Debunking the "opt out" myth

By Kathy G.

Today I want to write about a new paper on the labor force participation of married women in the U.S. The paper is of interest in itself, and also for the light it sheds on the so-called opt-out question (the debate over whether women are opting out of the work force).

First, a little about the study. It's in the current (July 2007) issue of the Journal of Labor Economics and it's by Francine Blau and Lawrence Kahn, two Cornell labor economists who are among the foremost experts in the economics of gender. (The article is available by subscription only, but if you email me I'™ll send you a copy.) They look at married women's labor force participation rates between 1980 and 2000, and they found two very important results:

-- There was a dramatic increase in the labor supply (as measured in hours) of married women between 1980 and 1990, but only a relatively small increase between 1990 and 2000.

-- Married women'€™s labor supply was significantly less responsive to both their own and their husbands' wages.

Now, what does that second statement mean? Traditionally, women'€™s labor supply has been much more elastic than men'€™s. In economics elasticity refers to the percentage change in one thing with respect to a 1% change in another; in the case of labor supply, it refers to the percent change in employment induced by a 1% increase in wages. Historically, men's labor supply has been inelastic -- they'€™ll work about the same number of hours no matter what, whether their wages go up or down.

Women's labor supply, however, has been more sensitive to wages. If the wages they can earn increase, they will work a lot more; if they decrease, they will work a lot less. Their labor supply elasticity has worked in the opposite direction with respect to their husbands'€™ wages --€“ if their husbands wages increase, they will work less, and vice versa. The reason economists give for the difference is that women are much more likely than men are to substitute home production (childcare, housework, etc.) for market labor.

Blau and Kahn report that, over the 1980 to 2000 period, women's labor supply elasticity with respect to their own wage decreased by 50 to 56%, and their labor supply elasticity with respect to their husbands' wage fell by 38 to 47% in absolute value.

The authors use alternative models and estimation methods, but the results are robust to each specification. They also look at various subgroups, including age groups, educational groups, and mothers of young children, and find the same basic results. They write that the decline in women'™s labor supply elasticity

was pervasive and dramatic across a variety of dimensions, including education, race, age, and marital status. It appears that women in general have either become more committed to the idea of working or anticipate spending a larger portion of their lives without spouses, with both phenomena implying reduced own wage labor supply elasticities. The similarity in the decline in elasticities across subgroups suggests that this commitment or expectation cuts across skill levels and even family type.

One of the subgroups the authors looked at is mothers with young children, and here is where the opt-out debate comes in. Over the last several years, there have been numerous articles in the media purporting that women are "opting out" of the workforce. The New York Times, in particular, can'€™t get enough of these stories, which invariably focus on married women who are highly educated, upper middle class, and white.

The problem with these reports is that they tend to be based on anecdotal evidence that has little or no support in social science data. And since these stories are at the same time heavily hyped and thinly sourced, it raises real questions about media bias and reporters' ideological agendas. Experts who are familiar with the data, such as Claudia Goldin, the Harvard economist who is the leading scholar on the economic history of women, have repeatedly debunked the opt-out myth. But many journalists, and even some feminists like Linda Hirshman, continue to propagate the idea that career women are leaving the workforce in significant numbers. And while I find Hirshman's work stimulating and provocative, and agree with a lot of it, the fact that it's based on a false premise is highly problematic.

To be fair, not all of these media reports were pulled out of thin air (or "ex rectum," as a friend of mine likes to put it). A few of them mentioned actual honest-to-goodness data, like the statistics included in this BLS report, which do indeed show a decline in the labor force participation of mothers of young children between the late 90s and early 00s. But Houston, there is a problem here: the BLS reports raw numbers only, and that'€™s not the right way to analyze this question. Just looking at the raw data in isolation can provide a misleading picture.

For instance, if the composition of the labor force changes, something may look like a time trend which in reality is just an artifact of there being more of group X in the population relative to group Y. And indeed, some groups of women with children, like Hispanic women and foreign-born women, now constitute a larger share of the population, and are significantly less likely to be in the labor force than non-Hispanic and native-born women, respectively.

Another issue is the business cycle -- if a recession occurs that causes a decline in employment for both sexes, but you ignore that and just look at the employment of women only, it will look like a supply-side decline, when actually it's a decline that, like the decline in male labor force participation, is a demand-side phenomenon.

So, what has the actual data had to say about women's labor force participation, and particularly the labor force participation of mothers with young children? The afore-mentioned BLS paper claims that the labor force participation for married mothers peaked in 1997, then declined for several years, and has been more or less stable since 2000. But none of the studies I'm familiar with that model for labor force participation and control for population trends, the business cycle, and other issues (like measurement error, selection bias, and omitted variable bias) back up that claim.

The Blau/Kahn paper, for example, finds that, €œat least through the 2000 period, "married women with young children appeared to behave very similarly to married women overall" --“ i.e., they increased their labor supply throughout the entire period, decreasing their labor supply elasticity with respect to their own and their husband'™s rapidly in the 1980s and more slowly in the 1990s. Their paper only looks at data through 2000, and it'€™s possible that women's labor force behavior changed after this date. But according to the BLS paper, the decline in labor force participation among young mothers began in the late 1990s. The Blau and Kahn paper covers that time period but doesn't find evidence of this. (I should point out that these two papers use different datasets -- the BLS uses the monthly CPS data and Blau and Kahn use the annual March CPS survey).

Another paper by Heather Boushey, an economist with the Center for Economic and Policy Research, looks at the issue using a different methodology. (Like the BLS paper, Boushey's paper is based on the monthly CPS data. Unlike the Blau/Kahn paper, this one has not been published in a peer-reviewed journal). Boushey models what she calls the "child penalty"€ on the likelihood of labor force participation, and finds that "after controlling for changes in demographics and the labor market, the negative effects of children on women's labor supply fell between 2000 and 2004." Though the raw data shows a decline in women's labor force participation during this period, according to Boushey the reason was the business cycle, and "œwhile women had previously been more insulated from cyclical unemployment, compared to men, now they appear to be nearly as vulnerable, although it remains the case that men'€™s employment rates fell further than women's over the past few years."

The bottom line appears to be that, controlling for demographics and the business cycle, the labor force participation of mothers with young children has slowed in recent years, but not declined. Perhaps we should be concerned about this slow-down, and in any case we should strongly support policies like government-mandated paid family leave and publicly provided child care, which better enable women to combine work and family. But the media-driven hype about women leaving the workforce and embracing more traditional roles is not grounded in empirical reality.