work experience, and occupation.
    • For example, while wage inequality for women of color has narrowed slightly over time, likely due to their increased educational attainment, as of 2015, black women still earn 34.2 percent less than white men and 11.7 percent less than white women, even after controlling for education, experience, marital status, and region of residence. (See Table 1.)

Table 1

Policies to increase wages and promote educational attainment would help improve women of color’s wages but are insufficient on their own. Policies are also needed to address persistent racial wage and hiring discrimination. Here’s one potential policy solution.

Potential policy recommendation: Collect data to understand problems facing workers of color
Title VII of the Civil Rights Act of 1964, overseen by the Equal Employment Opportunity Commission, prohibits employers from discriminating employers based on race, color, religion, sex, and national origin. Collecting firm-specific employment and pay data would allow the EEOC to better enforce Title VII, but it is not currently collected. In September 2016, the EEOC did announce it would begin collecting summary pay data and aggregate hours worked by pay bands, gender, race, and ethnicity for businesses with more than 100 employees. In August 2017, however, the Trump administration issued a stay before it got underway.16

Regions

  • The regions where women live and work accounts for 0.3 percent of gender wage inequality, or a $2.4 billion wage difference between men and women.
  • Regional differences in pay affect both men and women, but the effects aren’t evenly spread among them. Part of this is due to differences in states with minimum wages higher than the federal minimum wage and whether states have an equal pay law. States with smaller wage differences were almost twice as likely to have a minimum wage higher than the federal minimum wage rate of $7.25.

While the cost of living varies across state lines, wages usually reflect that region’s cost of living and should be relatively equal between men and women. Policies such as increasing the federal minimum wage would help eliminate gender wage inequality as a result of regional differences. Here’s one potential policy solution.

Potential policy recommendation 1: Increase the federal minimum wage
A 2014 Obama administration analysis found that raising the federal minimum wage to $10.10 per hour would narrow gender wage inequality by 5 percent, which would translate to an additional $24 billion in wages.

Demand-side causes

Most of the factors that contribute to the gender wage gap can be explained by the supply-side causes, yet the source of 38 percent of the wage gap is largely unquantified because of the difficulties in modeling socially constructed gender norms, according to Glynn. All of the statistics of gender wage inequality and the policies to amend this inequality included in this section were pulled from Glynn’s report and Blau and Kahn’s paper.

Socially constructed gender norms and internalized expectations about their behavior play a role in influencing women’s decisions about what education or occupation to pursue. Even the supply-side factors outlined above are seemingly easy to observe and measure, but might be less explanatory than estimated in the Blau and Kahn model. A study on engineering students, for example, found that more women than men changed their majors because the women were more likely to negatively interpret their grades, have lower self-confidence, and have less faculty and peer support compared to their male peers, limiting career prospects in a lucrative field.17

Discrimination also plays a role in the unexplained portion of gender wage inequality. Because earnings at a new job are often based on earnings at a prior job, any discrimination a woman experienced in what she was paid in the past will carry forward and compound in future jobs. After accounting for observable characteristics, Blau and Kahn found that 38 percent of gender wage inequality remains unexplained, which accounts for $303.7 billion in the difference between men’s and women’s wages in 2016. Economists interpret this unexplained portion as discrimination.

“The unexplained [portion of the gender wage] gap will also understate discrimination if some of the explanatory variables such as experience, occupation, industry, or union status have themselves been influenced by discrimination—either directly through the discriminatory actions of employers, coworkers, or customers or indirectly through feedback effects.”

—Francine D. Blau and Lawrence M. Kahn, “The gender wage gap: Extent, trends, and explanations.”

Policies that increase pay transparency, combat discrimination, and ensure that data about pay differences is collected will help address some of the “unexplainable” differences in men and women’s wages. Here are five potential policy soultions.

Potential policy recommendation 1: Fair Pay Act
The Fair Pay Act, reintroduced by Rep. Eleanor Holmes Norton (D-DC), would expand prohibitions against sex discrimination from “equal work” to “equivalent work,” clarify that any differences in pay must be justified by legitimate business interests, protect workers who share their pay information, and increase damages available to victims of wage discrimination.18

Potential policy recommendation 2: Paycheck Fairness Act
The Paycheck Fairness Act, introduced by Sen. Patty Murray (D-WA) and Rep. Rosa DeLauro (D-CT) in 2017, requires employers to prove that differences in pay were a result of business-related factors. This rule would protect workers who disclose pay to other workers, increase employer transparency regarding pay inequities, and hold employers accountable for pay discriminations.19

Potential policy recommendation 3: Workplace Advancement Act
The Workplace Advancement Act, introduced by Sen. Deb Fischer (R-NE) and Rep. Stephen Knight (R-CA), would amend the Fair Labor Standards Act by protecting workers from retaliation for discussing their wages if they do so in order to discover pay inequity among co-workers.20

Potential policy recommendation 4: Eliminate questions about past wages during the application process
Policies that ban employers from asking about wages earned at prior jobs will mitigate the impact of pay discrimination experienced in the past by preventing it from carrying forward to future earnings. The states of Massachusetts, California, Oregon, Delaware, and New York, the U.S. territory of Puerto Rico, and the cities of San Francisco, Pittsburgh, and New Orleans have all passed measures to ban the practice.21

Potential policy recommendation 5: Improve data availability on wages by gender
Other countries have laws requiring employers to collect data on their employees’ wages to determine whether male and female employees are being paid differently for the same work. The collection of wage data by gender, race, and ethnicity is necessary to measure what is actually happening and to assess whether policies intended to address gender wage inequality are working, as well as to ensure compliance with those policies.22

To learn more about the research and policy recommendations behind the information summarized here, you can read Sarah Jane Glynn’s full report, “Gender wage inequality: What we know and how we can fix it.”

