It’s been over a year since we discussed a paper on labor force participation by Julie Hotchkiss of the Atlanta Federal Reserve. The latest paper from Julie Hotchkiss addresses the rise in female labor force participation from 1975 to the late 1990’s as well as the recent reversal of this trend:
After decades of consistent increases, the labor force participation of women began to flatten out in the late 1990s and decline after 2000. This article investigates the changes in the labor force participation rate among women aged twenty-five to fifty-four that have occurred over the past thirty years … The rate of change in behavior has also declined over the past thirty years. Indeed, behavioral change between 1994 and 2005 had a direct negative influence on the observed decline in the labor force participation rate during these decades. Special attention is given to the unprecedented 2.7 percentage point decline in the labor force participation rate between 2000 and 2005, which can be explained by changes in both behavior and characteristics, with weaker labor market conditions in 2005 being one of the characteristics providing the greatest downward pressure. However, if the unemployment rate had been at the 2000 level of 4.5 percent in 2005 (holding everything else at 2005 levels), the labor force participation rate of women would still have been 2.3 percentage points lower than in 2000.
While some of us economists on the left wish to emphasize how weak the labor market remains citing the fact that the employment to population ratio is still far below where it was in 2000, some of the economists on the right are arguing that part of this decline represents choices and not weak aggregate demand. Hotchkiss’s conclusions give a bit of ammunition for those on the right. (Hat tip to Mark Thoma for his email).