Women and increasing income inequality: why it’s (mostly) women’s fault

Iâve been musing lately about the connection between womenâs labour force participation and income inequality and Iâve been forced to the conclusion that, once again, itâs probably womenâs fault. Increasing inequality in market incomes, that is.

My logic goes something like this. Once upon a time, most households in Australia had one income earner (Dad). The proportions that had no earners or more than one were relatively small. The level of household income inequality therefore was driven largely by the distribution of menâs wages.

Since then things have changed. There are now many more jobless households (one of the few international rankings where Australia is near the top) and a growing number of households with two or more earners, including quite a few where there are two fullâtime incomes.

So basically we have much greater diversity between households in the number of market incomes coming in, on top of the diversity in earnings. And the thing that has been driving that diversity most is, on the one hand, the increase in the number of jobless (mainly single parent) families and, on the other hand, the increase in womenâs employment, particularly among married women and mothers. Whichever way you look at it, women are largely to blame.

Now, many people of leftish persuasion would simply accept that increasing market income inequality is bad, without question. But it this is so, what is the policy solution? Should we go back to the male breadwinner norm as some would like? Surely not.

Or should we be trying to get more women working full-time or encouraging mothers who work full-time to work less in the interests of greater income equality? My guess would be that many, if not all, of the countries that have greater equality of market incomes are those in which female labour force participation is higher than in Australia and full-time work is the norm. But do we as Australians really want to go down this route?

Even the issue of whether or not single parents should have the choice not to work is not straightforward – most people accept that this choice should be available, at least in some circumstances, and many on the left argue quite vociferously that it should be an absolute right. But if large numbers of people choose not to work, market income inequality must surely go up.

The real issue for me is this â if a large part of the increase in household income inequality is being driven by the choices that people freely make about the extent to which they want to engage in paid work, how can this be a bad thing? It seems to me to be totally inconsistent to argue in favour of greater choice but to be concerned when choice results is greater inequality.

This isnât to say that we don’t need, or shouldnât have, policies to help people overcome inherited disadvantage and realise their potential, earning and otherwise. After all, I always thought that was one of the primary goals of feminism. But if one of the prices we have to pay as a society for women going out and making a life for themselves is greater household income inequality, I for one am happy to pay it.

(You will have noticed that I am not citing lots of statistics here, mainly because I havenât had time to go and seek them out. Perhaps someone out there can enlighten me as to whether there has been any research on this issue or is any clear evidence in favour of my proposition. If not, I would have thought it is something that would bear looking into.)

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Joshua Gans
Joshua Gans(@joshua-gans)
14 years ago

My guess would be that many, if not all, of the countries that have greater equality of market incomes are those in which female labour force participation is higher than in Australia and full-time work is the norm.

In cross country data there isn’t much of a discernable link between female labour force participation and household income inequality – so many other factors are more important. In any case, the relationship is very complex. Suppose countries A and B are similar in most respects, including average labour productivity, but the female participation rate is ten points higher in A than in B. If A’s additional working women are single or have low-paid husbands, then by working and earning more than their Country B counterparts they will tend to even up the distribution. If they are wives of brain surgeons and executives, by participating they’ll increase their families’ income and worsen the distribution. Then there is the question of whether female participation drives down the wages of unskilled males, which, taken in isolation, would tend to worsen distribution.

Backroom Girl
Backroom Girl
14 years ago

If A

Andrew Norton
14 years ago

“The real issue for me is this

Andrew Norton
14 years ago

BG’s basic concention was supported by this analysis:

Of the observed characteristics, changes in the distribution of work across income units

vee
vee
14 years ago

Isn’t this the same as the chauvinist version as:

You chose work over family and you got inequality income – that’s just too bad.

This comes back to my main gripe with classical liberalism – you have to be educated enough to know the potential downfalls of your choice otherwise it is likely to turn out to be a Hobson’s choice.

vee
vee
14 years ago

or should that be a catch 22? Ah close enough.

Backroom Girl
Backroom Girl
14 years ago

Andrew – Thank you for that link. It’s good to know that someone has done the basic research on this issue. I think it’s probably a no-brainer but hey it’s always good to know that some economist has proved it scientifically. As to whether I’m really a classical liberal – perhaps, though I think I might be more in favour of government intervention of some kinds than you.