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Women’s History Month: U.S. women’s labor force participation

Posted on by Maria Monroe

It’s Women’s History Month in the United States. What better time to discuss a key economic dynamic that both reflects and contributes to women’s changing role in American society than their advances in the workplace? Specifically, how has women’s labor force participation rate—the percentage of women engaged in the formal labor market by being employed or looking for work—changed over time? It’s an important issue. When women join the labor force, economies tend to grow more. Indeed, there is a significant relationship between a country’s per capita Gross Domestic Product and women’s labor force participation rate. (See Figure 1.)

Figure 1

For women in the United States, labor force participation rates have not followed a straight path. It has been a complicated narrative, deeply affected by women’s family roles, by discrimination, by the changing economy, by technological change, and by their own choices. And it is a continuing story, with surprising twists that economists continue to explore.

In a sense, this story begins with its first twist, in the 18th and 19th centuries. To be clear, this is a twist for us today, not for those who experienced it. From our modern perspective, we might assume that significant participation by women in the workforce was practically nonexistent until it began rising gradually in the 20th century. We would be wrong. A number of economists, and especially Claudia Goldin of Harvard University, have shown that women in the 18th and 19th centuries played a considerably more important role in the economy than we might have thought. They were critical to their families’ economic well-being and their local economies, not in their rearing of children or taking care of household responsibilities but by their active participation in growing and making the products that families bartered or sold for a living.

But eventually, as the production of goods became mechanized and moved outside of the home, women’s role in the market economy receded, and their labor force participation dropped substantially to its nadir near the end of the 19th century. Gradually, beginning after 1890 and very much into the 20th century, women had a growing place in the workforce. This path—declining from a high point in previous centuries, prior to the manufacturing economy, and then rising as the economy and society change over time—graphs as a U-shaped curve. One of Goldin’s most significant contributions was to show that the U-shaped curve applied to the development of economies worldwide, though, as Boston College economist Claudia Olivetti has shown, the dip is less significant for economies that began significant development after 1950. (For an illustration of the global nature of this phenomenon, see this graph created by the IZA Institute of Labor Economics.)

Goldin cites four periods after the nadir of women’s participation in the labor market, the first three of which she terms evolutionary and the final one revolutionary. In the first of these phases, from the late 19th century to the 1920s, it was primarily poor, uneducated single women who entered the workforce, often as piece workers in manufacturing or as employees in other people’s homes. Married women largely stayed home, and the single women who worked generally exited the workforce upon marriage. In the 1910s, we see more women working in teaching and in clerical positions, which began a period of major growth.

From the 1930s to the 1950s, Goldin’s second phase, married women entered the workforce in significant numbers, their rate rising from 10 percent to 25 percent. She notes that while 8 percent of employed women in 1890 were married, that figure rose to 26 percent in 1930 and 47 percent by 1950. These increases were the result of the rise of offices requiring clerical workers and new information technologies, along with tremendous growth in the number of women attending high school in the early 20th century. It’s worth noting that women’s workforce participation was negatively affected by their husbands’ income. The higher his income, the less she would “need” to work outside the home. But that began to change during this period.

In the next phase, according to Goldin, women’s labor force participation, driven by married women, rose substantially. And it continued to become more common for married women to continue working even as their husbands’ income rose. One reason that married women worked more was the growing availability of scheduled part-time employment. In addition, societal barriers, and in some case legal barriers, to married women continuing to work were dropping.

Finally came what Goldin calls “the quiet revolution,” the period from the late 1970s up to the very early 21st century. In this era, women’s overall labor force participation rate rose but not by all that much. What did happen, however, was that the percentage of women of childbearing age with a child under the age of 1 in the workplace rose dramatically, from 20 percent to 62 percent. What Goldin refers to as the revolution are these changes: Young women in their late teens during the 1970s altered their “horizons” (their career expectations) so that they anticipated long, continuous careers that would not be cut short by marriage and children. This development, in turn, encouraged them to invest more in their education, with increasing numbers going to college and beyond, thus preparing them for careers that gave them status closer to men in the workplace.

At the same time, women began postponing marriage and childbearing. This was almost certainly, as shown by Goldin and by the University of Michigan’s Martha Bailey and her co-authors, due in part to the introduction and growing popularity of the birth control pill, the reliable contraceptive that gave women more control over the timing of childbearing. The pill had the effects of both increasing female labor force participation and narrowing gender pay inequality. And women began to see their lives and their identities differently, with their professional selves becoming as important as their families.

And then something else happened. Beginning around 2000, the advances in women’s labor force participation stopped. The rate flattened and then began to decline. To be sure, the decline is relatively small, a few percentage points, but it is real and it is unique among developed countries, according to the Organisation for Economic Co-operation and Development. (See Figure 2.)

Figure 2

We still don’t know the reasons for this reversal, but we have some clues. Sandra Black of the University of Texas at Austin and her co-authors note that men’s labor force participation rate has been declining for several decades. Until 2000, this caused a significant, though not nearly complete, convergence between women’s and men’s labor force participation rates. Since 2000, however, the relative decline for women has actually outpaced that of men. Between 2000 and 2016, prime-age women’s labor force participation fell by 4.2 percent, from 78 percent to 74 percent. During the same period, prime-age men’s labor force participation fell by 3.7 percent, from 91 percent to 88 percent. The decline in men’s labor force participation is a trend generally attributed to poor labor market opportunities, particularly for low-skilled men. A question, therefore, is whether women’s rate began to decline for the same reason. Some evidence points in that direction, but the story is not necessarily a simple demand-side tale.

