What’s Behind the Recent Surge in Women’s Employment?

Dan Loney: A new report out from the Penn Wharton Budget Model looks at the strong rise in prime age women in the workforce during 2023. And that was very good news, since so many women left the workforce when the coronavirus pandemic hit. But what’s behind this recent surge? We asked that and more of Alex Arnon of the Penn Wharton Budget Model, director of business, tax, and economic analysis. Alex, great to have you back with us. Thanks for your time.

Alex Arnon: Great to be here. Thanks for having me on.

Loney: So take us through what we’ve seen here in 2023 with this rise, with this return of prime age women into the workforce.

Arnon: Sure. So the headline is that what we have seen is women reaching the highest employment rate in US history. Here we’re talking about prime age women, so that’s women 25 to 54 in their prime working age years. And for the first time in data in history that we can observe, more than three-fourths of these prime age women are in the workforce. And we see a number of interesting trends underlying that, which we can get into.

Loney: And how much of this is connected to what we’ve seen in terms of a rise of women attaining a college education or a high-level degree? How much does that connect directly to that?

Arnon: That is a huge part of it. And, you know, this is linking back to much longer-running trends, things that have been happening for close to a century now as women have entered the workforce and gradually closed the gap relative to men. And just a huge part of that has been the attainment of college degrees among women. What we have seen over the last few decades is that in terms of school attendance in college and especially in advanced degrees, women have just raced so far ahead of men. And so what we see now is the share of prime age women who have a college degree is substantially higher than for men. These women, the women with college degrees, are definitely the ones driving the rise in overall women’s employment.

Loney: And now I guess you even have to throw in the component of remote work as a factor here, especially for women who have children who have the ability to be able to work from home a couple of days a week instead of being in the office five days a week.

Arnon: Yeah, absolutely. And that was really actually where we started. We were trying to understand how much of this remarkable rise in women’s employment is just a consequence of the shift to remote work. What we see is definitely that is a factor, but it is not quite as important as I think we had expected going into this. What we see is that this trend of rising women’s employment, especially among college-educated women, especially among college-educated mothers, has been going on since long before the pandemic. For the last couple of decades or so.

And that’s not to say that remote work isn’t still part of that. I think gradually, in the couple of decades or decade or two leading up to the pandemic, we did see increasing ability to do at least some work remotely. That probably did contribute. But yeah.

Loney: Well, and for the longest time I think it was associated that a woman who also had to worry about the care of a child was kind of impacted with a quote-unquote “child penalty” as well. Is that decreasing as well?

Arnon: Absolutely. And so that is probably the single biggest factor, or the biggest dimension of this. That is, what happens after a woman, especially a college-educated woman gives birth. That has shifted dramatically over the last few decades. And, you know, the likelihood that a woman giving birth, a new mother, is going to be dropping out of the labor force on a permanent basis, that is shrinking and shrinking over time. Women have become much more likely— they have a kid and then they do go back to work. They pick things back up and continue along their career. There’s definitely not symmetry with men. We see a much bigger impact on women, but the gap is shrinking there.

Loney: But you have seen, though, a decline— although probably a little bit smaller than the rise on the female side— but a decline in terms of the men in the prime work age who are working at this point. That has trended a little bit lower in the last few decades as well.

Arnon: Yes, yeah. The employment rate of prime-age men has been slowly trending down for a very long time now. That is accelerated by recessions but is clearly related to longer-running structural changes in the economy. And so yes. At the same time as we’ve seen women hit their all-time high employment rate, men are still several percentage points below where they were several decades ago.

Loney: With the rise of women in the workforce because of a lot of these factors, especially the one about college attainment, college degree, et cetera, I guess we also have to look at outside factors as well. Because obviously part of the discussion around a college education is the cost. And in some cases, it has been a wall that some people have not been able to clear.

Arnon: Yeah, absolutely. This is not something we really touched on in our work, of who it is that actually ends up going to college. But this is definitely a big part of the story of both access to college— you know, the ability to survive for long enough economically to actually get that degree. It is definitely not evenly distributed. And I think we do see that reflected in what kind of women are entering the workforce, what kind of jobs they’re going into. This is not broad-based increases in employment. It is definitely concentrated in certain industries among certain types of women.

Loney: In terms of those women with a child, does the age of a child play a role in terms of the availability that a woman has, in terms of the level of work they would do in the office or work at home?

Arnon: Yes. Well, absolutely. And definitely I think anybody who has had a newborn at home will know that there is considerably more time and attention and work involved in younger children. And that is where we have seen most of the change over the last two decades, is in, how do mothers with very young children— newborns and toddlers— how do they relate to the workforce? And so the biggest change by far has been that right after giving birth, when the kids are at their youngest, when the care and attention from the parents is most critical. Those are the mothers who have become much more likely to work, is the mothers with the youngest children. With newborns, with infants. And so yeah, that is definitely a big part of what is happening. This is not like mothers with teenagers becoming much more likely to work. It is mothers with young children, and particularly newborns.

Loney: Alex, great to have you back with us. Thanks very much for your time.

Arnon: Great. Thank you. Good to be here.