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Another good reason to hire women: to boost productivity (and men’s pay)

Linda Nazareth is the Senior Fellow for Economics and Population Change at the Macdonald-Laurier Institute. Her fourth book, Work Is Not a Place: Reimagining Our Lives and Our Organizations in the Post-Jobs Economy, will be published in 2018.

It's International Women's Day, so let's talk about men. No really, enough about women's wages; so much has been written already. Let's focus instead on the way that men's wages can go up if women join the work force.

Over the past few decades, women's participation in the labour force has resulted in gains in the earnings of men. That may seem counterintuitive: You would think that an increased labour pool would push down wages for everyone. And yet, the evidence is clear. According to a new U.S. study from a researcher at the University of Akron, there is a very strong correlation between female labour-force participation and male earnings.

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The research, by economist Amanda Weinstein, focused on U.S. census data from 1980 to 2010. Looking at female labour-force participation and median wages in 250 U.S. metro areas, she isolated other factors in a bid to see how overall economies changed as women garnered paid employment.

The results were striking: Every 10-per-cent increase in female labour-force participation in a metro area was associated with a 5-per-cent increase in median inflation-adjusted wages for both men and women. That is a powerful statistic, given that over the time period in question the median worker in 40 per cent of the cities in question saw no wage gains at all as income inequality grew in North America.

The overriding reason why it is good – in dollars and cents terms at least – to bring women into the work force seems to stem around the murky concept of productivity. Roughly defined as getting more out of every hour worked, productivity is a hot topic in economics these days. When productivity goes up, wages tend to go up as well. That is why there has been so much hand-wringing in recent years over Canada's dismal productivity gains. If you want to increase the standard of living for everyone, you have to figure out how to be more productive.

Although the research to date is not crystal-clear on the mechanism by which it happens, bringing women into the work force causes productivity to rise. It seems that having more women looking for work creates a larger pool of skills and abilities from which employers can choose, which benefits them. As well, in both Canada and the United States, the industries that have gained the most over the past decades have tended to be in the service sector and to be the ones that rewarded higher skill and education levels.

Women's labour-force participation has especially aided in the expansion of those industries, and as they have expanded other jobs have been created. Think of a hospital that needs to attract skilled medical personnel and professionals in other fields as well. As they are able to fill their positions, other positions within and outside of the actual hospital are created and there tends to be an upward impact on wages.

Or maybe the fact that women increase the sheer numbers of workers just lets companies expand at higher rates. That a lack of workers hinders expansion is all too clear these days, as companies in many sectors lament the dearth of skilled workers. That is something that is only going to get worse in the coming years as the baby boom heads for retirement, taking their skills with them.

Although we do not have a comprehensive study showing Canada's experience over the same period, it stands to reason that increasing the pool of workers would potentially be a good thing for Canada's economy.

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As of 2017, 61.5 per cent of women over the age of 15 were in the Canadian labour force. Some of the other 38.5 per cent were in school or at home taking care of family, perfectly content to not be looking for work. Some were not content at all, but for one reason or another did not find it feasible to look for work.

Figuring out the reasons for why women are not looking for work – which could stem from a lack of good child care to a lack of information of what jobs are available – and addressing them could benefit the entire economy. It's worth a shot: As we worry about income stagnation and a declining level of family incomes, ignoring the potential contributions of 38.5 per cent of potential workers seems counterproductive at best and foolish at worst.

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