BERKELEY – Despite a deep recession in 2008 and a slow recovery thereafter, the first two decades of the twenty-first century were generally a time of economic progress in most advanced economies. Real (inflation-adjusted) per capita GDP in the OECD grew at a compound annual rate of 1.15% between 2000 and 2018, and employment levels steadily increased, hitting record highs in some countries.
But this growing prosperity was not shared evenly. Real average wage growth in this period was markedly slower than it was between 1995 and 2000, and real median wage growth was slower still. Work became less secure, and poverty rates (even after tax and transfer payments) rose. Moreover, gender gaps in employment and wages narrowed but remained large, and women continued to confront unique challenges as workers, consumers, and savers.
Consider the track record for women workers. Total employment across 22 advanced economies was at a record high at the beginning of 2020 (before the COVID-19 pandemic.) There were 45 million more jobs in 2018 than there were in 2000, and women held around two-thirds of them. The female labor force participation rate has grown throughout the OECD, with the exception of Norway – where it was already above average – and the United States, where it fell from 60% in 2000 to 57% in 2018. A comparison of female employment trends in Europe and the US indicates that improvements in paid maternity and paternity leave in Europe have spurred higher female labor force participation, whereas gains in female employment in the US have been held back by the absence of such policies in many states.
More broadly, rising female labor force participation was driven primarily by an increase in “non-standard” employment arrangements such as part-time and independent work. Both tend to be more family-friendly than full-time employment, but also more precarious, offering lower pay and fewer if any benefits. From 2000 to 2018, female part-time employment increased by 2.3 percentage points, which is larger than both the 0.7-point increase in full-time employment for women and the 2.1-point decrease in full-time employment for men.
Although work opportunities expanded throughout the OECD, they stagnated or declined for middle-skill, middle-wage jobs, which is one reason why overall wage stagnation has become such a persistent challenge. Average (mean) real wages grew just 0.7% per year across 22 countries between 2000 and 2018, which was less than half the average annual GDP growth rate (1.6%). And as of 2017, the median wage was just 81-90% of the average wage across the OECD, reflecting uneven wage growth across income groups.
From 2000 to 2018, the gender gap in earnings narrowed very slowly, and remains substantial in many advanced economies. The remaining gaps are the result of many factors, including gender differences in the incidence of part-time work and hours worked, and in occupations and senior roles, as well as overt discrimination and implicit biases against women. Still, there is considerable variance across the OECD: in Belgium, women earn 96 cents for every dollar a man earns; in South Korea, that figure falls to 65 cents; and in the US it is 82 cents. No country has achieved gender parity in wages.
As consumers, women have experienced mixed results. Like men, they have benefited greatly from a sharp decline in the prices of many discretionary goods and services, including communications, clothing, furnishings, and recreation. The McKinsey Global Institute estimated that, holding all else constant, people could work six fewer weeks per year, on average, and still consume the same amount of goods and services as in 2000.
Theoretically, this trend should have been particularly beneficial for working women, most of whom suffer from greater time poverty than men, because women continue to bear a disproportionate share of family-care responsibilities. Unfortunately, these potential consumer benefits were more than offset by the rising costs of housing, health care, and education, which have absorbed 54-107% of the average household’s income gains in Australia, France, the United Kingdom, and the US. Not surprisingly, single mothers – who head 60% of all US households living below the poverty line – were the most adversely affected by these trends.
The outlook is also worrying for women as savers. While real mean individual net wealth recovered to pre-crisis levels in many countries by 2018, real median net wealth did not, leaving lower-income groups worse off. According to one recent study, although women’s median net wealth is higher overall than it was two decades ago, a large gender gap remains. In the eurozone, women’s median net wealth is 62% that of men.
Moreover, owing to shifts in institutional pension arrangements, guaranteed pensions now cover just ten years of retirement (on average) in the countries studied, even though women at age 65 can expect to live for another 22 years, compared to 19 years for men. Saving for retirement thus weighs more heavily on women than it does on men. And while surveys show that women are more likely than men to save, they are also less likely to invest, thereby losing out on potential returns.
As the economic and social conditions facing individuals and households change, so must the social contract between citizens and their governments. The trends identified here suggest a growing need for access to good jobs, essential goods like housing and health care, and adequate retirement income. For women, recent gains in employment opportunities, wages, and family benefits need to be sustained, and persistent gender gaps need to be closed.
Of course, the COVID-19 crisis threatens to undermine many of the gains and aggravate many of the challenges documented here. As the advanced economies struggle to respond, the social contracts on which their citizens depend will be rewritten in ways that are difficult to predict. Whatever form they ultimately take, they must not overlook women workers.
Laura Tyson, a former chair of the US President’s Council of Economic Advisers in the Obama administration and a professor emerita at the University of California, Berkeley, is a senior adviser at the Rock Creek Group and a senior external adviser to the McKinsey Global Institute. Anu Madgavkar is a partner at the McKinsey Global Institute.
Laura Tyson and Anu Madgavkar