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Does rising income inequality fuel female employment?

Small town Alabama rocked my priors. “People here are very judgemental, they look down on you based on wealth, your house, your car or if you’re working in consumer-facing retail”, explained Hannah (a young waitress). Wait a minute. Social judgement based on wealth? I expected social conservativism, not competitive consumerism.

When I went to family barbecues, no one gossiped about impropriety. They were far more interested in prosperity. All the couples were dual earners, driving mighty SUVs. Cars are a major status symbol: portable displays of affluence, often heavily bought on credit, to keep up with the Joneses. My qualitative observations are exactly in line with a new public opinion poll. Patriotism, religion, families and community are down. Money is now more important.

Wall Street Journal 2023

But what sets people’s economic aspirations?

What about seeing others enjoying a vastly superior standard of living, then feeling inferior and rapidly trying to catch up? How might this impact gender?

If families desire increased earnings, they could just buy on credit and become heavily indebted. Alternatively, men may work long hours. Option 3: embrace female employment. When I interviewed husbands of working wives in Atlixco, Cholla, Puebla, Tlacolula and Mexico City (Mexico), they overwhelming emphasised economic necessity. Labour supply may be mediated by religiosity. If you believe that God will provide and that our fates are already written, or if you put more onus on the afterlife, you may not actually change your behaviour.

So even among regions with similarly high income inequality we might expect this to have a greater impact on female employment in secularising Latin America than more devout regions of the Middle East and North Africa.

Has this been observed historically? Yes. Over the 1970s, the relative median earnings of young men plummeted. Unlike their fathers, they could no longer provide for their families single handedly. The median man was falling behind those at the top, he could not catch up alone. This may help explain rising support for female employment. The overwhelming majority of Americans now say that children are better off if both parents work. Can female employment actually reduce income inequality?

Yes. This is precisely what happened in Latin America! Over the 2000s, more low-income women entered the labour force. This explains one third of Latin America’s reduction in inequality.

Could the USA’s wealth inequality help explain why 80% of working US women now work full-time, unlike 30% in the Netherlands and 50% in Germany?

I have not seen research on this question. So I share this merely as a hypothesis that someone clever might investigate! Look at the following graphs from the 2022 World Inequality Report.

Italy has lower income inequality and lower female employment.

Female labour market participation, Giulia Mancini 2016

Clearly there are no monocausal explanations.

Other possible reasons for low female labour supply include costly childcare, joint taxation, unused tax allowances, Catholic conservatism and a low rate of divorce. I also recognise that relatively low income inequality is not a necessary condition for soaring female employment. Spain and Italy have comparable wealth inequality, but very different rates of female employment. Another reason why many American women workers do so full-time is that they really enjoy it. Protestant work ethic. But I don’t think that’s consistent with data showing that most young mothers would rather work part-time or not at all. My reading of this data is that most mothers are instrumentally motivated by money.

Institute for Family Studies, 2021

So I would be curious to learn, Does income inequality affect female labour supply? Let me know if you test this!

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