Moody's Talks - Inside Economics - Bonus Episode: Narrowing the Gender Participation Gap

Episode Date: April 12, 2024

Moody’s Analytics colleagues Elise Burton, Dawn Holland and Olia Kuranova join the podcast this week to discuss global female labor force participation and how it has changed since the pandemic. They identify a few key reasons for the recent narrowing of gender participation gaps, explore the economic impact of increased female participation, and discuss ways in which policymakers could encourage more women to join the labor force.To read more on the gender participation gap: Click HereFollow Mark Zandi @MarkZandi, Cris deRitis @MiddleWayEcon, and Marisa DiNatale on LinkedIn for additional insight. Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics, and this is a special bonus inside economics podcast. And to have the conversation, I've got my two trusted co-host. Hey, guys, Chris DeReedy, Mercedon, Natalee. How are you guys doing? Great. And we got another podcast tomorrow, don't we, on the jobs numbers,

the employment data coming out. That should be a big number. Yep, looking forward. Is Dante going to be on with us? Do you know? I believe so. Is he? Yeah, good.

that that'll be a good podcast. And we've got three other colleagues with us today to talk about some work they've done on female participation, labor force participation rates across the globe. We've got Don, Don Holland. Hey, Don. Hi, Mark. Thanks for having us. Yeah, and you're hailing from London. That's right. Somewhere near London. Technically in London, but on the sort of sort of west. eastern edges. I could walk across the border out of London if I wanted to. Is that like a, you know, like a status thing? You know, it's really important to, yeah, I live in London. I, I'm in, no? Yes, it is. It's a big status thing. Yeah,

I think it's, I think it's really important. I think she's being sarcastic in a British kind of way. No? Is that, was that sarcasm I sense there? Although we learned, or I learned that you're actually, Are you, you're not American, are you are American. I'm, I'm a dual citizen. I, yes. Oh, okay. And you grew up close to where we all live here in Philadelphia. You grew up in Princeton.

That's right. That's right. Yeah. Oh, and you got that hoity tooty accent. Now where did that come from? I've been living here for a much bigger percentage of my life than I lived over there. But my kids would take issue with that and they think I have a very American accent. Honestly.

Yeah, honestly. Oh, really? I like your accent, by the way. It's a very nice accent. Yeah. But I'm going to claim you as an American. Is that okay? Yeah, sure.

No problem with that. I'll take it. I'll take it. At least for the next hour. Like for the next hour. And we got Olya, Olaia, Coronova. Hey, Olia, how are you? Hi, Mark.

Yeah, I'm good. Good. Good. And you're hailing from London. No. Yeah, you're in London as well, right? I am. I am.

And it is, it is a status symbol. Is it right? Am I wrong? It kind of is given, you know, the housing costs nowadays. Yeah. Yeah. Right. Yeah.

Yeah. Housing prices there have gone skyward too, haven't there? I mean, I think they've always been crazy, but the past few years has just been a bit insane. Yeah. And so Don lives on the west side of town. Where do you live? I'm northeast Clapton. Oh, that's right.

Yeah. Very good. Good. to have you on. And Elise, at least you're safely here in the U.S. of A, aren't you? Yeah. I'm in Scenic King of Prussia. Ah, you know, I went to high school in King of Prussia. Did you know that? I did not know that. Yeah. I went to Upper Merion High School. Oh, yeah. Okay. Yeah, one of these days. I passed that on the way end. Oh, right? Is that right? You go to Upper Merion, the Vikings? I don't know anyone who's been there, but except for you. Oh, except. I do pass it on my drive.

You guys would not believe my high school. You would not believe my high school. I got to, one of these days I got to tell you about it. It was, it literally is a book. When I was there, what happened, you know, ended up being a book. One English teacher murdered another English teacher for her insurance money. I'm not, and I'm not kidding you.

It became of this bestselling book and a movie and everything else. And it also turned out my principal was involved in drugs, And they caught him stealing from a sear store because he had some problem with the drug kingpin he was dealing with. He needed to raise some cash or something. This was my high school. I'm not kidding. We probably know some people in common involved in that because my best friend from

childhood's mother was the best friend of the woman who was murdered. No way. Yeah. And she was like in the movie and in the book. My friend was a character in the book. Oh, you know what? We need to talk about this some more. I'm really curious. You probably know her. Oh, yeah. We have some really so cool stories about, well, anyway, we digress.

This is a special bonus podcast, and we're going to talk about global female participation. And, you know, the thing here is that participation rates for women since the pandemic are up. They're up most, I think pretty much everywhere. And that has resulted in a closing of the gap between the participation rate of men and women. Female participation rates obviously are still lower than men. But that gap has closed. And the point of the study, lots of points, but trying to figure out what's going on here. But also, most importantly, that the closing of that gap has had pretty substantive economic benefits.

And we're going to talk about just how significant that has. has been, and that highlights the importance of trying to get female participation rates up even further here going forward. And you guys did some great research here, a great white paper that's out there in the public domain, and thought it would be really good to talk that over. So thus the podcast. But before we kind of dive in here, maybe Oli, I'll turn to you. What was the motivation for the study?

