Knowledge that Transforms

Labor force participation of married women increased from 49.1% to 83.5% during the past 2 decades. By cross-section estimates on micro data of the probability of labor force participation in 1967, 1973, and 1980 and by using these estimates for predicting changes in labor force participation, we have found that increases in own wage has been by far the most important explanatory factor. Women's real wages have increased relative to husband's after-tax earnings both as an effect of the introduction of compulsory separate taxation in 1971 and as an effect of dramatically decreased sex differentials in pay partly associated with increased female education.

This paper discusses three independent inquiries into consequences of the rise in women's labor force participation rate (LFPR) in the United States since 1946. (1) The growth in women's LFPR is decomposed by decade, age, marital status, presence of age-specific children, and years of schooling. (2) Evidence on the impact of the growth on the inequality in income among husband-wife families is summarized and the impact on income inequality in other family structures is discussed. The effect on the level of family real income is considered and "money illusion" in measuring the change in income is noted. (3) Bivariate autoregressive time series are estimated with annual data from 1950 to 1980, indicating that lagged values of women's LFPR are systematically correlated with measures of flow fertility, marriage, schooling, and men's income, while only fertility has a strong, persistent lagged correlation with LFPR.

A structural life-cycle retirement model with an improved specification over previous models is used to analyze and compare the long-run effects on the labor supply of older workers of the 1983 Social Security reforms. The effects of separate provisions from the 1983 amendments are examined. These include the raising of the normal retirement age to 67, the increase in the delayed retirement credit to 8%, and the lowering of the reduction rate for earnings over the test amount to $1.00 for every $3.00 of earnings.

Except in special cases, market work and household membership are jointly chosen. A Nash bargaining model of family behavior is used to specify stochastic structural relationships (two indirect utility functions and a market and a reservation wage function) that jointly determine work, consumption, and household membership. The maximum likelihood estimates of the implied trinomial probit model differ sharply from those obtained when either market work or household membership is taken as exogenous. This application to white male youths from the National Longitudinal Surveys shows the insurance function of families: parents insure their sons against poor market opportunities.

This paper is a survey of analyses of women's labor force growth in 12 industrialized countries, originally presented at a conference in Sussex, England, in June 1983. The main focus of the conference papers and of the current survey is on growth of the labor force of married women in the years 1960-80. Trends in fertility, wages, and family instability also receive attention as related developments. Married women's labor force growth is observed in all countries, except for the USSR after 1970, where labor force rates of women reached the level of men. Growth rates differ among countries. They apparently respond to growth in real wages and to growth in education, but response elasticities differ among countries. Estimates of these elasticities contained in the country papers were helpful in predicting the trends. Other findings include ubiquitous declines in fertility and growth of divorce in the 1970s. Both developments are related to long-run labor force growth. In all countries, wages of women were lower than wages of men. The 1960 average gap of 38% narrowed to 29% in 1980. Factors related to these trends, including public policy, are discussed in the survey.

Despite the rise in the feminist movement, the enactment of equal opportunity legislation, and the rapid increase in women's labor force participation, a substantial sex differential in wages has persisted in the United States for at least 4 decades. Measured by hourly earnings of year-round workers, this wage gap was 31% in 1955, widened to a 35%-37% range by the 1960s and early 1970s, and then narrowed to 33% by 1982. This paper examines the extent to which changes in the characteristics of men and women in the labor force and other factors can account for the observed pattern. The main finding is that increases in women's labor force participation were initially associated with a declining skill level of employed women relative to employed men, where skill is measured by years of schooling and job tenure. More recently the work experience of employed women has been increasing, which helps account for the recent narrowing trend in the wage gap. During the 1970s the wage gap probably woul have narrowed more significantly had it not been for high levels of unemployment combined with the downward pressure on wages of less skilled workers arising from rapid increases in the supply of young workers and women. Gains by younger women in work expectations, work experience, and college enrollment and other work-related investments point to a further narrowing of the wage gap in the next decade.

In this paper we develop and estimate the first complete and internally consistent model of the effect of Social Security on the labor supply of the aged. We develop a simple life-cycle model that captures the effect of Social Security on the joint choice of the date of retirement and hours of work immediately after retirement. We show that in the presence of Social Security the budget constraint relating these choices is highly complex and nonlinear, and we develop a maximum likelihood procedure for the model that yields consistent parameter estimates. Our procedure avoids the selectivity biases present in prior studies that have ignored the nonlinearity of the constraint or have examined only self-selected subsamples that exclude nonretirees. Our results show that Social Security has a significant, though relatively small, effect on the age of retirement and postretirement hours of work, and that the effect of Social Security grows with advancing age.

In this paper we investigate the reasons for the growth in the female labor force in America during the twentieth century. In our research, we study the longer-term trends since 1900 and conduct a more intensive examination of developments after the Second World War. On the basis of our work, we conclude that rising real wages accounted for 60% of the total growth in the female labor force. Half of this wage effect in expanding labor supply was the fertility-reducing consequence of a higher female wage.

This paper summarizes results from a validation study in which administrative records from a large manufacturing company are used to validate survey responses of a sample of workers from that company. Relatively little evidence of bias is found in reports of prior-year earnings and unemployment, the more salient fringe benefits, and union status. Quite diverse amounts of error variance are found in the survey reports, ranging from very small for reports of job tenure, annual earnings, and annual unemployment to very large for work hours and especially for a measure of hourly earnings constructed by dividing annual earnings by annual work hours. Furthermore, it is found that the conventional assumptions regarding measurement error in earnings models are not justified. In particular, there appears to be an important correlation between the measurement error in the reports of earnings and the level of job tenure, producing a bias in the estimated payoff to job tenure of roughly 30%. This result suggests a need for a greater understanding of the correlates of survey response errors.

This paper studies a fulfilled-expectations equilibrium in situations in which intermediaries provide personal opinions on the likelihood of success of personnel, projects, or investments. Each referee must recommend some candidates from a group of people about whom he has private information. The employer uses the recommendations to choose the workers, using his expectations about the quality of the recommended and the nonrecommended applicants. Although the referees use their information strategically, the competition among them produces optimal use of the information in the sense that employers make the same choices in equilibrium as they would if they had the same information as the referees.