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Home Opinion The economic case for female labour market participation
Economy • Women • Equality

The economic case for female labour market participation

Emma Kinloch - 24 September 2015

The expansion and better utilisation of the female workforce offers the potential of a significant boost to growth and productivity. A compelling economic – as well as political and moral – argument needs to be made for investing in female labour to reflect the realities of a 21st century labour market

 "Women are the single most under-utilised economic asset. Growing the female workforce is key to competitiveness, growth and productivity."

Angel Gurría, secretary-general, OECD, February 2015[1]

Speaking at a Policy Network joint event, with the APPG on Inclusive Growth and the Social Market Foundation, earlier this year the OECD secretary-general was unequivocal about the great opportunity there is to radically alter the labour market to allow it to reflect a modern workforce. This extra supply of labour is already there, it just needs to be unlocked. In a recent Policy Network article, Mari Kiviniemi, deputy secretary-general of the OECD and former Finnish prime minister, noted that recent OECD research has found that with a 50 per cent reduction in the gender gap in labour force participation it could lead to an additional gain in GDP of around six per cent by 2030, rising by a further six per cent again if the gap is completely closed.[2] These figures are averaged across the OECD countries but the fact remains that a significant boost in growth and productivity is garnered from enabling the expansion and better utilisation of the female workforce.

In 2014 40 per cent of economically inactive women in the UK citied “looking after the family or the home” as the primary reason for their inactivity (see figure 1). Although in the past 20 years the numbers citing this reason has fallen, it is still by far the biggest barrier to female employment.

Figure 1[3]

Barriers such as lack of flexibility, escalating costs of childcare, unequal leave arrangements and lack of viable back-to-work schemes have all contributed to women not being able to fulfil their potential in the labour market.

This paper argues that, rather than pigeonholing this policy area as ‘family-friendly’, parties need to recognise that the economic case is compelling and highly relevant in the context of low-growth outlooks; more women in work leads to a faster, stronger and more inclusive economic recovery.

At a recent Policy Network roundtable it was noted that if women were enabled to participate fully in the labour market an additional £10bn would be added to the economy.[4] In this post-crisis economy passing over a £10bn investment is unthinkable. This paper will assess where the current political debate is focused and then seek to offer progressive policy solutions – allowing women to have viable options to enable them to engage with the labour market.

Political response

Ahead of the UK general election Labour, the Conservatives and the Liberal Democrats all made ‘family-friendly’ policy a key tenant of their manifestos. There is an emerging consensus that childcare is central to the political offer to the British electorate – and a keen awareness of the potential and changing nature of female voting patterns.[5]

In his summer budget George Osborne delivered on the Conservative pledge to extend free childcare hours from the current level of 15 hours per week to 30 hours per week for all three- and four-year-olds. Prior to the election Labour countered the Conservative pledge by offering an increase to just 25 hours per week for all three- and four-year-olds, but set out a more holistic approach to family life. The Labour manifesto also pledged to double paternity leave from two weeks to four. Since its introduction in 2003 there has been relatively low take up of this entitlement.[6] This is most likely due to the low statutory pay which is currently capped at £138.18 per week or 90 per cent of average weekly earnings (whichever is lower). Labour pledged to raise the weekly statutory pay to £260 – a significant boost. Although female labour market participation has increased exponentially in the last 60 years, the domestic division of labour has not altered at the same rate. However, if the takeup remains at a low level it will do little than to further underline the asymmetric division of care work within two-parent families. 

In addition, Labour had a commitment to re-establish Sure Start centres as family hubs in communities and also recognised the value in the care grandparents provide for working families, often being the primary source of childcare. Labour sought to go further than just trading pledges on childcare hours by promising to introduce a ‘primary childcare guarantee’ which would have formed part of the ‘National Childcare Service’. This policy would make it a legal right for parents of primary-school-age children to access childcare from 8am- 6pm, Monday to Friday. This kind of wraparound care would provide stability for working parents to ensure their children would be supervised throughout those hours. Nevertheless, this would only apply to children above five years of age.