I mean, you know, we're economists. We're kind of interested in all these topics, but, you know, at the end of the day, you know, we're about, we do mostly different kinds of research. This is a little bit outside the kind of the kind of typical research that we, that we do. Why did you guys do it? Well, I mean, I think I may be biased here, but I'm sure you're biased. We're all biased. I just saying. Yeah, but I mean, you said it's outside of the, outside of the norm for us.

economists, but I think, you know, women in the labor market, it's one of the most significant economic narratives of the past century, right? You know, even if you look back this time, a hundred years ago, the access to paid labor was for women, just almost absent, right? And now that we have this gradual uptick in female labor force participation, there's this endless trove of information to pick through, right? It's changed a lot of things for women and for economies, for policies. So, I mean, that was the starting point, right? But what we started to notice was that there's these interesting trends in female labor force participation, specifically recently and specifically after the pandemic. And, you know, as you said, historically,

the share of women in the labor force has been low and particularly low compared to men. But this gap is narrowing and we looked a bit deeper about why and when and I mean the final reason really was it coincided really nicely with International Women's Day on March 8th and with you know women's history month which is all of March and I mean March 8th in particular is a day that's deeply rooted in the history of women's rights and coming back to you know that history that we have here, it really is still topical and still ongoing our fight for equality in the labor markets, for pay gaps and you name it. So March 8th is an important date in history for female suffrages. I mean, what happened March 8th? I mean, I think it started, correct me

if I'm wrong, Dawn, because you have more experience with this. But I think it started in the in the USSR or pre-USSSR, where March 8th was one of the first days where women had like a big, a big protest against for women's rights, right? And then it continued year by year. I see. Okay. Don, anything to add there on that history or the motivations behind? No, no.

I think that's absolutely right. So it's been a really longstanding holiday in sort of eastern. Eastern Europe and in the former Soviet Union, but is then broadened out more recently to something that we acknowledge across the world. So, at least, how did you team up with these two characters? How'd that happen? Actually, they reached out to me because I did a bit of research on the closing of the pay gap in the United States, and they happened to be already working on this project.

And they saw the piece, and they asked if I'd like to join, to add a bit of U.S. perspective. How'd that work out for you? Working with those two. Collaborating with them? Yeah, I'm just curious. I think it worked out pretty well. Okay. You guys are still buddies.

Oh, yeah. And Don and I, of course, we're neighbors because she's from Princeton and I'm from near Princeton. Oh, there you go. A lot in common here. We're finding a lot of commonality in our history. That's very good. Okay, so let's dig into the numbers. Wait, Mark, I do need to ask about that there is a fourth co-author.

that unfortunately is a big. That's Barbara. I'm hopefully not going to butcher this name, but her last name is Tyshira Araujo, one of those Brazilian names. So it was at least Don and I, but also Barbara. I forgot about Barbara, right? Yeah, she wasn't able to join today, unfortunately. Yeah, great economists. And she hails from Prague, I believe, doesn't she? Isn't she in Prague? She hails from Brazil, but she works. She's working in Prague. Oh, okay. Yeah. Right now she's living in Prague. That's right, yeah. Okay.

I'm sure there's a lot of good stories there too. Then somehow she's connected back to my high school in some way, I'm sure, but we'd have to dig deep. Probably. As it comes to a true crime podcast. Yeah, right, true crime podcast, right? Okay, so let's dig into the numbers. Here's, well, I did notice that you were focused on, first of all, maybe you can define

participation rating because we've been using that word, but maybe you can just explicitly define it. And then I notice you are using the participation rate for women between the ages, I believe, of 20 and 64. And the question is why? Why not women older than the age of 16? I mean, that may be a very U.S.-centric kind of question, but I'm just curious, you know, why you pick that. So maybe I'll go to you, Don, first. You want to define the participation rate and why you use that measure, particular measure?

if I have that right? Yes. So what we define as female participation rate is the percentage of a given demographic that is actively in work or seeking work. So we'll look at, you can segregate by gender, by age, to look at the share of that particular cohort that is actively in the workforce. But Elise, you're the expert on why we settled on the 20 to 64 age group. Mark, you're absolutely correct that it's a very U.S.-centric view to ask about the, why not use 16 to 64, for instance, because in the EU specifically, their age brackets are just a little bit different. So matching to age brackets. For instance, they would have, it's starting at 15, probably because you can begin working at 15 in the EU, whereas 16 is like the general time when we would consider people to enter, you know, the labor force. So to match the data,

between the EU and the U.S. and the U.K. and all these other places. 20 to 64 was like the best range that we could come up with. Oh, so it's just like the common denominator across the data that you had across all these different countries. Yeah, more or less. Right. Okay. Got it. Now, although we should stipulate, there's a lot of activity action going on in participation rates for women that are above the age of 65 and above as well. Yes, absolutely. But it's a bit of a different story between the U.S. and the EU for that in particular, Don, I don't know if you want to chime in with what's going on in the EU as far as 65 and over.

When you say there's a lot of activity, I mean, I think I would, you know, I think it's important to remember that the share of the cohort over 65 that's actively in work or seeking work is much smaller than the sort of what we would consider the prime workforce age of, depending on what country you're in, starting at some young age and ending in your sort of 50, 60 area. Got it, got it. Okay. And so what you guys, looking at that data, what you found was, well, first, there's large differences across country in female participation. I'd be curious what those differences are and who's kind of high participation, who's low. and then differences, although uniformly you saw the gap between participation by men and women close, and this is now we're really focused on the period since the pandemic hit,

but it's closed in some countries more than others. At least I characterize that the data right? I would say so, yes. I think it's probably best to start with EU and other countries that have a similar story. And then the U.S. is a little bit different. Oh, okay. You want to continue on? Until I kick off with what's going on in the EU,

because Elis is most expert on the U.S. So two things. So you highlighted it at the very beginning that participation rates of women is lower than it is for men, and that's true across pretty much every single country that publishes labor market data. And it's that gap. So it's the difference between the male participants,

rate and female participation rate that we call the gender participation gap. It's very narrow in a few countries like Estonia and Finland, but there's still a gap in pretty much every single country. And in the EU and the US at the moment it's standing around 10 percentage points. But what we've also seen, if you take a sort of long-term horizon over the last 40, 50 years, we've seen the gender gap has been consistently and steadily narrowing in most developed countries. We've had much sort of slower progress in a lot of the developing world. So gender gaps are particularly high in places like India, Turkey, Mexico, more than 30 percentage points. So that's a really big gap between the share of men and women who are working.