As previously noted, this decline in women’s labor force participation is not replicated in other OECD economies, where the rate continues to rise. Black and her co-authors point out that while the U.S. labor market is among the most flexible in its ability to accommodate changes in technology and other factors that change the nature of work, it is also among the least supportive in providing unemployment, job-search, and training benefits that could help both men and women adjust to change.

Those researchers also point to the potential positive impact of implementing paid family leave and expanded access to childcare on prime-age women’s labor participation rates. It is clear from recent research by Olivetti and Barbara Petrongolo of the London School of Economics that national family policies can have a significant positive impact on women’s labor force participation. The researchers examined family policy across high-income Western European countries, Canada, and the United States. What they found was that investments in childcare and early childhood learning had significant impacts on women’s labor force participation. They also found a positive impact, though less pronounced, for maternity leave policies of up to 50 weeks. Interestingly, separate research finds that family policies that benefit only women can undermine their potential impact, as they might affect employers’ attitudes toward female employees.

Unfortunately, what the OECD has also reported is that as of 2012, the United States ranked 33rd of 36 countries in investing in early childhood care and education, relative to overall income. This country is also the only developed country without a national paid leave program.

Another promising area for legislation to support women’s ability to participate in the workforce is scheduling stability. Over the past decade, researchers have documented instability and unpredictability in the schedules of retail workers, and they are increasingly showing that providing greater stability and predictability for schedules can not only improve employer profits and strengthen the economy but also improve the health of their workers.

It seems clear that a change in direction for U.S. policies related to childcare and early education, along with a strong national paid leave policy for family leave could help to reverse the downward trend of U.S. women’s labor force participation and put it back on the same path that most other developed countries are on. We have seen that while the 20th century saw a restoration of women’s strong participation in the workforce, the 21st century has seen a disturbing reversal. Policymakers can do something about this, and it would benefit families and the nation’s economy.

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Weekend reading: “Inequality” edition

Posted on by Maria Monroe

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Equitable Growth’s Heather Boushey released a statement on behalf of the organization following the passing of Alan Krueger. The statement highlighted Krueger’s belief that economics—and economists—should advance knowledge and serve people and how he helped make economics less about theory and more about maximizing its benefits for all.

Equitable Growth’s Greg Leiserson, Will McGrew, and Raksha Kopparam released their issue brief that provides an overview of the distribution of wealth in the United States to inform discussion of a potential net worth tax. The issue brief includes a series of figures that break down what the distribution of income and wealth in the United States looks like across wealth quintiles and what types of demographics are feeling the benefits of such wealth.

Alix Gould-Werth broke down newly released research from Equitable Growth grantees Joan C. Williams and Susan Lambert. Their research looked at how retail workers’ unpredictable schedules can impact their sleep quality. The research found that by improving the quality of workers’ schedules, workers slept more soundly and were more productive.

In recognition of Women’s History Month, Equitable Growth compiled some of the work we’ve published over the past few years on the role women play in the workplace and the U.S. economy. Pieces highlighted included Paid family and medical leave in the United States: A research agenda and Gender wage inequality.

Brad DeLong rounds up his latest worthy reads on equitable growth from both inside and outside Equitable Growth.

Elisabeth Jacobs and Kate Bahn discuss how the female labor force participation rate in the United States has changed over time and how this rate correlates to a country’s per capita Gross Domestic Product. The two note that U.S. women’s labor force participation, unlike that of other countries, has been on the decline since around 2000, and they call for policies like paid family leave, expanded access to childcare, and scheduling stability to help curb the decline.

Links from around the web

What is economic inequality exactly? Susannah Snider describes it as the gap between the income and wealth amassed by different groups in a society, describing the exponential growth in wealth disparities between the richest Americans compared to the rest of the country over the past five decades. She goes on to describe how economic inequality affects everyday folks, with working class families being unable to weather small financial setbacks or even beginning to build wealth. [usnews]

There have been lots of recent proposals for how to go about taxing the wealthiest people in the United States. Dylan Matthews breaks down recent proposals from Alexandria Ocasio-Cortez, Elizabeth Warren, Bernie Sanders, and others, discusses the historical background of taxes on the wealthy, and breaks down how taxing the rich can be hard in practice. Matthews pulls from some of the ideas of Equitable Growth grantees including Gabriel Zucman, Stefanie Stantcheva, and David Kamin. [vox]

Data shows that low-income students who attend top-tier universities earn close to what their wealthy classmates go on to earn. Yet the advantages of legacy admissions exacerbate inequality by denying admission for low-income students. Richard Reddick breaks down how opportunity hoarding in the college admissions process compounds economic inequality. [houstonchronicle]

Christian Weller proposes that only bold policy interventions can begin to shrink the racial wealth gap that persists in our country. Specifically, Weller maintains that we cannot just focus on income, but must also take a close look at ways to quickly close the racial wealth gap by enacting policies such as reparations. [forbes]

Alan Krueger’s work in the Obama White House propelled economic inequality into the mainstream, coining the term the “Great Gatsby Curve” that helped solidify the idea that income inequality is a serious harm. Dylan Matthews writes how Krueger’s popularization of the relationship of income inequality for everyday Americans created a new dialogue between lawmakers—one that is sure to continue on for years to come. [vox]

Friday Figure

Figure is from Equitable Growth’s “The distribution of wealth in the United States and implications for a net worth tax”

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Brad DeLong: Worthy reads on equitable growth, March 15–21, 2019

