Want to achieve a soft landing? Try advancing the gender equality agenda. By closing the gender equality gap in the U.S. labor market, it could help policymakers achieve the soft landing that policymakers have coveted. In doing so, we could reap $1.789 trillion in gains from a fair labor market.
Interesting things happen when we look at the economy through an intersectional lens—that is, when we disaggregate economic data by sex plus race and ethnicity. Just before the outbreak, the female labor force participation rate had climbed to 59.2%. By the October 2022 jobs report, that had dropped to 58%. When we consider this in terms of a percentage controlling for population growth, this means that 1.549 million women have disappeared from the workforce since February 2020.
It makes me uneasy, and my uneasiness does not come from fairness issues. I am not a radical. I’m a Gender Economist – Our economic strength stems from the diversity of our workforce. We need those more than a million women who have disappeared from the workforce to fuel our economic engines. Since 1970, women have contributed $2 trillion in value to the U.S. economy through increased labor force participation.
Trillions of economic opportunity wiped out by pandemic
Before the pandemic hit, closing the gender gap in labor force participation could have brought about $789 billion in gains to the U.S. economy, and we’ve gained $2 trillion since 1970 beyond that.
However, 29 years of progress towards gender equality in the labor market have been lost in the past two years. This setback potentially cost the U.S. economy $1.789 trillion. In other words, closing the gender equality gap in the labor market could provide $1.789 trillion in support for the post-pandemic U.S. economy.
If we included the missing 1.549 million women in the labor force in the October unemployment figures, the real unemployment rate for women would be 5.42%. Through the lens of intersectionality, things look much bleaker. For African American women, including the 328,000 African American women who have disappeared from the labor force since February 2020, the unemployment rate is 8.58%. For Latinos, including the 313,000 women who have disappeared from the labor force since February 2020, the unemployment rate is 6.03%. Not only do our policies fail to account for these women, but they also don’t understand much about why they leave the workforce. We don’t have data on this – but economists do suspect that many of them entered the informal economy.
These dizzying crossovers not only run counter to the Fed’s goal of achieving maximum full employment (the target unemployment rate is between 4.1% and 4.7%), they also run counter to the principles of economic prosperity.
What if, instead of cooling the economy with big rate hikes, we worked out solutions to get these women back into the workforce? Doing so would result in a three-step plan for addressing the challenges of a soft landing: one that would stabilize prices, encourage fair employment, and promote sustainable economic growth.
Gender equality key to economic soft landing
Achieving a soft landing needs to follow the three-step principle. Let’s review the choreography of this dance.
First, the economy heats up and inflation rises. Prices rose 7.7 percent in October from a year earlier.
Second, the Fed raises interest rates to cool the economy. The Fed raised the federal funds rate by 375 basis points in just 8 months.
Third, prices remain stable to avoid economic recession. If we choose to bring these 1.549 million women back into the workforce, we have hope for a soft landing. The reason is as follows.
Economic Benefits of Fair Employment
In the U.S. economy, there are about two job openings for every person looking for a job. An increase in labor supply would narrow the gap between workers and vacancies by almost 33%. By mitigating the deleterious effects of a wage-price spiral, more workers vying for dwindling jobs would help keep inflation in check.
To avoid a recession, unemployment across all cross-groups needs to be kept within the target range of maximum full employment of 4.1% to 4.7%. The intentional return of African-American and Latino women to the workforce, as disaggregated data by sex and race show, will ensure that there is no enduring K-shape in a country already showing the worst economic stratification recovery.
Overall, further rate hikes do not bode well for fair employment. Tight monetary policy led companies to consolidate labor on a “last in, first out” basis. That means women and black employees are often the first to be fired.
Gains of $1.789 trillion from a fair labor market are a conservative forecast, new research suggests, because the model used to calculate the figure relies on a so-called headcount measure. It treats every “head” equally. An employee is an employee.
However, there are no perfect substitutes for women and men in the labor market. Increasing gender diversity in a particular business unit improves a company’s financial performance in ways that models don’t capture.
For example, research at my company shows that for every 10% increase in gender equality at intersectionality, revenue increases by 1-2%. When models take gender equality into account, the female workforce can contribute as much as one-fifth of the economic gains. (Fortune Chinese website)
The author of this article, Katica Roy, is the CEO of Pipeline.
