In Changes in the Labor Supply of Married Women: 1980-2000, Francine Blau and Lawrence Kahn investigate changes in the labor supply of married women between 1980 and 2000. They find that women’s labor curve shifted sharply to the right in 1980s but only shifted slightly 1990s. This shift is coupled with husbands’ real wages falling slightly in the 1980s but rising in the 1990s. The authors believe that the labor curve shift in the 1980s is the primary cause of the rapid growth of the female labor supply. Also, from 1980 to 2000, women’s wage elasticity fell about 50%, while their responsiveness to their husband’s wages fell around 40%. This latter finding likely reflects the increasing need of women to be independent because of rising divorce rates and their increasing career orientation. The concurrent slowdowns in both women’s relative wage and employment increases in the 1990s suggest that women are now moving along their labor supply curves instead of shifting the curve as in the 1980s.
Blau and Kahn begin by summarizing changes in the percentages of women in the labor force. In 1947 31.5% of women and 86.8% of men were in the labor force. By 1999, women’s participation rose to 60%, and the men’s level had dipped slightly to 74.7%. The female/male ratio of full-time annual earnings increased from 60.2% in 1980 to 72.2% in 1999. Also, after 1970, the number of women in high-power jobs jumped exponentially. However, since 1990 the increase in women’s participation and relative wages has slowed. Between 1990 and 1999, labor participation rose only from 57.5% to 60% and relative wages compared to men increased only from 71.6% to 72.2% in the same respective years.
What is the cause of these changes in women working? A common explanation for growing participation by women is that in the 1970s and 1980s married women had to enter the labor market because the employment opportunities and real wages for their husbands declined. This position implies that the increased participation was a product of the income effect. However, previous research dispels this notion by finding that the women with the greatest increases in labor supply were married to men with high incomes. Also, the high-salaried men experienced more rapid wage increases over this period than low wage men did. If husbands’ wages had a large role, then the labor supply of women married to low earning men should have risen the fastest. However, the opposite happened, and the income effect can be rejected.
Blau and Kahn provide a summary of previous literature which discusses possible reasons why more women are working and also dispel common myths (like in the previous paragraph). Unlike these are studies, they focus instead on measuring how big these changes are. The authors use data from the years of 1980, 1990, and 2000 of the March Census Population Survey data to study changes in labor supply over time. The sample was derived from women between the ages of 24 and 54.
The authors measured the effect of wage and the effect of changes in the husband’s wage on women’s labor supply. They controlled for demographic factors and additional factors such as non-labor income. Wage elasticity measures how changes in salary affect labor supply. For 1980, the authors found that women’s wage elasticity ranged from about 0.8 to 0.9. By 1990, it was 0.6 and only 0.4 in 2000. Essentially, changes in wage in 2000 affected whether women worked only half as much as it did in 1980. The wage elasticity of the husbands of the wives was also measured as a comparison. They ranged from 0.01 and 0.14 and no pattern emerged.
Changes in labor supply can come from changes in the participation in the labor force or changes in the number of hours worked. If two women work forty hours a week, one woman completely quitting or both women working only twenty hours a week will create the same wage elasticity. The authors distilled whether women were participating more in the labor force or whether more part-time women began to work full-time. Their analysis revealed that married women’s participation elasticities dropped much more over the 1980-2000 than their wage hours elasticities conditional on employment. This suggests that the drop comes mostly from changes in participation.
Another major finding is that women’s labor supply was significantly less tied to their husbands’ salary. This link is called cross wage elasticity. They authors determine that the cross wage elasticity dropped from -0.3 to -0.4 in 1980; to -0.2 to -0.3 in 1990; and -0.2 in 2000. Therefore, the effect of changes in husbands’ salary dropped 37%-48% between 1980 and 2000. Also, the decreasing responsiveness of married women to their own and their husbands’ wages occurred within each education level and for mothers of small children analyzed separately. This implies that this labor independence is a pervasive phenomenon among married women.
The authors also measured how husbands’ participation was tied to their wives. The husbands of these wives exhibited an extremely low cross wage elasticity of less than -0.1. Thus, the husband’s participation is unresponsive to their wives’ income.
The conclusion is that married women’s own and cross wage labor supply elasticities are becoming more like men’s. This trend is likely caused by fewer women being on the margin of participating/not participating in the labor force. Increasing divorce rates and increasing career orientation of women probably cause the labor supply of women to be less sensitive to their own wages and to their husbands’ wages. The authors also add that these findings have implication for tax policy. The ability of marginal tax rate cuts to increase labor supply has dropped dramatically in twenty years because women’s labor supply is less responsive to external factors.