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

  1. Alan Krueger’s passing is horrible and tragic news. All sympathy to his family. He was a light that shone very brightly for good into many dark corners. May his memory be a blessing. Please read Heather Boushey’s “Remembrance: Alan Krueger,” in which she writes: “We at the Washington Center for Equitable Growth are deeply saddened to learn of the death of Alan Krueger. He was devoted to serving the public and to ensuring that economics was not only about theory but about improving people’s lives … As a pioneer in the use of natural experiments as the basis for economic research, his work helped create a paradigm shift in the discipline itself … The lessons learned from the advances in economics in no small part pioneered by Alan underlay much of the cutting edge of economics—and the work we do at Equitable Growth to show how inequality affects economic growth.”
  2. I have been waiting for this research paper for a while, and it’s very good. Read David R. Howell and Arne L. Kalleberg’s “Declining Job Quality in the United States: Explanations and Evidence,” in which they write: “We group … explanations … into three broad visions … the competitive market model, in which supply and demand for worker skills in competitive external labor markets generates a single market wage by skill group … [the] contested market models, in which … firms typically have substantial bargaining (monopsony) power; and social-institutional models, which … place greater emphasis on the public policies, formal and informal institutions, and the dynamics of workplace cultures and conflict … The supply-demand explanation, which has focused on evidence of occupational employment polarization (driven by skill-biased production technologies) and the rise in the college-wage premium … We conclude by summarizing policy recommendations that follow from each of these visions.”
  3. Well worth your time chasing the links from this review of work Equitable Growth has published over the past several years on women’s roles. At the root, I think, is that a great many of our economic and societal practices reflect gender reality as it stood 50, 100, or 150 years ago—and both biological and even more societal reality as it stood then was hardly conducive to the empowerment of women. Recall that two centuries ago, an overwhelming proportion of women became mothers, that the typical mother stood a one-in-seven chance of dying in childbirth, and that the typical mother (if she survived) would spend 20 years eating for two—pregnant or nursing—in a world in which childcare by nonrelatives was a thing for only the upper class. Legacy institutions from that time are unlikely to serve today’s women—or men—well. Read “Equitable Growth’s History of Focusing on Women’s Role in the Economy: A Review,” which details: “How women are reshaping the American economy … Gender wage inequality … Paid family and medical leave … Women … [and] family economic security … The gender gap in economics … The link between bodily autonomy and economic opportunity … The wages of care … Motherhood penalties.”
  4. The Gap, Inc. asked researchers to quantify the benefits from offering its retail employees more regular schedules. The benefits are substantial. Read Alix Gould-Wirth, “Retail workers’ unpredictable schedules affect sleep quality,” in which she writes: “Retail outlets of The Gap … [r]andomly assigned 19 stores to a treatment group to implement the intervention and nine stores to a control group that did not implement the intervention. The Gap was so committed to increasing the amount of notice workers had of its scheduled shifts that the company extended two components that were originally planned to be part of the intervention—two-weeks advance notice and the elimination of on-call shifts—to all of its workers in North America prior to the beginning of the experiment. So, this experiment tells policymakers and businesses alike how the multicomponent intervention affects workers’ lives beyond advance notice alone … The intervention made a substantively (and statistically) significant impact on the sleep quality of workers.”

Worthy reads not from Equitable Growth:

  1. Put me down as someone who thinks that the Federal Reserve and the European Central Bank have not tried, and are not trying, hard enough to learn from the Bank of Japan. They still do not seem to be at the point of understanding the relevance of Japan for themselves as well as Paul Krugman did two decades ago, when he wrote his Return of Depression Economics, his “Japan’s Trap,” and his “It’s Baaaack: Japan’s Slump and the Return of the Liquidity Trap.” This is not a good situation to be in. Read Enda Curran and Toru Fujioka,” BOJ’s Never Ending Crisis Has Lessons for World’s Central Banks,” in which they write: “The underlying problems confronting the BOJ—slowing growth, tepid wage increases, lackluster productivity gains, and aging populations—are becoming more pronounced in other developed economies … ‘When Japan first confronted the problem of very low inflation, monetary economists pooh-poohed the problem, saying there was an easy fix,’ said Raghuram Rajan, former governor of the Reserve Bank of India and now a professor at the University of Chicago. ‘After confronting the same issue in their own countries and showing an inability to deal with it, there seems to be a general consensus that the problem is harder.’ Its latest experiment in yield-curve control … has drawn the attention of Federal Reserve Deputy Chair Richard Clarida amid an examination of strategy at the U.S. central bank.”
  2. The empirical evidence so far seems to be telling us that policies prohibiting employers from knowing early about applicants’ criminal records may be leading to employers not looking at all at young black men. If this holds up, it would be very distressing and suggest strongly that such policies are truly counterproductive: Read Jennifer L. Doleac, “Empirical Evidence on the Effects of ‘Ban the Box,’” in which she writes: “I have prepared this written testimony to review existing empirical evidence on policies that prohibit employers from asking job applicants about their criminal records until late in the hiring process … This evidence can be summarized as follows: Delaying information about job applicants’ criminal histories leads employers to statistically discriminate against groups that are more likely to have a recent conviction. This reduces employment for young, low-skilled, black men. This negative effect is driven by a reduction in employment for young, low-skilled, black men who don’t have criminal records … Effective approaches to this policy problem are likely to be policies that directly address employers’ concerns about hiring people with criminal records, such as investing in rehabilitation, providing more information about applicants’ work-readiness, and clarifying employers’ legal responsibilities.”
  3. A panel led by Jason Furman proposed predictable rules and platform regulation—a “code of conduct for the most significant digital platforms,” treating them as essential services—plus ensuring data mobility and open standards are essential for the creation of a digital economy in which competition and innovation can produce large benefits. Unfortunately, none of those are in the financial interest of current tech shareholders or their lobbyists. Read “Unlocking Digital Competition, Report of the Digital Competition Expert Panel,” which says: “An independent report on the state of competition in digital markets, with proposals to boost competition and innovation for the benefit of consumers and businesses … Chaired by former chief economist to President Obama, professor Jason Furman, the panel makes recommendations for changes to the U.K.’s competition framework that are needed to face the economic challenges posed by digital markets.”
  4. Read Austan Goolsbee, “You Never Know When a Recession Will Sneak Up on You,” in which he writes: “The 2001 recession developed when the internet bubble popped … But … the internet accounted for, at most, about 2 percent of the economy then. If we use the logic we’ve been applying to trade wars and government shutdowns, it would seem that popping the internet bubble shouldn’t have been enough to cause a recession. But it did. The reason it did was that the pop freaked out people outside just the internet sector … Virtually every recession in the past 40 years coincided with a signal of fear, like a significant drop in consumer confidence. Sometimes confidence fell and didn’t spiral into recession, but all recessions have started with a confidence spiral … Let us all hope for excellent jobs numbers in the months to come, along with a rebound … But it would be a mistake to be overconfident … If something scares people enough, it can start a recession, and you probably won’t know until it’s too late … The great pitcher Satchel Paige once advised: ‘Don’t look back. Something might be gaining on you.’ Had he been an economist, he might have added, ‘And don’t start a trade war, either.’”
  5. Read Noah Smith’s piece on Alan Krueger, “Alan Led a Quiet Economics Revolution,” in which Smith writes: “[Alan] Krueger’s work defined what a modern economist should look like … He relentlessly focused on issues of practical, immediate importance. He constantly concerned himself with the betterment of the lives of poor and working people, but refused to naively assume that programs designed to help these people always had the intended effect. He was always aware of relevant economic theories, but never let himself be bound by them. This eclectic, humble, humanistic but practical approach has set the tone for an entire generation of young economists. He was taken from us far too soon, but his impact on economics, and on the world, will last for a very long time to come.”
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The distribution of wealth in the United States and implications for a net worth tax

