Introduction
In economics, labor is the human effort directed toward producing goods and services. Along with the other factors of production—land, capital, and entrepreneurship — it is a building block of the economy.
Employees exchange their labor with employers for wages, salaries, and other benefits such as health insurance and retirement benefits. These transactions take place in what is called the labor market and are worth more than half the total value of all the final goods and services produced in the economy during a given year.2
The labor market is so important that the U.S. Congress made promoting maximum employment part of the Federal Reserve's mandate, along with promoting stable prices and moderate long-term interest rates. Monitoring how the labor market is doing is important to fulfilling that mandate. However, it is also valuable for the Fed to understand how various characteristics of individuals affect their participation in the market.
For example, workers' gender affects their experiences in the labor market. These include their decisions to participate in the market, the types of jobs they hold, their decisions to exit the market, and ultimately their earnings. The following sections discuss these aspects of men's and women's experiences in the labor market.
How Many Men and Women Participate in the Labor Market?
To answer that question, the U.S. Bureau of Labor Statistics (BLS) uses data collected through its monthly Current Population Survey (CPS). This survey is administered by the U.S. Census, and it involves interviewing about 60,000 people who either live alone or as part of a household.3 Survey respondents identify as either employed (holding a job) or unemployed (being out of work and actively looking for work). The sum of the employed and unemployed workers is called the labor force. Because the size of the labor force is related to the overall size of the population, it is helpful to calculate the labor force participation rate by dividing the number of people in the labor force by the number of people in the population. Multiplying that rate by 100 expresses the rate as a percentage.
Figure 1 shows the different labor force participation rates for men (blue line) and women (red line) in the United States. A larger percentage of men than women participate in the labor force. Between 1960 and the late 1990s, the number of women in the labor force steadily increased, when more married women started to work outside the home. Factors that helped facilitate this change include delaying having children and using time-saving household technology, such as washing machines, vacuums, and dishwashers.4
Nonetheless, since 2000, the labor force participation rate for U.S. women has declined. Researchers have not identified a single reason for this decline, however. In other countries, such as Canada, the labor force participation rate for women continues to increase. More generous parental leave policies and tax incentives may play a role there.5
Do Economic Shocks Impact Working Women and Men Differently?
The labor market is affected by the expansions and contractions in economic activity known as business cycles. Figure 1 shows that the participation rates of both men and women decreased during the COVID-19-induced recession in 2020. At the time of this writing, those rates haven't fully bounced back. During contractions, known as recessions, there is less activity in the labor market (less hiring and moving from job to job) and more workers become unemployed. Recessions, however, can affect the employment status of men and women differently.
Figure 2 shows the unemployment rate for men (blue line), for women (red line), and across genders (black line). The BLS reports the unemployment rate in the CPS survey by dividing the number of people unemployed by the number of people in the labor force. Because there are different numbers of men and women in the labor force, calculating a rate for each allows us to compare their unemployment experiences. Multiplying that rate by 100 expresses it as a percentage.
During the 2007-09 recession, men experienced higher unemployment rates than women because more jobs were lost in occupations and industries that traditionally employ more men: namely, goods-producing manufacturing and construction.6 (See the boxed insert for examples of jobs in each industry).
During the COVID-19-induced recession in 2020, women made up the majority of those who became unemployed and the majority of those who left the labor force. An unequal distribution of household responsibilities between men and women could explain this phenomenon. In fact, during the first few months of the pandemic, mothers decreased their work hours outside the home four to five times more than fathers did.7 And research shows that women living with children under the age of six left the labor force in larger proportions than women with older children, suggesting that regular, reliable, and available childcare plays an important role in supporting women's continued participation in the labor force.8
However, recent research indicates that the unequal effects of the COVID-19 pandemic on the labor market experience of men and women were mostly temporary and that lingering differences are associated with age, race, ethnicity, and occupation.9 The type of jobs men and women tend to hold can either shelter them from or expose them to an economy-wide shock.