NCPA - National Center for Policy Analysis


December 5, 2005

One of the most dramatic developments in the United States since World War IIhas been the increasing labor force participation of women, says the National Bureau of Economic Research.

Whereas in 1947, 31.5 percent of women and 86.8 percent of men were in the labor force, by 1999, women's labor force participation had roughly doubled to 60 percent, while men's had fallen moderately to 74.7 percent.

Using the March 2005 Current Population Survey (CPS) data, researchers Francine Blau and Lawrence Kahn investigated married women's labor supply behavior from 1980 to 2000.

They found:

  • Married women's labor supply function for annual hours shifted sharply to the right in the 1980s, with little shift in the 1990s.
  • In an accounting sense, this is the major reason for the more rapid growth of female labor supply observed in the 1980s, with an additional factor being that husbands' real wages fell slightly in the 1980s but rose in the 1990s.
  • Moreover, a major new development was that during both decades, there was a dramatic reduction in women's own wage elasticity and women's labor supply also became less responsive to their husbands' wages.
  • Between 1980 and 2000, women's own wage elasticity fell by 50 to 56 percent, while their cross wage elasticity fell by 38 to 47 percent in absolute value.

These findings have implications for the national debate over supply-side tax policy -- tax cuts aimed at encouraging more work. If married women's labor-supply elasticity has declined, then the potential for marginal tax rate cuts to increase the labor supply is much smaller now than 20 years ago, since tax rates were much higher then as was married women's labor supply responsiveness, say the authors.

Source: David R. Francis, "Changing Work Behavior of Married Women," NBER Digest, November 2005.

Francine Blau and Lawrence Kahn, "Changes in the Labor Supply Behavior of Married Women: 1980-2000," National Bureau of Economic Research, Working Paper No. 11230, March 2005.

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