Applied Research Bulletin - Volume 6, Number 1 (Winter/Spring 2000)

Labour Force Participation: Women No Longer Playing Catch-Up

The spectacular increase in the female participation rate is certainly one of the most striking, if not the most striking phenomenon in the evolution of the Canadian labour market between the 1950s and the late 1980s. The virtual stagnation of the female participation rate during the 1990s is a notable reversal of this situation.

In the mid-1970s, the female participation rate was close to 45 percent, more than 30 percentage points below the male participation rate. By the late 1980s, women's rates had climbed to 59 percent, while men's had declined somewhat to around 76 percent in 1990. Over this period, the gap between the male and female participation rates narrowed by more than 14 percentage points.

Between 1990 and 1999, the dramatic increase in the female participation rate came to a halt. The rate was 58.7 percent in 1999, exactly the same as in 1990. During this period, the gap between the male and female participation rates continued to shrink; but no longer because of a rapid rise in the female participation rate but rather because of a steady decline in the male participation rate. The gap between the two narrowed by an additional 3.6 percentage points.

Male and Female Participation Rates

The main conclusion of a study by Paul Beaudry and Thomas Lemieux, who examined the issue at a symposium on the evolution of participation rates in Canada organized by Human Resources Development Canada and the Centre for the Study of Living Standards, is that large increases in the labour force participation rate of women are clearly a thing of the past.

The authors come to this conclusion by assessing the role of three distinct factors in the evolution of the participation rates of different cohorts of women in Canada between 1976 and 1994. A cohort is made up of a group of women who entered the labour market at the same time. Let us take, for example, the case of Canadian women who were 25 years old in 1976. This cohort's participation rate depends first of all on a macroeconomic effect which affects all cohorts in the labour force in the same way at the same time. Economic growth and institutional factors such as changes to Employment Insurance, to the minimum wage or to social assistance are examples of macroeconomic effects that can cause participation rates to rise or fall. The second factor, called the age composition effect, indicates how the cohort's participation rate changes with time. The third factor, the cohort effect, captures the differences among cohorts at a given age or macroeconomic effect. For example, if the cohort that entered the labour market in 1976 has a participation rate 10 percent higher than the cohort that entered in 1966 at the same age and under similar macroeconomic conditions, the cohort effect is 10 percent in relation to the 1966 cohort.

The Gap Among the Participation Rates of Women of Different Generations Is Diminishing

What characterized the increase in the female participation rate in the 1970s and 1980s was that every cohort entering the labour market had a higher participation rate than the previous one. According to the study by Beaudry and Lemieux, for recent cohorts of women the gap between the participation rates of one cohort and the one immediately following is disappearing, which explains the levelling-off of the female participation rate in the 1990s.

For example, the participation rate of the cohort of women who entered the labour market in 1992 is comparable to that of women who entered the labour market in the 1980s.

Macroeconomic Developments Partially Explain the Slowdown

The levelling-off of women's participation rates is above all a structural phenomenon related to the stabilization of cohort effects, which were at the root of the spectacular rise in female participation rates in the 1970s and 1980s. Unfavourable macroeconomic conditions magnified the trend but did not cause it. From 1981 to 1983, the drop in female participation rates attributable to macroeconomic effects was offset by the cohort effects that caused the participation rate to increase by 1 percent a year at the time. But with the stabilization of cohort effects from 1989 to 1994, comparable macroeconomic effects in the early 1990s caused a drop in participation rates.

Women's Participation Rates More Closely Resemble Those of Men

Another finding that supports the study's conclusion that large increases in women's participation rates are not likely to occur again is that women's participation profiles by age have flattened out. As the graphic "Participation Profiles by Age" shows, men's participation rates increase with age until about age 30. Between the ages of 30 and 54, men's participation profiles are flat. After the age of 55, their participation rates drop as men retire from the labour market. Today, women's participation profiles by age are similar to those of men. This pattern emerged as women's participation rates caught up with those of men in the 1970s and 1980s. In 1976, for example, the female participation profile did not level off between the ages of 30 and 54 but at a younger age.

Participation Profiles by Age

According to the Beaudry/Lemieux study, the period of dramatic increases in participation rates is therefore over. The rates can be expected to hold relatively steady in the future. There will still be room for a two- to three-percentage point rise in women's participation rates if macroeconomic conditions continue to improve. However, it would be unrealistic to expect an increase of 5 to 10 percentage points in future periods of growth, as was seen from 1983 to 1989. The cohort effects that prevailed at the time are simply not present today.

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