July 27, 2020 / 7:57 PM / 11 days ago

Breakingviews - U.S. aid can give shot to women in the workforce

SAN FRANCISCO (Reuters Breakingviews) - If necessity is the mother of invention, then the Covid-19 pandemic is providing an opportunity to fix a long-dated problem: the lack of resources that encourage many women to stay employed. Women have been hit hard by the pandemic, with a higher jobless rate and lower labor participation rate than men. Congress is mulling economic Band-Aids in upcoming bailout packages. But the economy would benefit if it took on more ambitious plans, like creating universal childcare.

The U.S. Capitol dome is pictured ahead of a vote on the additional funding for the coronavirus stimulus economic relief plan, amid the coronavirus disease (COVID-19) outbreak in Washington, U.S., April 21, 2020. REUTERS/Tom Brenner

Women’s employment in America had already been going in the opposite direction before the pandemic hit. Their labor force participation rate peaked at 60.3% in 2000. Since the 2008 financial crisis, it had been steadily decreasing at a faster rate than men, an anomaly among Organisation for Economic Co-operation and Development countries, and was contributing to a decline in the overall rate of Americans who were employed or seeking a job.

The cost and inadequate supply of childcare professionals are partly to blame. More than half of Americans live in areas considered to be childcare deserts, according to a 2018 Center for American Progress study. When it’s available, an average family can spend as much as a third of their income on it. 

That impacts the workforce. In Nebraska, where childcare is more affordable, more than one in two mothers worked full-time, according to a study in Sociological Research for a Dynamic World. In contrast, California had one of the highest concentrations of non-working moms, and its childcare cost ranks in the top five.

The coronavirus outbreak exacerbates those problems. In June, the labor force participation rate for women at least 16 years old was 56.1%, though they make up half of potential workers, and their unemployment rate was at 11.7%. For men, the rate was nearly 67.2% and 10.6%, respectively. 

The closure of day cares and schools is an additional burden. The Boston Consulting Group found that while half of working parents said they shared childcare burdens equally, another 37% said it fell primarily on a mom’s shoulders. Without government support, about half of America’s childcare supply could disappear, the Center for American Progress suggests.

While Congress this week is focused on immediate stopgap measures, like whether to extend an additional $600 a week in unemployment benefits, it may be missing an opportunity. Boosting the number of women in the workforce could be a measure that helps bailouts turn into stimulus.

For example, a study in the Harvard Business Review said every 10% increase in the female labor force participation rate in a metropolitan area correlates to a 5% increase in median real wages for everyone. A growth in pay has a ripple effect on the U.S. economy because it increases personal income, which in turn can boost consumer spending. That accounts for about 70% of GDP and its strength before the pandemic helped offset the effects of a trade war with China and slower business investment.

In the decades before it began declining, the bump in women working or looking for a job offset the declining participation rate of men, contributing to an overall increase to a rate of participation above 67% in 2000. Working women also accounted for a bulk of the increase in family income since 1970. A 2016 McKinsey Global Institute study found that $2.1 trillion could be added to the U.S. GDP in 2025 if access to childcare was improved.

The United States is already behind most industrialized countries when it comes to helping working parents. It ranks second to last just above Turkey, spending 0.6% of GDP on policies that benefit families, according to the OECD. Presumptive Democratic nominee Joe Biden has proposed universal childcare as part of his platform, committing to spend $775 billion to increase childcare availability and provide free pre-kindergarten schooling. Regardless of which party is doing the talking, at a time when Congress is looking to thoughtfully spend money in ways to get the economy roaring again, universal childcare will produce economic benefits amid the pandemic and beyond.

Breakingviews

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