Opinions expressed in opinion articles published on Fortune.com are solely those of the author and do not represent the views and positions of Fortune.
Translator: Zhong Huiyan-Wang Fang
Want to stick a soft landing? Try sticking to an agenda of gender equity. By closing the gender equity gap in the US labor market, we can achieve the coveted soft landing policy leaders are striving for. And in doing so, we can reap the $1.789 trillion upside of labor market equity.
Something fascinating happens when we view the economy through the intersectional gender lens–that is, when we disaggregate economic data by gender plus race and ethics. Right before the pandemic hit, women’s labor force participation rate had climbed to 59.2%. 2022 jobs report, the rate had dropped to 58%. When we deal in percentages that control for population growth, that means 1.549 million women have vanished from the labor force since February 2020.
This bothers me, and not for reasons of fairness. I’m not an activist. I’m a gender economist–and our economy derives its strength from the plurality of the labor base. We need those million-plus lost women to power our economic engine. Since 1970, women have added $2 trillion of value to the US economy by increasing their labor force participation.
A trillion-dollar economic opportunity obliterated by the pandemic
Pre-pandemic, closing the gender gap in labor force participation could have yielded some $789 billion for the US economy on top of the $2 trillion we’ve already gained since 1970.
However, in the last two years, 29 years of progress toward gender equity in the labor market has been obliterated. This regression has cost the US $1.789 trillion in economic potential. In other words, closing the gender equity gap in the labor market could bolster the post-pandemic US economy by $1.789 trillion.
If we include the 1.549 million missing women from the labor market in October’s unemployment figures, women’s real unemployment rate would be 5.42%. The picture looks much bleacher through the intersectional lens. For Black women, including the 328,000 from the miss for labor Since February 2020, the unemployment rate is 8.58%. For Latinas, including the 313,000 of them missing from the labor force since February 2020, the unemployment rate is 6.03%. Not only do our policies fail to take these women into account, but we also don’t know much about the reasons they left the workforce. The data is simply not available–but economists do suspect many of them went into the informal economy.
Not only do these vertiginous intersectional unemployment rates violate the Fed’s mandate of maximum employment (of which the target unemployment rate ranges between 4.1% and 4.7%), they also violate the principles of economic prosperity.
What if instead of yanking interest rates to cool down the economy, we craft solutions to bring these women back into the workforce? Doing so would generate a tripartite solution to the soft landing challenge: it would stabilize prices, encourage equitable employment, stain and fuel economic growth.
Gender equity is the key to a soft landing
A soft landing follows a three-step dance. Let’s review the choreography.
First, the economy heats up and inflation rises. October’s prices were up 7.7% compared to the previous year.
Second, the Fed raises interest rates to cool down the economy. The Fed has raised the federal funds rate by 375 basis points in only eight months.
Third, prices stabilize and the economy avoids a recession. If we choose to bring those 1.549 million women back into the labor force, we can hope for a soft landing. Here’s why.
The economic benefits of equitable employment
Our economy has approximately two open jobs for every person looking for work. An expanded labor base would close the worker-to-open-job gap by nearly 33%. More workers chasing fewer jobs would keep inflation in check by mitigating the harmful effects of the wage-price spiral.
To avoid a recession, we need to keep unemployment for all intersectional cohorts within the maximum employment mandate range of 4.1% and 4.7%. As the gender and race disaggregated data show, bringing Black and Latina women meaningfully back into the workforce would ensure we ‘t have a protracted k-shaped recovery in a country already exhibiting some of its most egregious levels of economic stratification.
Further interest rate hikes do not bode well for equitable employment levels in general. Tighter monetary policy causes companies to consolidate their workforces to the rhythm of “last hired, first fired.” And that means women and Black employees are usually the first to get cut .
Emerging research suggests the $1.789 trillion upside of labor market equity is a conservative projection–because the models used to calculate that figure rely on what’s known as a headcount measurement. It treats every “head” the same. A worker is a worker.
However, women and men are not perfect substitutes in the labor market. Increasing the gender diversity of a given business unit leads to improved financial performance of the firm in a way not captured by the models.
For instance, my company’s research shows that every 10% increase in intersectional gender equity yields a 1-2% increase in revenue. When models do account for gender equity, the economic gains of women’s labor force participation could be up to a fifth larger.
Katica Roy is the CEO of Pipeline.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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