What I was just trying to do with this post was to point out that when dealing with a policy ‘problem’ such as increasing market income inequality it’s important to understand what the underlying drivers of the problem are in order to know what, if anything, governments can do to address it. In this case, the primary underlying drivers are a development that, for me at least, is unequivocally good (increasing female labour force participation) and another that is not good in itself (increasing single parenthood) but is in part a consequence of the positive decision to make adequate income support available to single parents. (That is, increasing market income inequality is not, as most commentary on the left would have it, primarily caused by deterioration in employment pay and conditions, employment casualisation, Work Choices, etc.)

So we are left with two choices. We could just accept that increasing inequality in market incomes at the household level is an inevitable consequence of societal change . Or we could support policy change to ameliorate that underlying trend.

But as always in policy, there are ways and ways of doing this. As I suggested in the original post, I wouldn’t favour trying to undo the trend to two-income families. (I do worry at times that this is the ‘hidden agenda’ behind the Government’s massive increases in family assistance.)

So the most productive route would seem to be to increase the proportion of two-income families, at the expense of both one-income and no-income families. And in the end this is what Welfare to Work is about, whether you agree with the detail of those policies or not.

And while wage rates don’t show up as the primary driver of household income inequality, they may well be operating to increase inequality at the individual level. And if that is something we are concerned about we need the right mix of policies to ensure that people can acquire the skills they need to support themselves adequately.

But the traditional solution of many in the welfare sector – giving people with little or no work more money – would, I fear, be counter-productive. While it might reduce income inequality in the short term (and indeed, there is pretty strong evidence that disposable income inequality has not risen over the past decade), if it encourages people not to work or to work less it will inevitably feed back into greater market income inequality.

Anthony
Anthony
14 years ago

“increasing single parenthood … is in part a consequence of the positive decision to make adequate income support available to single parents.”

And also a consequence of the introduction of no-fault divorce in the 1970s. Extending widows pensions to all sole parents and the family law reforms must be seen as inextricably linked.

“the most productive route would seem to be to increase the proportion of two-income families, at the expense of both one-income and no-income families. And in the end this is what Welfare to Work is about”.

I’m unclear how the new welfare to work requirements imposed on single mums will increase the proportion of two-income families at the expense of no or one income families.

“I wouldn

Backroom Girl
Backroom Girl
14 years ago

You’re quite right Anthony that it’s a bit difficult to turn single parent families into two-earner families – though some people reckon that the new partner you meet at work is likely to be a better bet than the one you meet in the Centrelink office :-).

But perhaps you missed the bit of Welfare to Work that is targeted at stay-at-home mums in unemployed and other low income couple families – it’s supposed to get them out to work as well. But then they’re not quite as vocal or well-connected a lobby as the single mums.

Backroom Girl
Backroom Girl
14 years ago

And of course, a one-income family is still an improvement on a no-income family.

Anthony
Anthony
14 years ago

yeah, I was aware that welfare-to-work requirements extended to all people on parenting payment, not just single mums, so that fits with your thesis.

I remember the US welfare reforms of 1996 had as their stated goals not just promoting work but also decreasing the ex-nuptial birth rate and ‘promoting marriage’. I don’t know what the various States have done to realise the last of these (I think something in Minnesota got some profile in the literature) or whether there has been any discernible marriage effect.

The federal government’s spending on a marriage counselling services might be seen as apeing this aspect of US welfare-to-work policy?

Backroom Girl
Backroom Girl
14 years ago

I think from something I read some time ago now, the promoting marriage objective of US Welfare to Work is one that they haven’t had a lot of success with. It’s worth noting though that in terms of US welfare people are not treated as married unless they are actually de jure married, unlike our arrangement of recognising ‘marriagelike’ relationships. This may be part of the explanation of why welfare mums haven’t raced into getting married – it may actually be financially beneficial to stay single.

And of course I don’t have an problem in principle with policy that is designed to maximise women’s lifetime attachment to the workforce, whereas one that tries to get them hitched is all a bit icky.