The increase of women in the paid workforce was arguably the most significant change in the economy in the past century. Yet although the female labor force participation rate has been rising steadily in the country, it has not done so evenly across states and cities.
Previous research has explored the factors that create these disparities, but not much is known about their effects. Looking at Census data from 1980 to 2010, I studied how women’s participation in the workforce influences wage growth in approximately 250 U.S. metropolitan areas.
What I found out is that places with higher female labor force participation rate experienced higher real wage growth than otherwise similar cities.
For example, in 1980, 59.5% of women in Minneapolis were in the labor force, compared with just 53.4% in Columbus, Ohio. That difference led to over 4% higher median wage growth for Minneapolis, which saw median wages grow $0.54/hour more than Columbus from 1980 to 2010.
Despite increases in gross domestic product per capita, real wages for many workers have been stagnating in recent decades. The trend has particularly hurt men, while women have largely benefited from the growing service sector.
Some cities, such as Flint, Michigan, saw median real wages go down despite more women entering the workforce. This is because there are many other factors that affect wage growth in cities aside from the female labor force participation rate. Cities like San Jose, California, and Boston, with more robust economies and high-growth industries, expected to see higher wage growth than cities like Flint, which saw its main industry decline and its economy shrink.
Overall, my models suggest that every 10% increase in the female labor force participation rate in a metropolitan area is associated with a 5% increase in median real wages — for both men and women. When women are incorporated into the economy fairly (i.e., when they don’t face discrimination or aren’t segregated into low-paying, female-dominated occupations), the effect they have on cities is even larger. While female labor force participation rate across metropolitan areas have increased in every decade between 1980 and 2010, the largest gains by far were made in the 1980s, when women also made the largest gains in shrinking the gender wage gap and in reducing sex segregation.
When fewer women participate in the labor force, the economy operates without the talents and abilities of 51% of the population. If cities want to take advantage of the real wage gains that result from more women in the workforce, they should ask women what they want and find ways to meet their needs.