Finally, the Liberal Democrat manifesto addressed a problem which the other two major parties have omitted to provide a solution to: how to plug the gap between the end of paid parental leave (nine months) and the start of the free hours entitlement once a child reaches three years of age. They had pledged to initially match the current entitlement offered to three- and four-year-olds of 15 free hours a week to all two-year-old, and then gradually increase this entitlement run from nine months to two years. For three- and four-year-olds they pledged 20 hours free entitlement per week.

This widening of the debate is essential. Data released from the Office for National Statistics covering 2014 labour market engagement shows the direct link that the older the child the more likely the mother will be actively engaged with the labour market (details in figure 2). This being the case the focus of policy must target women with the youngest children, to give them the support to re-enter the labour market. The support is already in place to some extent through the school system for older children but there is a deficit for those mothers of children aged five and under.

 

Figure 2[7]

Away from the election posturing two other policy developments are in the process of being rolled out this year. The first is the recent change in parental leave. Parents to any child born or adopted from 5 April 2015 are entitled to make use of this policy option. Once the mother ceases maternity leave, the remaining weeks (of the full 52 leave week entitlement) can be shared between either of the parents, with the parents deciding themselves how that leave will be split. The basis of this policy initiative recognises that caring for a child is an undertaking for both parents. Nevertheless, without the use of a use-it-or-lose-it ‘daddy quota’ – such as the three-month paid reserved leave for fathers in Norway – this policy could make little tangible change.

Second, is the introduction of the tax-free childcare (TFC) accounts this year, which are replacing employer-supported childcare vouchers. TFC is an online account into which parents (and employers if they wish) can pay in to contribute to childcare costs. For every 80p paid in by the parents the government will contribute 20p, with the government providing up to a maximum of £2,000 per year. However, this scheme is only available to working parents who make tax contributions. This leaves 900,000 working families without access to this scheme; these are families for whom access to affordable childcare is perhaps the most crucial.

A key method to combine changes to traditional gendered roles and to bolster the economy would be a predistributive approach. Predistribution is a public policy approach that seeks both to counter inequality at source and to encourage economic growth simultaneously[8]. This is a move away from the more traditional redistributive method which counteracts unfair market outcomes using a corrective welfare state. The predistributive model focuses on employability, human capital and skills as well as challenging market structures to ensure a more equitable outcome. In regards to women’s labour market activation three public policy areas in particular lend themselves to a predistributive model: parental leave policy, back-to-work schemes and a fresh approach to part-time employment. If predistributive change is enacted in these three areas women, our most underutilised economic asset, will have the opportunity to fulfil their economic potential. Furthermore, gender norms, which so often pervade and restrict public policy would be meaningfully altered.

Leave entitlement

Although the current Labour plan to double the paternity leave entitlement to four weeks is to be welcomed, it is still falling short of the parity that is needed to alter employment patterns. To aim for a more balanced entitlement with paid maternity and paternity leave would be beneficial in several ways. It would significantly reduce the ‘motherhood pay penalty’ (the fall in earnings that is linked to the break of economic inactivity following childbirth) for women as they would be economically inactive for a shorter period. With men having a  statutory right to paid paternity leave over a similar (although inevitably shorter) period, it would become the norm that new parents are absent from the workplace post-birth, leading to attitudinal change and practical changes in care provision in the home.

Writing recently for Policy Network, Pia Schober, senior research associate at the German Institute for Economic Research, takes this argument further. Schober cites research that has shown that when fathers’ take up of leave exceeds two weeks the domestic division of labour becomes more balanced in the medium to long term.[9] A focus on encouraging fathers to have a more active role in caring for their children therefore is beneficial in three ways: challenging gender norms of care provision, enabling more women to return to employment and altering the domestic division of labour within the home. With the expectation from employers that all new parents (male and female) would be absent from the workplace for a relatively short period of time post-childbirth, the gendered assumptions that lead to the ‘motherhood pay penalty’ and to women of childbearing age being discriminated against when seeking employment, would be significantly diminished.

