There is a common question asked about whether working women is a primary cause of lower annual earnings? For starters, it certainly is a primary cause. However, I am not here to argue and say that women shouldn’t work because they contribute to wage stagnation; the truth is it not really about women; it’s about supply and demand.
Moreover, I believe the problem lies more in the area of government regulations rather than a growing female workforce. If government regulations were reduced, we probably would have seen a higher rate of job growth that would accommodate the female workforce without suppressing wages. However, outside of a few exceptions, men and women are competing for the same jobs in the US.
Female Workforce Explodes
At the turn of the 20th century, it was pretty standard to see the men or husbands working while the women or wives stayed home. In 1948 there were 17.3 million females and 43.4 million men in the workforce. During the same period, the share of the labor force for women was 28.6% and 71.4% for men.
By 2016 the number of women in the labor force grew to 74.4 million whereas men grew to 84.7 million. The female labor force grew four times the size while the male labor force grew only twice the size. Also, in 2016, women accounted for 46.8% of the US labor force.
Male Annual Earnings Slows While Female Annual Earnings Grows
In the early-mid twentieth century, male annual earnings grew by a significant amount. In 1960 the median annual earnings for men were $38,991 (in 2017 dollars), and by 1973 that figure rose to $55,317 (2017 dollars) an increase of 42% in thirteen years. However, the median annual earnings for men stagnated from 1973 until 2017, where the median annual earnings were $52,146, a decrease of 6% from 1973.
Women, on the other hand, experience a significant rise in median annual earnings going from $23,657 in 1960 to $41,977 in 2017, an increase of 77%.
Although women receive less annual income than men, in the past 50 years, their wage growth rose much faster than their male counterparts. It’s only natural for the growth rate in men wages to stagnate to compensate for the rapid wage growth for women.
Supply and Demand
The laws of supply and demand can largely explain the slower growth of wages. As the theory goes, if there is more supply of something, the value of that product or service will fall.
Therefore, when women decided to enter work in the 1970s, the overall supply of labor will naturally increase, devaluing the value of work. The only way to keep wages high is if the number of jobs was to grow, causing an increase in demand for labor. However, the annual change in job growth has been relatively flat since women started entering the workforce.
If we look at the charts below, the labor force participation rate for men declines and increases for women.
Furthermore, men and women are finding themselves competing in a labor market that is not large enough to provide a higher rate of wage growth for both genders. Instead, we’re seeing a fall in wages for men and a rise in wages for women. However, neither gender is earning enough money to outpace the rising cost of living.
Rising Costs of Living Outpaces Wage Growth
The CPI has risen seven times the amount since 1960, far outstripping the annual median earnings growth rate. However, if women had not entered the workforce, I do not think earnings for men would increase sevenfold. Consequently, women had to work because one family income was no longer able to provide a middle-class lifestyle.
Lastly, the responsibility of lower wages don’t fall on women, but on our government. Thanks to our government’s lax monetary policies, the value of the US dollar has decreased substantially. Women had no choice but to enter the workforce alongside men.
Today there are more women in the workforce than ever. However, the two-income families are still struggling to maintain the same standard of living of the past.