The strong economy in Utah and in most of the United States is good news for job seekers. Jobs are plentiful and many businesses and industries are facing severe labor shortages.
The worker shortage is due to a number of factors, but one of them is fewer people participating in the labor force.
In January 2000, labor force participation hit a historic high of 67.3 percent as more women entered the workforce. But after the 2001 and 2008 recessions, labor force participation declined dramatically to 62.3 percent. Currently, even with a strong economy and high demand for workers, labor force participation has risen only to 62.8 percent.
Interestingly, in Canada and a number of other countries, labor force participation has not declined but has, in fact, risen. A recent Economic Letter published by the Federal Reserve Board of San Francisco, or FRBSF, notes, “The decline in labor force participation of U.S. men and women ages 25 to 54 stands in stark contrast with other industrialized nations, where participation rates of prime-age workers have increased over time.”
Since the early 1990s, prime-age (25-54) labor participation in Canada and the U.S. have moved in opposite directions, the study says. In 2017, some 87 percent of prime-age workers in Canada participated in the labor market, compared with 81.7 percent in the United States, a 5.3 percentage point gap.
The analysis by the FRBSF found that “three-fourths of the difference between the two countries can be explained by the growing gap in labor force attachment of women.” For men, the U.S.-Canada prime age labor participation gap is 2.5 percentage points. For women, the gap is 8 percentage points.
“If the U.S. could reverse the trend in participation of prime-age women to match Canada, it would see 5 million additional prime-age workers join the labor force.”
The study determined that employment and social policies in Canada, especially Canada’s extensive parental leave policies, make it easier for women raising children to remain in the labor force, while in the U.S. structural barriers keep millions of women on the sidelines.
“Parental leave policies in Canada provide strong incentives to remain attached to the labor force following the arrival of a new child,” notes the study. Jobs are protected with the same wages and benefits continuing to accrue during the leave, and benefits funded out of employment insurance provide income replacement during the leave. A parent on leave maintains a continuous employment relationship lasting for up to 78 weeks in combination with existing maternal leave.
I’m not suggesting that governments mandate policies similar to Canada’s. But the study makes clear that if individual businesses want to attract and retain more women employees, good parental leave policies and flexible work arrangements are key.
If parents can take a leave, while being assured their job, seniority, wages and benefits are protected, they will be more loyal to the company and be more likely to return. Parental leave policies are good for parents, good for babies and good for businesses.
Certainly, some families want, and are able, to have a parent stay home full-time with children. That is an ideal situation for many, but it doesn’t work for everyone. The reality is that a high percentage of women, even those with children, will be employed during their prime working years.
We ought to encourage policies that are good for them and their families.