but one of the interesting things we noted, so just looking at the EU since over the last 15 years, female participation has been rising at about twice the rate of male participation. So that's allowed the gap over that period to narrow by about four percentage points. Don can just stop you for a second? Because in my, you know, I'm very obviously U.S. centric. And in my mind's eye, what I see is participation rates declining for both men and women. Certainly over the past 20, I think female participation in the U.S. peaked back in 2000 or something like that, a long time. Yes, that's correct.

And so this gap that you're talking about narrowing is not necessarily because they're both rising and females rising faster than male. it's that that females declining, you know, less quickly than it is declining for men. Is that, is that fair? Do I have that right? Oh, it depends on what country you're looking at. Okay, okay. So what's consistent is the narrowing of the gap. Okay.

But whether you're narrowing that by both rising or by female participation falling by less than men, it depends on the country. And at least I think you, you know, what's, you have more stats on the U.S. Can I ask globally? If you look at female participation, reach globally, are they rising? Or are they flat? Are they declining?

I mean, in the broad historical scheme of things. Rising. They're rising. Okay, fine. All right. And then for the U.S., as Mark, you just pointed out, for both men and women, it started a decline in participation

after peaking in the late 90s and early 2000s through the mid-2010s. And then we saw sort of more of an uptick in the years immediately. preceding the pandemic. Then since the pandemic, the participation for women has been rising significantly faster than the participation for men, which part of that is due to the fact that women were more impacted by the pandemic than men. So there were more space to make up, but that doesn't account for necessarily everything that we're seeing. Hey, did you guys know,

factoid for you? We're not playing the stats game, but this is a little bit good one, that the most recent survey of happiness across the world, you know, who's the happiest in the world? What is it, Alia? Norway or Finland. Finland. Finland. It isn't Finland.

Didn't you say, Don, that's where the gender gap is, the participation gap is its narrowest? It's absolutely. It's one of the narrowest in the world. I think the UK came second to bottom in terms of the happiness index. That's what somebody told me. Yeah, it was very depressing. A miserable place.

Well, is that causation or correlation? I'm just asking. I was going to get to Finland as part of the policy talk. Okay, okay. All right. All right. Good, good. What's the happy place?

Okay, so where has the gap, which countries has the gap closed the most since? So you're really focused on the most recent period since. the pandemic or just prior to the pandemic till now. And the gap has closed. It's still 10 percentage points across the globe. So it's still wide, but it's closed. Which countries has it closed the most for? So good question. So I think it's in some of the, well, it is in some of the countries where the gender gaps are widest between male and female participation rates, where we've seen some of the most impressive progress in terms of narrowing those gaps. So in countries like India, the participation gap has narrowed by six percentage points since 2019. Significant progress also in

places like Turkey, in Mexico, Philippines. But it's not exclusive. This is really something that we're seeing globally. And I guess it's kind of obvious that places where that are the furthest behind and have the most catch-up space might be banking the most progress in a short period of time. But we've seen, you know, in the EU participation in three years has jumped by three percentage points. So that's, you know, equivalent of one point a year, which is pretty impressive as well. And where has it the gap closed the least? And has it increased anywhere in the world? So I'd say that the progress has been a bit more mixed in Latin America.

We've seen gender gaps narrowing in places like Mexico and Argentina and also Chile, but not so much movement in Brazil, possibly because of some longstanding social norms that are difficult to shift. Okay. Okay. Marissa, Chris, anything you want to ask on the data, just to get the listener a better sense of what the data is saying. Anything, Marissa? Well, I know in the U.S., because we look at this all the time, right, if you look at prime age workers, so a little bit different from what you're talking about, 25 to 54, and that may be a U.S.-centric,

the female participation rate for that age group is now at an all-time high. where it was coming out of it. Is that right? Yeah, I didn't know that. It's above where it was in 2000. Is that the case anywhere else in the world or is that unique to the United States? So, I mean, I would just, you know, in in Europe, female participation race are at all-time highs because they've never had this decline. They've never had that period of decline that you had seen in the U.S.

They've been on this steady rising pace. Even in Western Europe. Yeah, yeah, that's right. And they are, they're already very high. So you have to think at some point, the scope for further rises is going to get smaller and smaller. We've got female participation rates in excessive 80 percent in all the Nordic countries in the Baltics, Switzerland, Portugal, to name a few of the sort of higher performing ones. So, Marissa, so going back to my mind's eye, I see declining female participation, but you're saying prime age, 25 to 54 is up. So that was it teenagers and where we've seen the big decline in participation? Well, there was a decline from, you know, when it peaked in 2000, right? Through most of the 2000s, it then started flattened out and then started declining for

over a decade. Yeah. But then prior to the pandemic, so once the labor market really tightened again, you know, the years right before the pandemic, it began rising. And then, of course, there was the pandemic shock. But as Elise said, then there was this very strong bounce back following the pandemic. No, I know. But the female participation rate today in the United States is meaningfully lower than it was in 2000.

And you're saying primary age, it's higher. Maybe it's just the aging of the population. I think so. Yeah, sure. Yeah, I think so. I think it's just we have such a big demographic moving into the 65 and older bucket where participation rates are much. Much, much lower, right, 25.

