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Jobs for the girls: the silent revolution in Australia's workforce

Jessica Irvine

Women are marching on Washington DC, and other capital cities including Sydney and Melbourne, this weekend to protest against Donald Trump's presidency.

But women in Australia have been making a less visible, but more lasting, statement in the workforce.

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Sometimes changes can happen so steadily and stealthily, they go unnoticed.

The march of women into the workforce, seen in rising female employment rates, is one such change.

But policy makers – including the Reserve Bank – will need to take note to ensure policy settings remain appropriate for Australia's rapidly changing economy.

Over the past decade, the number of employed men in Australia has grown by 785,000. But the number of employed women has surged by 931,000.

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Tipping scales

The portion of the working aged female population who are employed has risen from just 40 per cent back in the 1970s to around 56 per cent today.

By contrast, the proportion of the working aged male population in employment has been falling since the late 1970s from 75 per cent, to just 66 per cent.

As a result, the gap between the respective female and male employment to population ratios has shrunk to just 10 per cent, down from 20 per cent in the early 1990s and 35 per cent in the late 1970s.

   

While the pace of convergence in male and female employment has slowed a little, the relentless march towards equality continues.

Of course, two thirds of women are employed on part-time, compared to just one third of men. Due to prevailing social norms, women are often more inclined than men to work part-time hours to accommodate either child rearing or elder care responsibilities.

Full time strain

Much concern has been expressed recently about the strong growth in part time jobs, relative to full time positions.

While there there was an increase in full time jobs in the last quarter, the number of people employed in full time jobs actually shrank last year, by 34,000 people, while the number of part time employees surged 125,500.

There is a tendency to dismiss such job creation as inadequate – and that may be true, from a social justice or individual welfare point of view.

But when it comes to monetary policy, the Reserve Bank reads the jobs market tea leaves in a more specific way.

Of course, the Reserve Bank has a mandate to promote both full employment and price stability. But in practice, this mandate has found expression in a commitment to keep consumer price inflation in the economy in a target band between 2 to 3 per cent, on average, over the medium term.

From month to month, it is most interested in what the jobs data can tell us about how much spare capacity there is in the labour force, and the implications for prices.

If there is a vast army of idle labour, for instance, this will tend to reduce inflationary pressures.

Wages watched

But if everyone has the job they want, with the hours they want, the labour market is tight. Any uptick in business demand for labour will quickly flow through into higher wages and higher prices.

Of course, one way to see how tight the labour market is is to look at the headline rate of unemployment. At 5.8 per cent, Australia's jobless rate is broadly steady from a year ago.

However, job creation has been relatively weak and there has been a rise in labour under-utilisation – people wanting more work but unable to get it. Only a drop in the participation rate has prevented a steeper rise in the jobless rate.

So how much spare capacity is there in the labour market?

Well, that depends not only on new job creation, but the changing demand for work. The number of jobs on offer is fairly easy to gauge, but the demand for them is more nebulous.

Are more people working part time because they want to, or do they want more hours?

Ageing answer

In its latest board minutes, the Reserve Bank revealed it has an entire program of work underway dedicated to answering this question.

An ageing population is part of the answer. Combined with recent turbulence in retirement nest eggs, many older people are choosing to stay longer in the workforce, often in a part time capacity. Do they want more hours? Maybe not.

Some do. Indeed, many older workers who would have previously classified themselves as retired, might now think of themselves as part-time workers who would like more hours. But whether they're really able to work much more, is unclear.

Working women are also driving the changes. A recent paper by Reserve Bank economist Michelle van der Merwe titled Factors affecting and individual's future labour market status delved a little deeper into the employment experience of women.

Drawing on longitudinal data from the Household Income and Labour Dynamics in Australia survey, van der Merwe was able to trace how people fare in the labour market from year to year.

Family ties

Not surprisingly, factors which negatively affect a person's chance of being employed from year to year include having a long term health condition, not completing high school, being a migrant from a non-English speaking background and being a mother of dependent children.

Indeed being a mother of dependent children is strongly linked to having a lower chance of being employed in the next year.

Interestingly, and confirming the breadwinning stereotype, being a father of dependent children actually increases the likelihood of employment.

But the trend across all women is more muted.

Over the past decade, the average employed female is only marginally less likely to be employed in the following year, compared to the average employed male, despite many stepping out to have children.

When you break down the figures, a more surprising result emerges. Leading into the global financial crisis, the average employed woman was indeed much less likely than the average employed man to retain their employed status in the following year.

But after the crisis, there is a "complete reversal". Indeed, in the period 2011-14 employed women were significantly more likely than men to still be employed in the following year.

"These results could reflect a range of factors including the need to supplement household income because of negative shocks to wealth associated with the financial crisis, changes in preferences associated with how much time an individual wants to spend outside the labour force and changes in traditional gender roles associated with child rearing."

Men's work

Much of this has to do with the decline of male-dominated jobs post the mining boom.

But perhaps a more uncertain workforce has prompted more mothers to try extra hard to maintain their links to the workforce after children. Perhaps changing societal attitudes mean they wanted to anyway.

Either way, women are marching into the workforce, often in a part time capacity, joining a growing number of older part time workers.

For interest rates, this may mean the large rise in part time employment may reflect, in part, a new preference for working part time, rather than frustrated wannabe full-timers.

There may be less spare capacity in the labour market than the rise in part time jobs might suggest, leaving the headline jobless rate as a fairly good indicator of labour market capacity. To the extent this is true, the Reserve Bank will be less inclined to keep cutting interest rates future.

Time will tell. But it's clear policy makers can no longer afford to ignore the march of working women.

Ross Gittins is on leave.