It is widely assumed that women workers are the first to be hit by economic crises because they tend to have more vulnerable and flexible jobs, but the ongoing European financial crisis suggests a different pattern, argue C. P. Chandrasekhar and Jayati Ghosh in this edition of MacroScan.
The general perception about the employment impact of economic crises is that women workers are disproportionately affected by job losses. This reflects both analytical expectations and the experience of past financial crises. Where exports are hit and women are particularly involved in export-oriented production, it is only to be expected that women will be disproportionately affected. But usually the impact extends beyond this. Since more women than men tend to be employed on fragile non-permanent contracts, they are more vulnerable to being laid off in conditions of declining demand or other difficulties faced by employers. The expansion of open unemployment also puts pressure on wages, such that real wages decline (and sometimes even nominal wages are affected) and this may also increase gender gaps in wages.
During the Asian financial crisis of 1997-98, women workers were the first to be laid off even in non-exporting sectors, because of the job segregation that put them in the low paying and more “flexible” activities unlike the more diversified and relatively more secure occupations of male workers. For example, women were laid off at seven times the rate of men in South Korea in 1998-99, and evidence from the crisis of 2008-09 also points to a similar tendency in other Asian countries.
However, the recent crisis has been somewhat different from these predictions in terms of gendered employment results. The ongoing crisis in the Euro Zone has thus far had worse effects for men workers than for women. Male workers in Europe have been worse affected by job cuts and layoffs, such that the unemployment rate for men increased more than for women. This has been particularly evident in the three Baltic countries, Ireland and Spain. In Iceland the unemployment rate for women was higher than that for men throughout the 1990s. However, in the 2008-09 crisis, the overall unemployment rate increased significantly, but the unemployment rate for men rose faster so that it became higher than that for women.
Much of this may be due to the sectoral impact of the crisis so far. Certain categories of workers have been hit more than others, particularly temporary workers (for example, 90 per cent of employment losses in Spain); low-skilled workers especially in manufacturing and construction; and younger people, who typically have experienced double the rate of unemployment of other age categories.
However, women workers have also been affected adversely. Within male-dominated sectors, women workers have often been the first to be dismissed. Women workers have experienced more wage cuts than men, and there is some evidence that gender gaps have stopped declining or have even increased in some countries. There is some evidence of not only real wage cuts but also nominal wage cuts, as in Estonia, Latvia, Lithuania and other new EU Member States, some of which has been made easier by labour market deregulation that allowed employers to unilaterally re-categorise jobs as part-time and thereby reduce working hours even marginally so as to reduce nominal wages.
A less noticed but still significant impact has been on unpaid labour, as fiscal austerity measures and attempts of employers to reduce costs have led to the reduction or removal of arrangements to reconcile work and family life, which typically has the maximum negative impact on female workers. Since more men have lost their jobs thus far in Europe than women, it may even come about that overall in the labour market there may be more women than men in paid jobs. However, the gender construction of societies is still such that women bear the brunt of the burden of household responsibilities and the care economy, whether or not they are employed elsewhere, so that the “double burden” of paid and unpaid work may become an even stronger reality.
These trends are strongly related to policy measures. As noted in Work Inequalities in the Crisis: Evidence from Europe, Daniel Vaughan-Whitehead, ed., Geneva: ILO 2012, page 3: “The policy shift that occurred in the second half of 2009 — from anti-crisis expansionary packages to restrictive budgetary policies — may also change the outcome in terms of inequalities. Employment cuts have generally been higher in the private sector, but have extended recently to public sector employees. While men have been hardest hit in the first phase, employment and wage cuts in the public sector and in services, which are female-dominated, will mainly impact upon women, thus reversing the narrowing gender pay gap and unemployment gap generated by the crisis so far. Other categories of employees — more skilled and older, but also disabled, and lone parents — are also likely to be directly affected by the cuts in budgetary expenditure. Employees from ethnic minority groups will also be hit because of their concentration in certain segments of the public sector.”