Okay, well, that's an interesting point then. That is an interesting point. Yes. And as Don touched on earlier, there is more activity in over 65 in Europe. In the United States, participation for women in the over 65 bracket did decline after the pandemic. Okay. And you're right, the teenage participation. So those under 20 has been kind of structurally falling for some time.

For both men and women. Men and women. Yeah. Right. Okay. Chris, anything on the data? Just a quick question. I noticed in chart two of your paper, which compares the gap across countries, that China was

at the very bottom was the lowest, I think, about five points difference. Is that truly the lowest? Or is that just a selection of countries? Is Estonia actually lower than that? Or is it? Estonia is even lower. Estonia and Finland are like, two percentage points, I think, or just around.

So, yes, those were a selection of the larger countries. Chris, what's the capital of Estonia? Quick. You don't know? Start with the tea. Starts with tea. At least, do you know? I'm liking it.

This proves I'm not U.S. centric because I know the answer. Is it Chibliisi? No, Tablis. No, Tablis. Georgia. Tallin. Talon. Yeah. Hey, are you impressed?

Very. I'm impressed. Okay. All right. Okay. So, bottom line, participation rates between men and women have narrowed. Still, you know, globally wide, 10% of point, but narrowed. Some places more than others, places where the gap has been as largest is where we've seen the most significant narrowing. probably no surprise. So then the question is, okay, what's going on? Why? You know, why has this happened? And maybe, Oli, I'll turn to you first.

What's the number one reason? I'm sure there's more than one reason, and it varies across country. But what's like at the top of the list of reasons? Well, I mean, that's hard to say because we really in our report identify three reasons. But I guess the one that we start with is that post-pandemic, we, We've seen very, very tight labor markets with record low unemployment rates. And I'm sure, as you know, in the U.S., this is very true. So during the pandemic unemployment, spike to, correct me if I'm wrong, around 15% spring 2020,

then it just plummeted down all the way to below 4%. So 3.5 around it is right now. And it's kind of stayed there since. And this is near historic lows for the U.S., but even in the Eurozone, for example, just yesterday we got some data for employment and the unemployment rate is still at 6.5. And, you know, compared to the U.S., that's a little bit higher, right? But it's the lowest since the inception of the EU. That's 1999.

And it's just consistently going down, you know. So what we're seeing here is that, you know, firms are strapped for labor. They're having to offer additional incentives to incite. applicants to come back into the fold. And this could be higher wages, but it also is these different benefits, you know, flexible working conditions and child care benefits. A lot of this is very, you know, disproportionately beneficial for women. And so it's enticing pulling back women into the labor force. There's two more reasons, but. Oh, okay, okay. So number one reason is, I guess, high labor markets, yeah. Yeah, I mean, in that,

And I guess it's interesting that labor markets are tight everywhere, almost everywhere. Yeah. Despite the pandemic, maybe because in part of the pandemic. I think in part, in part because of the pandemic. Right. You know, we really see those unemployment rates kind of like rush back down after this peak, you know, after people come back in after the restrictions and, you know, things are starting back up at a rapid pace and women are really making use of it.

Mm-hmm. Okay. Okay. So number one reason is just businesses need help. They've got all these open positions, unemployment's very low. And does that mean that wages were women have also risen more than for men? I mean, is that that may be outside the scope of your work, but do you know? So at least in the U.S., we can say that the gap has narrowed a bit in recent years, particularly coming from the top of the income distribution. So for high earners, It has gotten much narrow. Obviously, for low earners, it's been fairly equal about 0.90 on the women's to men's earning ratio for many years. But in recent years, high wage earners have gotten a lot more equal as well. Great, great. Good. Overseas in the rest of the world, I guess the data is not really as good, hard to tell. It tends to be more annual data rather

than quarterly data, so it's not quite as up to the minute. But there has been, and Don, if you want to jump in, there has been a bit of a narrowing in recent years as well. Okay. Okay. So number one, tight labor market. What's number two, O'Lea? So the second reason is kind of the push factor. It's the cost of living crisis. So whereas tight labor markets, we're really pulling women back in with these incentives. The cost of living crisis is really just pushing people back in because household incomes are strapped and women are coming back into the fold to meet basic needs for households or supplement household incomes. You know, we, in our report, we covered that real disposable incomes per capita in 23 are lower than in 2019 for several countries. And this is true for the UK, for Germany, for Japan, for South Africa.

and, you know, in the Eurozone, we've only really seen real wage growth pick up very recently after this, like, prolonged period of high inflation. And when you combine high inflation and high interest rates, you really have a recipe for, you know, pushing people back into the labor force and trying to supplement household incomes. Yeah, I would guess, and the cost of living is up for kind of staples, things that you, they're not, luxuries. I mean, this is rent. This is food. No, absolutely. Like, it's up across the board, right? It's energy. It's housing costs. It's goods. It's services. It's everything. So, I mean, it really doesn't discriminate. Right. Right. Okay. Hey, Dawn, Elise, anyone on anything else on reason number two,

the higher cost of living across the globe. And of course, that goes to, again, the pandemic. and I'd throw in the Russian war in Ukraine, right? Because the pandemic scrambled supply chains, scramble the labor market, the Russian war caused oil and natural gas prices go skyward, agricultural prices. And that's the primary cause for that surge in inflation, and higher cost of living that you're talking about. Anything else to add on that? The only thing I would add is, so we talked a bit about the older age groups,

