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Exercise For Country X: –Population = 100,000; –Employed = 60,000; –Unemployed = 3,000; –Not in LF = 37,000. Answer these questions: –1) Calculate size.

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Presentation on theme: "Exercise For Country X: –Population = 100,000; –Employed = 60,000; –Unemployed = 3,000; –Not in LF = 37,000. Answer these questions: –1) Calculate size."— Presentation transcript:

1 Exercise For Country X: –Population = 100,000; –Employed = 60,000; –Unemployed = 3,000; –Not in LF = 37,000. Answer these questions: –1) Calculate size of LF; LFPR, and unemployment rate. –2) Give examples of not in LF. –3. Give reasons woman might switch from not in LF to LF. –4) If go into recession, what expect will happen to: A. # employed and # unemployed. B. # not in LF.

2 Explaining  LFP Using Comparative Statics 1. Effect of  husband’s earned income: –Like any  nonlabor income: Demand theory: will  D for all normal goods including leisure   paid work and  home production. –Will  MVT M since will  MU of purchased goods (as purchase more from husband’s increased income). Relate to real world: –Explains race differences in LFP. –Does not explain  female LFP since husband’s Y has been  until very recently. Contradicts notion that married women “pushed” into LF from low husband’s Y.

3 Continue with Comparative Statics 2. Effect of  female wages: –Rising wages  opportunity costs of leisure and home production so will  both  LFP. –Remember: MVT M = MU C = w/p: So  wages is an  MVT M. Relate to historical trends: –Wages  throughout 1900s but mostly from after WWII till early 1970s.

4 Continue with Comparative Statics 3. Children and LFP: –Presence of children (young kids in particular) will increase value of time in home production (  MVT H ) so will reduce paid work and leisure. –Relate to history: fewer kids so lower MVT H. 4.  Home Productivity: –Impact is unclear—complicated. –Relate to history: much  so probably contributed to  LFP.

5 Evidence from Costa (2000) Summarized evidence about importance of married women’s wages on their LFP. Divides 20 th century into 3 periods: 1) 1900 – 1930: little influence of own wages; primary influence was husband’s income. 2) Mid-century: big influence of own wages. 3) End of century: less influence of own wage or husbands’ income as LFP became norm.

6 Female LFP Rates Remember the big increase over time in female LFP rate: –1950 = 34% –2001 = 60.1% Percentage of total US labor force that is female: –1900: 18% were female –1950: 30% were female –2001: 46.6% were female Today: more than 50% of mothers with preschool children are in paid LF.

7 To Note in Figure 3.7 Age-LF Participation profiles for women in years 1940, 1960, 2001. Two major features: –1)  female LFP for all age groups up to 65 –2)  ing LFP pattern for women in childbearing years. In 2001: still bit of peak at age 24, but then stays fairly high.

8 6 Reasons for  Female LFP 1. Rising real wages. 2.  es in fertility patterns. 3.  es in educational attainment. 4.  ing living standards. 5.  job opportunities. 6.  ing social attitudes.

9 Details for the 6 Reasons Reason #1:  real wages: for females, substitution effect is dominant, causing  LFP. Reason #2: Fact: having young children increases value of nonmarket time. What has  ed? (i) #kids per mother has declined. Why? –Birth control –Increased cost of having kids.

10 Continue with #2: (ii) postponement of childbirth for many women: –1970: 19% of first births to women aged 25+ –2000: up to 51%. Key: hard to establish career while also having young children. So some have kids later; some have no kids at all. –1992 survey of female executives: 42% had no kids

11 continue Third component of changing fertility patterns: More women continue to work even when children are young –1970: 30% of married women w/kids  age 6 in LF. –1996: 63%. One result: dramatic increase in utilization of non-maternal child care

12 Education Changes This is reason #3: Changes in Educ. Attainment: –Big increase in women getting 4- year college degree. Anyone with college degree: more likely to be in paid LF; why? –Go to college because want to work –College can change expectations –W/degree:  opp. cost of leisure

13 Continue High divorce rates tend to  education as means to economic independence. Also:  es in Field of Study: –1971: % undergrad degrees to women: 1% engineering; 9% business. –1998: 17% engineering; 49% business. –50% of law students are female.

14 Reason #4: Living Standards Theory:  female LFP so that family can maintain a good standard of living, even though: – Male wage growth for college- educated workers declined in 70s and 80s; –For unskilled workers, real wages actually fell. –Remember: focusing on standard of living relative to upbringing (Easterlin’s theory).

15 Reason #5: Increased Job Opportunities In past 50 years, “female” jobs have experienced above- average job growth. In 2000, over 63% of working women in 6 occupations: –Administrative support –Food preparation services –Sales clerks in retail trade –Teachers –Secretaries and typists –Nurses

16 More on Reasons Reason #6: Changing social attitudes: –If wife works, no longer conclude that husband is a failure. –More acceptance of child care.

17 All 6 Factors Related Not possible to know what caused what. Were the rising real wages most important? Did more women working cause the shifting in social attitudes? One way to disentangle different factors is to compare LFP trends across countries. –Remember int’l comparisons.

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