Flexible working and access to parental leave have helped American women enter the workforce at historic numbers, a shift that could help the U.S. economy grow more, lower inflation and bring down record interest rates that are at their highest in two decades.
On current trends, 3.3 million women are set to join the labor market over the next five years after years of stagnation following the surge that kicked off in the 1960s but leveled off in the 1990s.
The increased number of working women could also help lessen the effects of millions of Americans retiring and leaving the labor force in the coming years, a trend that was accelerated during the COVID-19 pandemic, with implications for future growth of the economy. If women continue to join the labor force at these numbers it would add 0.2 percent of annual economic growth over the coming half-decade, Oxford Economics revealed in a new analysis.
The boost in productivity from women would give the U.S. economy a better chance of avoiding a recession that some economists believe will hit the country next year as a result of the Federal Reserve's hiking of rates to two-decade highs in its effort to battle soaring inflation.
"We also think the effects could boost the chances of a soft landing," Oxford Economics analysts wrote, referring to an environment where high rates help lower inflation without too much damage to the labor force and the economy.
With more people working, wages—which coming out of the pandemic rose substantially—would decline and help lower inflation to the Fed's target of 2 percent at a quicker pace.
"With more slack in the economy and inflation proving less sticky, the Fed would pivot to a faster pace of rate cuts next year and beyond," Oxford Economics said.
Lower inflation could lead to a decline in the prices of goods and services. A drop in the Fed's rates may help push mortgage rates down, which at north of 7 percent are at their highest in two decades and have made buying a home the most expensive it's been since the beginning of the century.
Childcare Is Key to More Women Working
To sustain the increased participation of women in the workforce, more childcare access would be key.
"To judge whether recent trends can be sustained, we need to understand what's behind them. By far the overwhelming factor depressing labor force participation for women relative to men is that women are far more likely to drop out due to family responsibilities," Oxford Economics wrote.
Women are seven times more likely to stop working due to family commitments compared to their male counterparts.
"Most mothers out of the labor force aren't staying out by choice," Oxford Economics analysts point out.
One factor that has helped women find it easier to continue working is more access to paid family leave. While the United States lacks mandated universal access to paid family leave, an anomaly compared to its advanced economies peers, private sector and local governments have stepped up to offer workers this benefit, helping women to stay working.
This, in addition to more hybrid work—another shift that also accelerated during the pandemic—has given women with young children the flexibility to care for their families while keeping their jobs.
Oxford Economics points out that a decline in fertility rates has also boosted the number of women working, with 200,000 more people in the workforce as a result.
While this is an opportunity in the short term, in the long term it is a risk for the U.S. economy.
"It's a double-edged sword for the longer-run, because a lower birth rate implies slower growth in the working age population down the line," the analysts suggest.
Another risk that could stifle the ability of more women to join and continue working is whether the flexible work environments that rose during the pandemic will stick. Also, family-friendly policies instituted by the government, such as child-tax credits and support for childcare, are lapsing.
The question remains how committed private companies are to improving paid leave policies.
"None of that suggests that the rise in female labor force participation can't continue. But the swing in expectations is one reason to think the pace of change may slow from here," Oxford Economics wrote.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more