So what we see is very different in Europe compared to the U.S. is that the over 65 female participation rate has actually risen post-pandemic. And you would have to assume that part of that would be because of the higher cost of living crisis suffered over here, which has made perhaps more people remain attached to the labor force for longer than they would otherwise have. You know, the kind of the pet theory I have here for why participation rates for older Americans is not rebounded during the post-pandemic period is people are just a lot wealthier. You know, stock prices are up, housing values are up. So folks in the top, certainly half of the distribution of income and wealth, they're a lot wealthier. I mean, just a statistic in the four years since the pandemic hit, the average household,

net worth of Americans. So that's what people, the value of what people own, less what they owe, is up $325,000. Now, obviously, that's very skewed. So it's an average. And, you know, it's skewed by some folks at the top of the distribution, but nonetheless. And I think the Disappet theory is that those, and those are folks that are more generally well-to-do, higher income, more highly educated, you know, folks, and more likely, to be working in the, you know, as they age for, you know, for lifestyle reasons, they really, really don't need to. And because of their increased wealth, and that's kept it down. And if you look across the globe, wealth is, you know, people are doing wealth is up.

House prices are up in the UK as well, but not nearly as much. And stock ownership is not anywhere close to what it is in the United States, anywhere else in the world. Does that, does that resonate with you, Don? That sounds like it makes perfect sense. But it doesn't explain why things are so different over in Europe. But I guess one other factor that's relevant for Europe is that we've actually seen retirement ages, and this isn't post-pandemic, but it's over the last decade. Statutory retirement ages have been rising, and they've been rising more for women than

they have for men just because there had been this historic. discrepancy. So that could be another cause for the difference that we see in this part of this side of the Atlantic. Got it. Okay. So that's number two. You said there were three reasons. What's the third reason? The trifecta, right? The third reason is the rise of flexible work. And actually, I mean, I personally find this one the most exciting because I feel like it's really about global attitudes like shifting after the pandemic. And I know in Moody, we're all very much like accustomed to remote and hybrid work. But in general, there's been this massive shift, right?

So one of the statistics that we point to in the U.S., for example, is that post-pandemic, 30% of work days are conducted remotely as opposed to 10% before the pandemic. So that's a big increase. And because of this availability of flexible and remote work, I think women in particular have been very, like, it's been very beneficial for women because they are disproportionately tasked with caretaking. And this is caretaking for children, for the sick and the elderly or for the home. And to have a more flexible, flexible, to have more flexible work is better for them because they can then combine these responsibilities with a full-time job.

And, you know, we see that in the UK, for example, we have women more likely to join the labor force or to switch from part-time to full-time work if they're offered these hybrid and flexible opportunities. Yeah, I saw that statistic. I was so surprised that almost a third of hours worked in the U.S. are from the home or certainly not in the office. And that's up from 10%. I'm rounding, obviously. 10% pre-pandemic. I didn't know that. I knew it was up. I didn't know it was up that much. And it looked based on your chart, it looked like it was a pretty stable number. It's not come in, you know, to see.

It spiked, obviously, in the teeth of the pandemic, came in once we went back to work, but it's been stable since then. But this is exactly what I'm saying. There's been this, like, step change in global attitude that, you know, like, even though this spike has not lasted, it's still left the level. much higher than it was previously. And this has been, you know, one of the key reasons for women to really jump back in because they're now seeing it more.

It's easier for them to combine all these responsibilities. Yeah. Okay. So I've got another theory as to what's going on. But before I give you my theory, let me throw it back to you at least. Do you have any other, is there a reason number four on your list of reasons why this is going on? No, just three. Three is the perfect number, Mark.

I know three is a good number, yeah. Three is definitely a good number. You know, it always has to be three, but I'm going to give you a fourth one. I'm curious. But before I do that, Marissa, do you have a fourth one or you want to throw out there? I don't, no. No? Okay.

I mean, no, I don't have any data to back up what could be. That doesn't stop me, you know? That's true. I still can come forward with a deal. It's the theory. All right. Okay. No, I don't. I mean, I wonder about the child care component mixes in with the flexible work, because you could have a flexible work situation. But if you have little kids running around, you can't really do both, right? So it seems like there needs to be something, some mix of having availability of child care in there somewhere. So I do want to hear about that.

Oh, okay. Well, O'Leo, what do you think? And you will hear about that and the policy recommendation. Okay, fine. Okay. We'll come to it, you're saying. Okay. Hey, Chris, do you have any other theories? So my number four would be some compositional shift. Yeah.

That's where I was going. Yeah. Okay. That certainly was what happened from like post-World War II to today in the U.S., right? More emphasis on services, healthcare education. I don't know if that, I don't know if you could really say that that's a post-pandemic effect here. I don't know that we've had a surge in that type of... Well, here's what we know, though, Chris. We know that construction and manufacturing,

particularly manufacturing globally has been flat on its back in the last couple three years. You know, as you raise interest rates, that takes a bite out of those two rates sensitive sectors of the economy. And the post-pandemic kind of spending patterns of consumers meant that we had this big kind of down draft in spending on goods after we did a lot of it during the teeth of the pandemic. And those are male dominated, right? Those are not, and that's one reason to keep male participation rate down. And the other is health care, you know, big increases in health care spending in many parts of the world. And that's female dominated. So I'm just curious you guys, what, Olya, Don, Elise, I mean, did that, did you consider that, or is that something

that got on your radar screen? So one of the things that was actually interesting is that it's actually some of the heavily male-dominated sectors that have seen some of the biggest rises in female participation post-pandemic. So we're looking at the utility sector, we're looking at the construction sector, certainly not something that we expected

when we started digging into the industrial structure. So that was very interesting. Now, to be fair, utilities is a very tiny percentage of total employment. So that's not what's necessarily shifting the needle. So it is very likely to be more closely allied to some of those other have more female-dominated sectors that Chris was pointed out. Okay.