This said, as noted previously, without leave being use-it-or-lose-it, behavioural and labour-market changes would be minimal. Reports have found that many fathers would like to spend more time caring for their children but feel requesting leave would negatively impact their career prospects.[10] This is why paternity leave, in particular, should be extended and Britain’s relatively generous statutory maternity leave shortened to fundamentally shift employment patterns post-childbirth.

Britain has the longest maternity leave in the OECD countries (52 weeks) compared to an OECD average of 19 weeks.[11] If there was a move towards parity for leave entitlements the financial burden by the state and employers would not be altered significantly and it would encourage women to take a shorter break from employment.

Back-to-work schemes

As noted above there is often a financial penalty paid by mothers who take extended periods of maternity leave, but there is perhaps a bigger challenge faced by both mothers and the wider economy: when women take extended periods of leave and break their link with the labour market completely. The particular challenges of a prolonged break from the labour market, such as a devaluing of skills and the need for greater flexibility to work alongside family life, need a thoughtful response both from state actors and private sector employers. One facet of this response is to recognise that there are skills needed to provide unpaid care work within the home; although not remunerated, those skills are not without value. Rather than seeing this as ‘dead’ time in terms of skill development, employers should recognise the not-insignificant skills it takes to be a full-time care giver.

A joint study undertaken by the Resolution Foundation and Mumsnet found that mothers who are currently out of work but wish to join the labour market often face significant barriers. Nearly all surveyed stated that they faced one barrier to work and most stated two (42 per cent and 38 per cent respectively);  16 per cent gave three or more barriers. Tailored responses that appropriately reflect the often complex situations these women face are essential. Among the most often cited barriers to work are the high cost of childcare and lack of employer flexibility.

Unlocking this key group of women who have effectively been missing from the labour market allows revenue through taxation to be collected and conversely eases the burden on the welfare state.

Part-time work – a flexible approach?

The current status quo of women altering working patterns post-birth takes the form of part-time work or flexible working patterns. This has led to the feminisation of part-time work. Women make up the overwhelming majority of the part-time workforce in the UK and 43 per cent of that work is classified as low paid. Low pay is particularly acute for women in part-time work, however, over a quarter of women are in low paid work overall in the labour market (compared to just 16 per cent of men).[12]  The ghettoisation of part-time employment is in large part due to mothers primarily being the parents who alter their working pattern post-birth, as a consequence of social norms dictating parental roles. These norms are further compounded and institutionalised by expensive childcare provision, a lack of flexible working patterns and perceived low status of part-time roles, among other challenges.

This cycle of low pay will be perpetual until women have the access, through policy provision, to work their ideal number of hours and in work that is at the appropriate skill level. Several initiatives have sought to counter this cycle, such as the social enterprise Timewise,[13] which seeks to match up mothers with quality part-time work appropriate to their skill level and that compliments their familial commitments. By their very nature, social enterprises cannot hope to provide a UK-wide solution, but can provide a useful blueprint for change.

At present workers have the right to request flexible working arrangements when they have worked for an employer for 26 weeks. This right enables the employee to request a way of working that suits their needs, such as “having flexible start and finish times, or working from home.”[14] Yet the employer is under no obligation to alter the contract or working arrangements of the employee to allow them to better balance their work and family life.

There is a real human capital argument to strengthen the rights employees have in regards to flexible working. Employers spend time and resources training employees to integrate into their organisation. If the employee’s work schedule no longer works for them due to a lack of flexibility on the part of the employer it is conceivable they will seek employment elsewhere. If that employee departs from the organisation all the human capital they have accrued is lost to that employer. The employer will then need to spend the time and resources to again train a new employee into the role. A shift in legislation which puts the onus on the employer rather than the employee would inevitably strengthen female engagement with the labour market and allow employers to retain the human capital they have invested in.

