Forget Cherishing Women: Family-friendly Policies Are Essential Tools in Fighting Income

Forget Cherishing Women: Family-friendly Policies Are Essential Tools in Fighting Income Inequality

By Judith Warner

Early this year, a team of distinguished economists, current and former government ministers, academics, labor leaders, and opinion makers gathered at the Mayflower Hotel in Washington, DC, to announce an ambitious plan to create "inclusive prosperity" on a transnational scale. The experts — led by former US Secretary of the Treasury Lawrence H. Summers and Britain's then-Shadow Chancellor of the Exchequer Ed Balls — spoke about new investments in infrastructure, raising wages, and more progressive taxation. They also highlighted a time-tested approach that is too often omitted from mainstream economic debate: maximizing the earnings power of women.

The Scandinavian nations have largely managed to avoid the 'toxic cocktail' of 'growing inequality' that is now poisoning social and economic life in much of Europe and the United States, said Pär Nuder, Sweden's former minister of finance. A key reason for this success, he said, is that "we have, contrary to many other countries in Europe and elsewhere, mobilized the whole work force. Not only the male part but also women."

Nuder conveyed a truth that has been proven time and again in studies around the globe: Women's employment is key not only to a nation's economic growth but also as a powerful countervailing force to the contemporary scourge of income inequality.

Since the 1980s, household income inequality has increased in nearly all advanced industrialized countries. The rate and extent of that increase, however, has varied among nations due to a variety of social, economic, and political factors. Among the most important of these is women's work, which is supported in many countries through generous paid leave, child care, and flexible scheduling policies. A 2013 European Commission policy brief stated this categorically: "It has been shown that 'women-friendly' reconciliation policies play a major role in facilitating work-life balance for female second earners in households, thus increasing household income and countering inequality."

The dual awareness that women's work serves as an income equalizer among households and that family-friendly policies, by extension, are essential tools in fighting income inequality has been slow to take root on this side of the Atlantic. In recent years, it instead has been fashionable in the United States to point to studies showing that women's work has actually worsened income inequality. That conversation has focused on "assortative mating" — the practice of people marrying others like them, in this case, others with a similar education level — to argue that the widespread movement of women into the workplace since the 1970s has brought high-earning men and women together into even more high-earning households in an entirely new way.

This report will argue that this line of reasoning is misleading and — worse — pernicious: It is the latest in a set of destructive attitudes that have kept the United States from moving forward with the rest of the industrialized world in adopting policies that support women's employment.

It has previously been established that women's earnings have played a key role in bolstering the health of the US economy. Last year, the White House Council of Economic Advisers, or CEA, analyzed decades of data from the Bureau of Labor Statistics’ Current Population Survey and reported that nearly all of the rise in U.S. family income between 1970 and 2013 was due to women’s increased earnings. "In fact, if women's participation had not increased since 1970,"CEA wrote, "median family income would be about $13,000 less than what it is today."

Women's earnings have also played a central role in tempering the growth of inequality. A new analysis from the Center for American Progress, carried out by Policy Analyst Brendan Duke, shows that from 1963 to 2013, inequality in the United States — measured by the distribution of income among the bottom 95 percent of married couples — rose 24.9 percent. Women’s earnings in that period rose fivefold. That increase, Duke demonstrates, had a significant effect on counteracting the rise of inequality; indeed, he shows that if women's earnings had not changed, inequality would have increased 38 percent. In other words, inequality in the United States would have grown more than 50 percent faster if women’s earnings had not increased between 1963 and 2013.

Economists Maria Cancian and Deborah Reed previously measured the impact of wives' earnings on income inequality by developing a set of counterfactual scenarios that could be compared to observed findings. Using data from 1979 to 1989, they compared data on married couples’ incomes to a series of alternative scenarios in order to isolate the effect of wives’ increased labor force participation and earnings. They concluded that wives' earnings reduced income inequality because the income distribution would have been more unequal in their absence.

Economist Susan Harkness conducted similar research, using data from 2004, that compared counterfactuals in which no women worked and all women worked. Her findings reinforced the conclusions drawn in previous research, finding that if no women worked for pay earnings, inequality among coupled households would be 63 percent higher, while if all women worked, it would be 22 percent lower. Brendan Duke's analysis builds upon this previous body of research by expanding the time period studied to 1963 to 2013 and by tweaking the counterfactual scenario with which the observed data are compared. In his analysis, the observed data on incomes of married couples are compared with an alternate scenario in which women’s earnings inequality and inflation-adjusted earnings remained unchanged from the early 1960s. In doing so, he found that the wives' earnings helped reduce income inequality growth because inequality would have grown roughly 50 percent faster without their increasing contributions to their families' income.

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Forget Cherishing Women: Family-friendly Policies Are Essential Tools in Fighting Income Inequality

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