Okay. So it feels like it's more than just compositional within these industries. We've also seen female participation rates rise, yeah, consistent with the other things you've been saying. Okay, very good. I wanted to talk about the economic impact, but before I go there, do you guys think this is going to continue? I mean, because if you think about this, you know, tight labor market, remote work, dynamics, yeah. High cost of living.

High cost of living. I guess they all kind of sort of remain in place, right? So that will continue to drive this closing of the gap. Is that a reasonable forecast, Elise? So we think a lot of these things are going to be semi-permanent, but we could see some backsliding if, for instance, the labor market loosens up, which we see that it's showing signs of loosening in the U.S.

Inflation's coming down in the U.S. and in other places as well. And, I mean, the cost of living crisis, as Don and Oli were educating me on in Europe is still really bad. But if that should come down, then we could see some backsliding. remote work arrangements, as Olia was pointing out, are, seem to have leveled off at a level that could be sustained, and that would sustain additional gains in labor force participation. So if you're forecasting the gap between male and female participation, you'd say it probably will still narrow, but just at a much slower pace going forward compared to what we've experienced

over the last several years. Certainly. And as, as Dom was pointing out, with places like Finland and Estonia where the gap is so small, it gets to a point where it's, like, what is it going to take to close that last 2%, 3% gap between men and women? Like, those could be such ingrained norms in those countries that it's really hard to close those kinds of gaps. Got it. Okay. Okay. Well, let's just then turn to the economic impact. And Dawn, you want to describe, I'm not going to give away the, I don't think I gave away the bottom line number, but maybe you want to do that and explain how you measured it and put it into some kind of context. Okay, let me try.

So basically, we're kind of following in the footsteps of a study that Marissa did a few years ago. So we started out wanting to use the Moody's global macroeconomic model to help us quantify what this narrowing of gender gaps that we were observing actually means for the global economy. So specifically, what we've tried to isolate is the impact of the narrowing of the gap. So that means, so if we say since 2019 gender gaps had remained unchanged, which they did not, then female and male participation would have risen at the same rate. So what we are trying to capture is the extra rise in female participation that we've seen. seen since 2019 over and above what we may have seen for male participation rates.

So we're isolating that change in participation. We've calculated it for 39 of the world's largest economies of which all had seen gender gaps narrow since 2014. And all told that brings about 40 million new entrance into the labor force. across the world since 2019. So that boosts global labor force by about 1.5%. We turn that through our model. And the punchline is that this has added about $1.5 trillion to global income.

And we're measuring that on a purchasing power parity basis, partly because some of the countries that have had the biggest narrowing of the gaps, notably India has a much different purchasing power than would be implied by the market exchange rate. And what is, when you said income, would it be GDP? I mean the same thing when you say income. I mean the same thing. I mean the same thing. Okay.

Okay. And global GDP is, again, this is in my mind's eye, so I may have it wrong, about $100 trillion, I think. At market exchange rates. Oh, and at market exchange rates. Okay. So if I do it on a PPP basis, it's something higher than that. $170 trillion. Oh, okay, a lot higher than that.

Okay. Okay. So I take $1.5 trillion, divide by $170 trillion. and I get, I don't know, 1% or something. Yeah, something just below one percent. Something below, just one point. And I divide by four, because there's been four years, that's a quarter percentage point. This is, hey, guys, this is what's called a back of the envelope calculation, just in case you wanted to know.

Quarter percentage point per annum is due, the growth in GDP on a PPP basis over the line. last four years, a quarter point of that growth per annum is due to this closing of the gap between men and women? Roughly speaking. I would drop 2020 out of that because obviously we saw the opposite happening in that in that year. So the dynamics are different. But yeah, all told, if you look at the change between 2019, 2024, so we're measuring it

as of this year. But that's how we get to our $1.5 trillion. Okay. And should I be thinking of this in nominal terms or real after inflation terms? These are in nominal terms. Nominal terms. Okay. So, again, from my mind's eye, global real GDP growth over that period, maybe three on a PPP basis.

inflation is three, maybe even higher. So that's six. And you're saying a quarter point of that six is due to this closing of the gap. Again, obviously, that's a very rough back of the envelope calculation. Is that kind of sort of right? That sounds broadly right. Okay. Okay.

Okay. Okay. You're saying it's meaningful. It is meaningful. Yeah, it matters. It's meaningful. 40 million people. Yeah, 40 million people.

But, I mean, there's a lot else going on in the global economy, obviously. So, yeah, right. Okay. Very, very interesting. Okay. And so that would argue strongly that it would be a good thing if that gap continued to close, right? Because that's, well, particularly if the gap's closing as both participation rates are rising. If it's closing because one's falling less quickly than the other, I'm not so sure, but I guess.

But, you know, it's better if they're rising. So to that end, do you think, I guess I'll direct this to you, O'Leo, do you think that governments kind of understand, policymakers globally understand this and are thinking about how to provide, you know, some support to this dynamic to close the gap even further? or is this lost on people? I think it depends where you look at, but the more studies they're done, like our study, that highlight the economic impact of bringing women back

into the labor force and keeping them attached to labor force, the more impactful it will be. And the more governments will have to have to implement policies that really support that. And I think what these policies look like

is going to obviously very country by country and I think I'll say my two main points and then Don't you need three Oliya, I'm just saying. No, but now I'm splitting it so I'm doing two and Don is doing the third one. Okay, okay, just ask you. We got the three.

We got the three, Mark. But what I really wanted to say is that it will differ what a country needs depending on where their economy is at, right? and where their level of development is at, because, you know, developing economies will benefit the most from a set of policies that have already maybe been implemented in developing countries. And some of these are to do with, like, education and, you know, but for developing countries, developed countries in particular, I wanted to highlight two things.