Posted on by Maria Monroe

Wealth inequality in the United States is high and has increased sharply in recent decades. This increase—alongside a parallel increase in income inequality—has spurred increased attention to the implications of inequality for living standards and increased interest in policy instruments that can combat inequality. Taxes on wealth are a natural policy instrument to address wealth inequality and could raise substantial revenue while shoring up structural weaknesses in the current income tax system.

This issue brief provides an overview of the distribution of wealth in the United States to inform discussion of a potential net worth tax—or other reforms to the taxation of wealth—in the United States. This brief draws from “Net worth taxes: What they are and how they work,” by Greg Leiserson, Will McGrew, and Raksha Kopparam.23

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The distribution of wealth in the United States and implications for a net worth tax

A net worth tax is an annual tax imposed on an individual or family’s wealth, or net worth. Wealth is the difference between the value of a family’s assets and liabilities. Assets are things a family owns, including both financial assets such as bank accounts, stocks, bonds, and ownership stakes in closely held businesses, and nonfinancial assets such as a car, house, or real estate. Liabilities are a family’s debts such as mortgages, credit card balances, and car loans.

Wealth is distributed in a highly unequal fashion, with the wealthiest 1 percent of families in the United States holding about 40 percent of all wealth and the bottom 90 percent of families holding less than one-quarter of all wealth.24 (See Figure 1.) Notably, 25 percent of families have less than $10,000 in wealth. The share of wealth held by the wealthiest families substantially exceeds the share of income received by the highest-income families.

Figure 1

Wealth disparities have widened over time. In 1989, the bottom 90 percent of the U.S. population held 33 percent of all wealth. By 2016, the bottom 90 percent of the population held only 23 percent of wealth. The wealth share of the top 1 percent increased from about 30 percent to about 40 percent over the same period. (See Figure 2.)

Figure 2

The high level of wealth inequality in the United States also is reflected in the substantial difference between median wealth ($97,000) and mean wealth ($690,000). As a result, 84 percent of families have wealth below the mean. The 90th percentile of the wealth distribution is $1.2 million. The 99th percentile of the wealth distribution is $10 million.

The percentiles of the wealth distribution near the top are smaller when people are grouped into tax units (the people appearing on the same tax return) rather than households, as there are low- or moderate-wealth tax units that are part of higher-wealth households. The 95th percentile of wealth among tax units is $1.7 million, and the 99th percentile of wealth among tax units is $8.5 million. (See Table 1.)

Table 1

The highly skewed distribution of wealth is one of the primary reasons the burden of a net worth tax would be highly progressive.25 Moreover, systematic differences in wealth across age, race and ethnicity, and educational attainment mean that a net worth tax would shift the burden of the tax system not only from poor to rich, but also from younger families to older families and from families of color to white families. Median wealth for a family with a head of household younger than 35 years old in 2016 was $11,000, while median wealth for a family with head of household age 65 to 74 was $224,000. (See Figure 3.)

Figure 3

Median wealth for families in which the survey respondent was white and not Hispanic or Latino in 2016 was $171,000. Median wealth for families in which the survey respondent was black or African American and not Hispanic or Latino was $17,000, and median wealth for families in which the survey respondent was Hispanic or Latino was $21,000. Median wealth for all other families was $65,000. (The sample for the Survey of Consumer Finances is too small to disaggregate wealth among the diverse groups that make up this population.) (See Figure 4.)

Figure 4

Families in which the household head has a 4-year college degree had median wealth of $292,000 in 2016. In contrast, families in which the household head had attended some college or has an associate degree had median wealth of $66,000, and families in which the household head has a high school diploma had median wealth of $67,000. Families in which the head did not have a high school diploma had median wealth of only $23,000. (See Figure 5.)

Figure 5

Net worth taxes typically apply only to the relatively wealthy or extremely wealthy and exempt the rest of the population. The patterns of wealth inequality among the entire population shown above are mirrored among the wealthy. Families with $1 million of wealth or more are older, more likely to be white, and more likely to have a 4-year college degree than the population as a whole. (See Figure 6.)

