How Can the U.S. Get More Women Into the Workforce? Ask Canada

By Ben Leubsdorf Features Dow Jones Newswires

During the decades after World War II, a growing share of U.S. and Canadian women participated in the workforce, boosting household incomes and national production, while opening new opportunities for women themselves.

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Then in the late 1990s, something changed. Female workforce participation began slipping in the U.S. while it kept marching higher in Canada. By 2016, 74.3% of U.S. women between the ages of 25 and 54 were working or looking for work, compared with 82.2% in Canada, according to Organization for Economic Co-operation and Development data. Both were near 76% two decades earlier. The participation gap between men and women also narrowed more in Canada than in the U.S.

Understanding the divergence could help fix America's growth problem. President Donald Trump has pledged to boost annual increases in U.S. output from around 2% to above 3%. Achieving that ambitious goal would likely require, among other things, boosting labor-force participation.

Many women choose to remain outside the labor force or spend time away from work, often to care for children. But women who want to work, but don't or can't, represent untapped economic potential. Enabling them to join the job market over time could generate stronger labor-force growth, offsetting drags from an aging population and other forces, and in turn boost the economy's growth trajectory.

The continued rise in female workforce participation north of the border could be, in part, a reflection of economic conditions. Canada's economic growth has edged past that of the U.S. since 1997, averaging 2.5% a year versus 2.3%. Unlike the U.S., Canada avoided a recession in 2001 and also avoided a severe financial crisis last decade. A healthier U.S. labor market might have continued to draw in more women, too.

But the phenomenon also likely reflects policy choices.

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Canada's federal government encouraged more two-working parent households in the late 1990s and early 2000s by cutting tax rates, adding support for child care and expanding paid parental leave. Quebec's provincial government introduced universal day care.

The U.S. government spends relatively little to subsidize child care and has no national paid family-leave program, though employers are required to grant up to 12 weeks of unpaid leave.

" Canada's rapid progress in female labor force participation was no accident; it reflects deliberate and targeted policy measures," International Monetary Fund Managing Director Christine Lagarde said last year.

Extended leave didn't seem to have much immediate effect on how many Canadian mothers returned to work after giving birth. But there was evidence subsidized child care boosted the number of Quebecois mothers who worked.

An IMF study found Canada's tax and benefit system changes -- including phasing out income surtaxes and introducing a new child tax benefit -- helped boost female participation.

Federal Reserve Chairwoman Janet Yellen, in a May speech, highlighted research concluding that "policy differences -- in particular the expansion of paid leave following childbirth, steps to improve the availability and affordability of child care and increased availability of part-time work -- go a long way toward explaining the divergence between advanced economies" in women's workforce participation.

If the U.S. "had policies in place such as those employed in many European countries," she said, the participation rate for prime-age women could reach 82% -- roughly Canada's level.

One study, released in 2013 by Cornell University economists Francine Blau and Lawrence Kahn, concluded that almost 30% of the decline in U.S. women's participation relative to other advanced economies between 1990 and 2010 could be traced to those countries pursuing the policies such as those Ms. Yellen mentioned. Some measures might be more effective than others, but "all the elements certainly play a role," Ms. Blau said.

The U.S. isn't the only country where officials are looking to women as a source of stronger economic growth. Leaders from the Group of 20 nations pledged in 2014 to reduce gender participation gaps 25% by 2025. The International Labor Organization in June said achieving that goal would boost global output by 3.9%.

Still, there are reasons to proceed carefully in crafting new policies that could ripple through the U.S. economy and society.

The White House recently proposed a six-week paid parental leave program, citing the prospect of stronger economic growth as one motivation.

But generous paid leave would likely encourage more women and men to remain home longer after birth, benefiting their children but reducing the supply of workers in the short run. It's also unclear whether paid leave is significantly more effective than unpaid leave in boosting long-term participation; both allow workers to keep their jobs and so ease the eventual return to work.

Requiring employers to grant new mothers' requests for reduced hours or flexible schedules could lead some companies to avoid hiring women for full-time positions, despite laws barring such discrimination.

More women might end up in part-time jobs, with limited chances for promotion and career advancement; Ms. Blau's study noted U.S. women are less likely to work part time and more likely to hold high-level jobs than women in other advanced economies.

"Policies aren't that easy to devise," Harvard University economist Claudia Goldin said. "Sometimes you push one lever and that works, but it hurts something somewhere else."

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

July 02, 2017 09:14 ET (13:14 GMT)