And the first one is paid and equal parental leave. And this is where it comes back to, you know, Finland being the happiest place in the world. and having the lowest gaps in gender labor force participation. And this is because Nordics, I think Finland and Norway and all those countries in that area, they are very good at providing equal parental leave. And when we start from the basis of providing maternity leave, you know, in the U.S., Elise was telling me that the U.S. has no mandatory paid maternity leave. leave. So it's not paid. But when we when we start by blocks, right, we start first with paid leave.

So that already allows parents to take time off without job loss and financial hardship. It encourages women to come back to work after having a child and it increases their attachment to the labor force, which is really what we're looking for because this attachment really takes a dent. And so does pay and a gender pay gap after a woman has a child. This is where we see those big losses. And to get women attached to labor force is very important to get them back and after they have a child. So first, paid. And now equal parental leave.

So that's for both partners, for both men and women. And disproportionately it's been women taking maternity leave. But now we want to suggest an encouragement of equal parental leave, which will promote this fair sharing of responsibilities between men and women, between both parents. And it encourages the parents to alternate the leave so that women can come back faster and with less worries to the labor force.

And, you know, this is what they're doing in the Nordics and they have some of the smallest gaps. But, you know, these policies really vary, even on a European level, where we have mandatory minimum, of 14 weeks in Germany and then 58 weeks in Bulgaria. I think that's, you know, left over from that, like, Eastern European, in Eastern Europe in general, they're very long because they want to promote birth rates.

But, you know, and then compared to the U.S., which has no mandatory payment or any to leave. So that's the first one, paid and equal parental leave. Totally agree with that. Yeah, I mean, I think in just speaking as someone who's hired all, a lot of men and women over a long career in just observing kind of the paths people have taken, men and women, I do think the fact that women historically, and I'm speaking U.S., obviously at this point, that women step out of the workforce, historically, for a lot longer to take care of the kids, has clearly has an impact on lots of outcomes. And it's really very important that

you get, we equalize paternity and maternity leave. So I think that, you know, put everyone on the same footing. And I think we'll see much equal, much greater equality and outcomes in terms of participation, in terms of pay, in terms of, you know, advancement within organizations, that kind of thing. I think that's, that's absolutely critical. Good point. So number two.

Number two is what Maris said. By the way, if you decide to run for office and, you know, looking to get in the government, you got my support. I may even donate to your campaign, if that's a lot. Thank you. Yes. I'll be campaigning for a paid and equal parental leave. There you go.

That's a winner. That's a winner. I think so. I think so. And I mean, the best thing is that the studies are showing that it is so, right? We're having great data coming out of Scandinavia and, you know, happy people and they're doing well. and they have all those good policies in place. And what they also have, of course, is childcare.

That's the second one. And it's not just the provision of childcare. It's the provision of affordable childcare because we do have provision of childcare across Europe. But within Europe, there's massive differences. For example, we have net childcare costs that range from 5% of an average income of a single woman. That's in Germany and Austria.

to 52% and that is in the United Kingdom. We're so proud. So, you know, in many countries, we've even seen that childcare costs can be so, so prohibitive to the point

where they are at the same level, if not more, than housing costs. So there's been a study done in the UK where two thirds of families have childcare costs that are more than their mortgage. And you know, it's, you have a child and then you have a mortgage and you

basically, by paying for child care, you have a second mortgage. And what are you supposed to do with that? And so essentially, it's, it comes down to having the provision of affordable child care. And, you know, as I said, many European countries are doing this well. But there's still a ways to go for the UK, for example. And I'm not sure what the situation is like in the U.S. actually. It's not great. It's not as bad as the UK. Don was telling me 52%. That's insane.

But it's not great. There was a study from, I believe, the Census Bureau, two years ago, looking at the gross cost of child care. And in some places, it ranges up to the housing costs. So 20 plus percentage points, percent of your income. Yeah, it's been a, the fodder for a lot of political campaigns. Like when Elizabeth Warren, that may not ring a bell, but she's a senator from Massachusetts,

she ran on a program that included increased child care benefits, limiting the percent of a family's income that could go to child care. And above that, they would get support from the government to try to limit the costs. But, you know, obviously that really hasn't gone anywhere. The other thing that people have been focused on here is the child tax credit. You know, you have children and you get a tax credit. And there's been efforts to expand, increase that, make it refundable so that even if you don't pay taxes, you get a check back, you know, for the cost of child care.

So there is movement, but certainly long way to go, I think, there in terms of, you know, providing that kind of care. You said that there was a third policy proposal. It was a third reason. Yeah. Or it's not. I'm just going to go in. My policy, and that's for Don.

For Dawn. Okay. Okay. Don, so super briefly. Yep. No, no, no. Go. Shall I go ahead?

I'm now judging you whether I'm going to contribute to your campaign or not. So go, go ahead. Okay. Well, I won't be running in the U.S. So this is more of an issue for developing countries. And it's trying to address gender gaps, not just in the labor market, but in education. especially in STEM subjects, which is one of the factors that's behind particularly low female participation rates, especially in higher paying jobs in many developing countries.

Oh, okay. Very good. I know we're getting a little long on the tooth here, but maybe I'll just turn it back to Marissa and Chris because I kind of dominated the conversation. Any any gaps in the conversation you want to call out and fill in, Chris? No real gaps. I do have a question, though, about a shorter term policy question, given the drivers here, tight labor market and rising living costs, does that actually suggest we should be running the economy hot here for a while, tolerating a higher level of inflation? If the objective is this reduction of the gap. I've got a view on that. Do you guys, anyone else have a view on that? I certainly wouldn't base my political campaign on that proposal. I think she said she disagreed.