Figure 6

Low-wealth and high-wealth families differ in terms of the assets and liabilities they hold. Cars and other vehicles account for the overwhelming majority of wealth for low-wealth families. Middle-wealth families hold much more of their wealth in home equity, with more modest contributions from retirement accounts, bank accounts, and cars. Very high-wealth families hold much more of their wealth in business equity and financial assets outside retirement accounts. (See Figure 7.)

Figure 7

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Remembrance: Alan Krueger

Posted on by Maria Monroe
Alan Krueger, Bendheim Professor of Economics and Public Policy, in his office in the Louis A. Simpson International Building. August 2017.

Heather Boushey, Executive Director and Chief Economist at the Washington Center for Equitable Growth, issued the following statement in reaction to the death of Princeton University economist Alan B. Krueger:

We at the Washington Center for Equitable Growth are deeply saddened to learn of the death of Alan Krueger. He was devoted to serving the public and to ensuring that economics was not only about theory but about improving people’s lives. His contributions to the discipline and to our country were at the heart of why Equitable Growth exists and the work we do.

Alan’s groundbreaking work with David Card used new data and methods that showed the overall, mainly positive, impact of increases in the minimum wage—a finding at odds with prevailing theory that changed the way we think about the economy and economics. As a pioneer in the use of natural experiments as the basis for economic research, his work helped create a paradigm shift in the discipline itself, from a focus on economic modeling to a focus on how real people and real institutions are affected by changes in policy and in the economy.

Today, economists can’t imagine the discipline without this kind of work. The lessons learned from the advances in economics in-no-small-part pioneered by Alan underlay much of the cutting edge of economics—and the work we do at Equitable Growth to show how inequality affects economic growth. Alan gets a huge amount of the credit for this fundamental change. Over his career, Alan made economics much more useful to policymakers and helped change the way policy is developed and debated.

Alan believed it was important to engage in public service. His work during the Obama Administration contributed enormously to our nation’s emergence from the Great Recession. As a mentor to me and to many other economists, Alan emphasized the value of serving the public. Providing me career advice once, he said he couldn’t imagine not having had the opportunity to serve—and expressed his joy at having had more than one chance to do so.

Alan Krueger believed economics—and economists—should advance knowledge and serve people. He helped make the discipline a little bit less about theory and a lot more about figuring out how the economy actually works for people and maximizing its benefits for all, not just a few. This organization, and I personally, will miss him a great deal.

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Equitable Growth’s history of focusing on women’s role in the economy: A review

Posted on by Maria Monroe

One of the ways that The Washington Center for Equitable Growth is recognizing Women’s History Month is to bring to attention some of the work we’ve published over the past few years on the role women play in the workplace and the U.S. economy, the challenges they face in meeting their work and family responsibilities, and why and how government should be making it easier to do so. Following are some highlights of our many articles, issue briefs, and reports addressing these issues.

  1. The United State of Women: How women are reshaping the American economy. Speaking at the White House United State of Women Summit in 2016, Equitable Growth Executive Director and Chief Economist Heather Boushey discussed the role of women in the economy. Their increasing participation in the workforce from 1979 onward raised Gross Domestic Product by an additional 11 percent, she said, and they are now the breadwinners or co-breadwinners in nearly two-thirds of U.S. families. But federal policies in the 21st century have not kept up with the growing need for family leave, schedule stability, and other support to ensure that women can enter and remain in the workforce.
  2. Gender wage inequality. Despite the increase over the past several decades in women’s work hours and incomes, which are now a significant part of overall household financial stability and U.S. economic growth, women are still severely limited by gender pay inequality. Their average earnings are nearly 20 percent less than men’s average earnings. This comprehensive 2018 report, by sociologist Sarah Jane Glynn, presents in detail the reasons why gender pay inequality persists today in the United States and possible policy solutions at the federal level, as well as in select state and local policy settings. The paper also contains significant analysis of intersectionality and incomes, shining a light on how race and gender combine to affect economic outcomes.
  3. Paid family and medical leave in the United States: A research agenda. Changes in women’s labor force participation in the United States mean that the majority of families no longer have a stay-at-home spouse to provide unpaid care for a new baby, a sick loved one, or an aging family member. Too many workers are unable to provide such care or deal with their own health challenges at the expense of their own financial well-being. This failure takes a broader toll on the health of the U.S. economy. A growing number of states are experimenting with policies designed to provide widespread access to paid family and medical leave. This 2018 paper, by Equitable Growth Senior Director for Family Economic Security Elisabeth Jacobs, explores the evidence from these experiments of the need for and impact of such policies; surveys a wide range of literature that spans labor market outcomes, health outcomes, and broader macroeconomic outcomes; and lays out a research agenda designed to accelerate the evidence base for state and federal policymakers.
  4. Women have made the difference for family economic security. The steady movement of women into the U.S. workforce over the past five decades has dramatically changed the composition of family incomes across the country and up and down the income ladder. But this 2016 issue brief by Heather Boushey and Kavya Vaghul showed that family income did not increase faster than in earlier eras despite women’s additional earnings. The authors explored how over the previous four decades, women’s increased earnings and increased annual hours of work were essential, as families across the United States sought to find and maintain economic security.
  5. The gender gap in economics has ramifications far beyond the ivory tower. The economics profession has a well-known gender discrimination problem. Obstacles in the paths of women seeking to succeed in economics are numerous and pervasive. This has ramifications not only for women’s careers and the economics discipline, but also for U.S. society. In this 2017 column, former Equitable Growth Policy Analyst Bridget Ansel describes a working paper by University of North Carolina at Chapel Hill’s Anusha Chari and Paul Goldsmith-Pinkham of the New York Federal Reserve that shows how economists’ own experiences affect the issues they elevate, and that the shortage of women in the profession has an impact on the issues raised to policymakers and the analysis they receive from the profession.
  6. Understanding the link between bodily autonomy and economic opportunity across the United States. In this 2018 column, Equitable Growth Economist Kate Bahn argues that retaining control over decisions about if, when, and how to bear a child is one of the many work-life challenges women face in the U.S. labor market. Access to reproductive health care is critical to retaining control over childbearing. Bahn describes a paper to be published later this year in which she and her co-authors demonstrate the effect of access to reproductive health care by examining the current variations in occupational mobility between states for women and men, as a comparison group, based on such access.
  7. The wages of care: Bargaining power, earnings, and inequality. Women perform by far the majority of care work in the United States. This is a good example of gender segregation, and it’s no coincidence that care work is a traditionally low-paying profession. Nancy Folbre of the University of Massachusetts Amherst and Kristin Smith of the University of New Hampshire report that their analysis in this 2018 working paper “raises important questions regarding the impact of gender on wage determination. Are care workers paid less because they are women? Or are women paid less because they are care workers? The answer to both questions is probably yes.” Neither employer discrimination nor individual preference is solely responsible for the effect of gender on earnings in the care industry. The lower pay does, however, reflect on how the labor market treats vital, but stereotypically feminine, capabilities.
  8. Motherhood penalties in the U.S., 1986–2014. This 2018 working paper by Ph.D. candidate Eunjung Jee and professor Joya Misra of the University of Massachusetts Amherst and U.S. Census Bureau Research Economist Marta Murray-Close addresses the pay gap between mothers and childless women. The authors examine the evolution of this phenomenon, known as the “motherhood penalty,” over three time periods: 1986–1995, 1996–2004, and 2006–2014. They find that the motherhood penalty has persisted over time and may have worsened for mothers with one child. While it has narrowed due to mothers gaining in education and workforce experience, it persists when those factors are controlled for. Their findings may confirm the need for policies aimed at supporting mothers’ employment to reduce the motherhood wage penalty.
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Retail workers’ unpredictable schedules affect sleep quality: Evidence from the Gap