The financial crisis brought to bear several other factors which have played a role resulting in less-than-ideal working arrangements for women. Although initially more men lost work in the recession, when job losses came as a direct result of austerity women were disproportionately impacted.[15] With higher rates of employment within the public sector, combined with higher rates of part-time employment, their roles were often the first to be cut. Indeed, conditions in the public sector look set to remain less than appealing for the remainder of this parliament with the chancellor confirming a four-year pay freeze for public sector workers. In addition, women’s employment has also become more insecure through an increasing reliance on temporary or zero-hour contracts. Boosting economic growth and economic competitiveness depends on a growing female workforce not an insecure, low-paid one. 

Conclusion

The policy options set out above combine the strengthening of current legislative provision and low-cost alterations to existing leave arrangements. Both attitudinal change and tangible outcomes are essential to fulfilling the potential of the women who are currently blocked from full labour market participation. Steps which would affect behavioural change such as ‘daddy quotas’, a right to flexible working (building on the right to request), high-quality part-time employment and convenient wraparound childcare options, are not easy ‘add ons’ to simply lure the ‘female vote’. These are essential components of fiscal policy options to give the economy a much-needed £10bn investment. These policies will give us both a fairer and a strengthened economy that will reflect a 21st century labour market.

Emma Kinloch is senior events and stakeholder manager at Policy Network. She co-ordinates research and policy work on 'working for women, parents and growth'

Policy Network will host a fringe event at Labour party conference on the economic case for female labour market participation on 29 September in Brighton. It takes place in partnership with the Family and Childcare Trust.



[1] Policy Network, The OECD agenda on inclusive growth, February 2015, further details available at http://goo.gl/YydZ27 consulted 13.04.15

[2] Kiviniemi, M. Time to add gender equality to the growth agenda, Policy Network, April 2015, http://goo.gl/GkrLQh consulted 13.04.15

[3] Office of National Statistics, Participation of Women 2014 release, March 2015, http://goo.gl/6nzYqX consulted 06.08.15

[4] Policy Network, Women and the post-crisis labour market, March 2015, audio available at http://goo.gl/BwZmPx consulted at 13.04.15

[5] Add ref to Emmenger and Manelow paper for PN

[6] Williams, M, 40% of fathers do not take paternity leave, The Guardian, January 2013, available at

http://goo.gl/ix9XyW, consulted 13.04.15

[7] Office of National Statistics, Participation rates of women, with or without dependent children 2014 release, March 2015, http://goo.gl/4jd7RI consulted 06.08.15

[8] See here for a series of articles and essays on “predistribution” http://www.policy-network.net/content.aspx?CategoryID=354&ArticleID=3491&fp=1

[9] Schober, P ‘Daddy leave’: a route to greater gender equality in housework and childcare?, Policy Network, April 2015, http://goo.gl/yw1MX6 consulted 13.04.15

[10] Kelly, G and D’Arcy, C. (eds), Securing a pay rise: The path back to shared wage growth, The Resolution Foundation, March 2015, from chapter, Harkness, S. Second earner to primary breadwinner? Women’s wages and employment, http://goo.gl/srLq1F consulted 22.04.15

[11] OECD, Key characteristics of parental leave systems, OECD Family Database, May 2015, http://goo.gl/TE6M88 consulted 22.04.15

[12] Holmes, C. Turning over the ‘hourglass’ labour market argument, Policy Network, November 2014,  http://goo.gl/GmITkT consulted 13.04.15

[13] Timewise Foundation, About Us, April 2015, http://timewisefoundation.org.uk/ consulted 22.04.15

[14] GOV.UK, Flexible Working, November 2014, http://goo.gl/9qlbVn consulted 13.04.15

[15] Fawcett Society, The changing labour market: delivering for women, delivering for growth, April 2013, available at http://goo.gl/msEJcf, p5, consulted 13.04.15


 

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