It is worth examining trends in some of the more crisis-hit countries of the Euro Zone in more detail. To that end, some gender-disaggregated data for Greece, Ireland, Portugal and Spain (GIPS for short) are analysed here, in comparison with other countries that have been less affected by the crisis so far. These four countries are chosen because they have already experienced significant recession in output and employment (in the case of Greece, substantially negative GDP growth for nearly five years) and because the process of fiscal tightening has already been underway for some time.
Gender wage gaps
Consider labour force participation rates (LFPR), as shown in charts 1 and 2. One of the interesting features of the past decade has been the gradual increase in female participation rates even as male rates have remained stagnant or declined slightly.
This is true for the OECD as a whole (chart 3) as well as for the GIPS countries. Further, the process clearly began well before the 2007-08 crisis, so it cannot be attributed solely to the crisis. Indeed, during the previous boom the increase in female labour force participation was attributed to the process of economic expansion that was drawing more and more women into paid economic activities. However, it is worth noting that the process has been much more marked in the GIPS countries, where female LFPRs have increased by 8.5 percentage points over the decade as a whole.
What is even more interesting is that they continued to increase even after GDP started declining, and even in the period of deep recession they have gone up even as male rates have declined. (Only in Ireland did both female and male rates decrease.) In Greece, for example, female LFPR increased by 2.6 percentage points between 2007 and 2010, while the male LFPR fell slightly by 0.2 of a percentage point.
Another concern relates to gender wage gaps in the wake of the crisis. It is often argued that because women workers tend to be less unionised and have lower reservation wages, their wages are more easily cut in periods of downturn, and this has certainly been observed in a number of other crises in the past, especially in developing countries. Thus in South-East Asia, gender wage gaps increased during the crisis, as is discussed below. However, in Europe a somewhat different process has been occurring, as indicated in table 1. In Greece and Ireland gender wage gaps actually decreased quite significantly after the crisis, even as they increased in Portugal and Spain. Meanwhile, even the countries that have not yet really experienced the crisis, such as Germany and Austria (which incidentally have some of the highest such gaps of all OECD countries), gender wage gaps also decreased.
One important caveat must be borne in mind: the data presented in table 1 refer only to full-time work, and women workers tend to be much more heavily represented in part-time work, which has also increased after the crisis. So the full extent of the gender wage gap or its trend over time may not be accurately portrayed here. Even so, such a diverse pattern deserves consideration.
The explanation for these varying trends can be found in the occupational segregation by gender in different countries, relative to the sectors that have been most affected by crisis. This particular crisis has affected banking and financial sectors (even though not as much as could be expected given the gravity of the crisis and the culpabilities involved) and employment in these sectors is still dominantly male. This has been a high-remuneration sector, and even though it remains so, the returns have come down somewhat in the wake of the crisis, thus reducing wage dispersion among skilled and professional workers. The other activity that has been clearly hit is construction, which is another sector that men workers (of the semi-skilled variety) tend to be more concentrated in, and therefore as this has come down, wage dispersion in semi-skilled activities has also possibly come down. Since most women workers tend to be at the bottom of the wage distribution anyway, their wages may remain intact or decline only slightly compared to male workers.
Chart 3 describes the changes in part-time work (which is one of the forms of non-regular work) in the GIPS countries as well as in the OECD as a whole. As noted above, women are much more heavily represented in such contracts, with more than one-fifth of all women workers in such work, and the proportion has been rising. However, the proportion has been rising in both OECD as a whole and in the GIPS countries – and indeed it has also been rising in the countries relatively unaffected by crisis, such as Germany. If anything, the GIPS average for the incidence of part-time work (for both men and women) is slightly lower than for the OECD average, although the rate of increase has been marginally faster. There is no doubt, however, that the incidence of part-time employment has continued to rise throughout the crisis. If all forms of non-regular employment (including self-employment) are added to this, the outcome would probably appear to be starker.