Posted on by Maria Monroe

Policymakers, advocates, and researchers are increasingly paying attention to the role work schedules play in the lives of low-wage workers. They find that regular, predictable schedules are rare in the retail field. In fact, typical retail workers have little input into their hours, receive fewer than three days’ notice of their schedules, and face canceled shifts and wide variation in their schedules from week to week.

Recently released research conducted in the retail outlets of The Gap, Inc. adds to the evidence base by shedding light on surprising connections between retail workers’ schedules and their sleep patterns. The researchers find that poor schedules translate to poor sleep. In turn, other research suggests that poor sleep translates to poor health and subpar work performance.

The research was conducted by Joan C. Williams of the University of California Hastings College of the Law, Susan Lambert of the University of Chicago School of Social Service Administration, and Saravanan Kesavan of the University of North Carolina Kenan-Flager Business School. Their research is co-funded by the Washington Center for Equitable Growth.

To increase Gap workers’ control over their schedules and their schedule stability, the study authors designed a novel, multicomponent intervention. The intervention included:

  • App-based shift swapping
  • Standardizing start and end times of shifts
  • Funding for extra shifts when stores were understaffed
  • Increased consistency for workers’ schedules from week to week
  • A “part-time plus” group of workers, who received a soft guarantee of at least 20 hours per week

The researchers then randomly assigned 19 stores to a treatment group to implement the intervention and nine stores to a control group that did not implement the intervention.

The Gap was so committed to increasing the amount of notice workers had of its scheduled shifts that the company extended two components that were originally planned to be part of the intervention—two-weeks advance notice and the elimination of on-call shifts—to all of its workers in North America prior to the beginning of the experiment. So, this experiment tells policymakers and businesses alike how the multicomponent intervention affects workers’ lives beyond advance notice alone.

The researchers compared the experiences of workers in the treatment and control stores and found that the intervention improved the consistency and predictability of workers’ schedules. Perhaps more surprisingly, the researchers found that the intervention made a substantively (and statistically) significant impact on the sleep quality of workers who received the intervention.

After the intervention was implemented, the researchers compared the self-rated sleep quality of workers in the treatment stores and the control stores. Controlling for worker demographic characteristics and sleep quality in control and treatment stores prior to the intervention, the study team found that the scheduling intervention improved sleep quality by 6 percent to 8 percent.

Why is this surprising? Some scheduling practices—such as working “clopening” shifts, in which a workers may have fewer than eight hours between a closing shift at night and an opening shift the next morning, or working nonstandard overnight hours—seem to obviously interfere with a worker’s ability to sleep. But this intervention aimed to generally affect the stability and predictability of workers’ schedules and to increase workers’ control over their schedules. The intervention did not specifically seek to reduce clopening and nonstandard shifts—the most obvious culprits behind poor sleep.

So, what might be driving these impacts? One Gap worker interviewed by the research team described how fluctuating schedules prevent workers from establishing the regular circadian rhythms that people need in order to fall asleep. She remarks: “Myself and my counterpart have to completely swap our sleep schedules every two days and it really takes a toll on our lives outside of work and ability to sleep for the next day.”

Similarly, when workers are called in unexpectedly to work during their normal sleep hours, this affects sleep quality. Another Gap worker described a last-minute twilight shift: “Friday, we added three extra bodies to get a shipment done. I had four of us come in at 3 a.m. Our little army was sleepy.” To have consistent time for sleep, people need consistent schedules.