She doesn't like that idea. It doesn't like the idea. Running on a high inflation platform? I don't think that that would get past voters to run it hot to close the gap. We'd prefer to run it hot without the inflation. Can we do that, please? When you figure out how to... I think we can.

This is what we're doing. That's what we're doing. That's a hot economy with low inflation. We just got to see. stay here. I think it's doable. I mean, you got to... The target is if we had, would you tolerate two and a half or three? Well, I guess I would for other reasons, but I'm not sure.

Yeah, but you give us with one and take us with the other, right? I mean, because now your cost of living is higher and that back to your, I mean, I'm not sure if it's really helping out here, but interesting. I don't know. That, Don, Oliug, anything you want, at least voted against it. What do you guys think? I think I vote against as well. I think maybe it's easier to just implement the policies that we know work for women rather than undertaking the risky road, you know. But I see what you're saying. No, you don't. Come on. No, I don't. You have no idea what he's saying. Yeah. He's trying to stir things up is what he's trying to do. That's my role.

Yeah. Hey, Marissa, anything you want to add? Well, I was just going to say, you know, a few weeks ago we had Heidi Shearholz from the Economic Policy Institute as a guest on the podcast. And this is what she was arguing. Part of her argument was that not only has a tight labor market benefited women, but it's helped African Americans. It's helped other, right, minorities and historically disenfranchised people be pulled into the labor force. And she was arguing that this was a good thing if you could run the economy hot without. stoking higher inflation, that it wasn't, it wasn't just women, right? It was sort of this rising tide lifts all boats argument that she was making. So it is an argument that we heard. I guess the way, Chris, though, I think this, what you're saying really matters is to the question about if I'm on the Fed, should I be, it's kind of risk management. Which risk am I more worried about it? Is it the risk that I'm going to keep rates too high for too long and push the economy into recession, or is it the risk that, you know, keep, I lower rates too soon,

inflation begins to pick up, you know, ultimately have to combat that. I'd say this kind of argument about learning a hot economy to help more disenfranchised groups to participate more fully in the economy, you know, female participation or underserved groups like African Americans or Hispanics, kind of shifts the weighting maybe or the risk, the kind of the risk that you're willing to take here, that I'm more willing to take a risk that I'm going to run the economy too hot and get the inflation as opposed to keeping the brakes on the economy and pushing it into recession. I guess that's where that kind of criteria might enter into the kind of thinking that you have around the risks that are involved.

But barring that, I mean, at the end of the day, you know, the inflation is, you know, is a problem for the people you're trying to help, they get really upset about it for good reason. And ultimately, it's very difficult to maneuver from two to three without going from three to four. And at that point, the Fed has to push the economy into recession. So I don't know, that's a pretty difficult one. That's a very nuanced kind of argument, I think.

I don't know. Is that kind of what you were thinking, the way I framed it? Yeah, just being a little bit provocative here. but I see that the tight labor market is the main driver here, right? I think that drives the flexibility in work arrangements, right? Employers are willing to be flexible because they have to be. So I don't know if we'll get the policies, the policy response of the continued policies if the labor market should weaken or, you know, we don't have as tight a labor market.

The pressure won't be on policymakers or employees. at that point. Yeah, accommodative. In the longer run, it may be. I mean, as the demographics change and as the population ages in a lot of places, and we're looking at, just as in Western Europe in the U.S., very low birth rates, some of this stuff also encourages a higher rate of birth, right? I mean, anecdotally, families are having to make the decision between having children or delaying having children because of things like the high cost of housing and having kids and child care. So policies put in place like this also make that an easier financial decision. Okay.

Well, very good. That was a great discussion. Anything else to add before we call it a podcast, Dawn, Oli, Elise, anything else you want to add that we missed? Cover a lot of ground. I would just add one thing just to throw it. to be it, to pull a crisp and throw a wrench in things a little bit, which is that Don mentioned Estonia very glowingly in the,

the fact that they have such a close gap between men and women. However, their wage gap is the widest in the European Union. It's about 21 percent. 21 cents on the dollar women do not earn to men. So they make 78 cents on the dollar to a man. Why are you picking on Estonia? I'm just asking. Poor Estonia, my gosh.

I mean, there's like $3 million. Now you're picking on the poor Estonians. It's good in the participation gap, but the wage gap obviously could use a lot more work. And is that largely industrial composition? What a good question, Maris. Thank you. I don't know. I don't know.

I'm pretty delayed. They're from 2022. So it's not clear exactly what's causing this. I just wanted to throw it out there that. Just closing the participation gap won't necessarily close the wage gap. Yeah, I guess that's the broader point, right? You're making it's, look, this is just one measure of how we're doing here. There's lots of other measures and can't forget about wages and advancement and lots of other things.

So it's just one dimension to a multidimensional kind of issue. Exactly. You got it. Yeah. Perfect. Good. Well, thanks, guys. I really appreciate that.

And for the listener, how can they find this? I know it's out there. What would be the Google that you would put in? So it's on the Moody's website and it's called narrowing the gender participation gap. And it's not behind any paywall. So if I go to Google and say narrowing the labor participation rate, Olia, Koroina, I'll get there. Yeah. I'm sure I'm sure I'll get there. You probably would, yeah. Yeah. Okay. Okay, very good. Well, with that, I hope you enjoyed the special bonus podcast, and we'll be recording another podcast tomorrow on the jobs numbers, and I hope you find that of some value, and we'll talk to you soon. Take care now.