These findings are echoed in nonexperimental work. Sociologists Danny Schneider at the University of California, Berkeley and Kristen Harknett UC San Francisco find that workers who do not work on-call shifts are 8 percentage points more likely to report good quality sleep than those who do.

This suggests that the findings from the Gap underestimate how much scheduling interventions could affect sleep quality among retail workers. Remember: Neither workers in the treatment nor the control stores worked on-call shifts, and workers in both groups of stores received two-weeks advance notice of their schedules. For workers with little advance notice of their schedules and for those who work on-call shifts, increases in stability and predictability could translate into even more sizeable gains in sleep quality.

Why does sleep quality matter? Adequate nightly rest is not a luxury good for people in search of radiant skin. Sleep is essential to heart health, hormone regulation, and psychological well-being. When inadequate sleep is a chronic condition, it can lead to obesity, diabetes, and infection. Beyond sleep’s importance for worker health, sleep also matters for job performance. Sufficient sleep is linked to better cognitive processing, while low sleep quality is linked to irritability.

To perform their jobs well, retail workers need to troubleshoot in real time and display patience and kindness in interactions with customers. Consistent with the importance of sleep for labor productivity, in related work the study team found that their intervention also affected business’ bottom line. In treatment stores, labor productivity grew, and profitability increased by a remarkable 7 percent.

The Gap study shows that by improving the quality of workers’ schedules, businesses and policymakers can simultaneously stimulate the U.S. economy and improve workers’ health. Indeed, cities and states are increasingly seeing the value in requiring employers to raise the floor on schedule quality. New York City, San Francisco, Seattle, Philadelphia, Emeryville, California, and the state of Oregon have all passed legislation that has a similar goal to the Gap intervention: to provide workers with more control over their schedules and to ensure that schedules are more predictable. Rigorous academic research increasingly suggests that retail workers in these jurisdictions will be sleeping a little more soundly and working a little more productively.

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Weekend Reading: “Digital Competition” edition

Posted on by Maria Monroe

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

This week, Equitable Growth released the working paper “Declining Job Quality in the United States: Explanations and Evidence” by David R. Howell of The New School and Arne L. Kalleberg of the University of North Carolina at Chapel Hill. The paper finds that in spite of a growing U.S. economy, the bottom half of the wage distribution has seen their average pay decline since 1980. Moreover, a rising share of workers are in low-wage jobs, and these jobs are now less likely to offer benefits like health insurance than before. It is an important read for anyone who is concerned about the quality of jobs that are being created.

The U.S. Bureau of Labor Statistics this morning released its monthly JOLTS report, summarizing total hiring, firing, and other job flows throughout the economy in January 2019. You can check out Kate Bahn and Will McGrew’s analysis and charts of the JOLTS report here.

Every week, Brad DeLong compiles very good links from both Equitable Growth and around the web. You can check out his latest worthy reads here.

Links from around the web

The British government released a report this week by its independent Digital Competition Expert Panel, chaired by Jason Furman of Harvard University, a member of Equitable Growth’s Steering Committee and former chair of the White House’s Council of Economic Advisers during the Obama administration. The report rejects the idea that digital platforms are natural monopolies and suggests policy recommendations to help competition thrive in digital markets. These recommendations include making it easier for people to move their personal data to other services, developing digital systems with open standards, encouraging data sharing with potential competitors, strengthening antitrust policy, and preventing anticompetitive mergers. The report points out that over the past 10 years, the five largest digital firms have acquired more than 400 companies globally, and none of those acquisitions were blocked. [Digital Competition Expert Panel]

Despite high state income taxes on the rich, more rich people are moving to California than leaving, according to research cited by the Los Angeles Times. While many of the less well-off are leaving California because of high housing costs, the rich find California to be an attractive place to live because of opportunities to boost their incomes and networks. This suggests that for states, high taxes are not a huge deterrent if the economy is thriving. [Los Angeles Times]

Gene Sperling, the former director of the National Economic Council in the Clinton and Obama administrations, published an article this week arguing that economic policy should ultimately aim to improve economic dignity. He writes that it is misguided to focus too much on GDP or productivity growth because those measures can still rise when most of the gains go to the wealthiest Americans. He says what matters is how the quality of life is improving for most people. He defines economic dignity as having three pillars: the ability to care for one’s family, the pursuit of potential and purpose, and economic participation without domination or humiliation. He urges policymakers to focus not on ideology but rather on which policies will ultimately be most effective in providing economic dignity. [Democracy]

The Trump administration released its 2020 budget proposal this week. Spending decisions are ultimately up to Congress, but the budget provides a snapshot of the administration’s priorities. The proposal includes steep cuts to Medicare, Medicaid, and the Supplemental Nutrition Assistance Program, formerly known as the Food Stamp Program. [Washington Post]

The New York Times reports that the Trump administration is working on a proposal to monitor recipients of Social Security disability benefits on social media sites such as Facebook and Twitter. Their purported aim is to crack down on fraud by finding evidence that a disability benefits recipient may not be disabled, such as a photo of someone golfing. Advocates for people with disabilities are concerned that this could lead to some people being wrongfully removed from the program, since some disabled people may want to post pictures of themselves from before their disability. [New York Times]

Friday Figure

Figure is from Equitable Growth’s “JOLTS Day Graphs: January 2019 Report Edition.”

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JOLTS Day Graphs: January 2019 Report Edition

Posted on by Will McGrew

Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for January 2019. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report.

1.

The quits rate has held steady at 2.3% since June of 2018, continuing its historically high trend.

2.

The hire-per-job opening rate continues to trend downward, remaining less than one hire for every job opening.

3.

The vacancy yield edge up slightly in January, but remains less than one unemployed worker per job opening.

4.

The Beveridge Curve is trending upward, reflecting a high job openings rate combined with a low unemployment rate.

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