US policymakers have one last chance to avoid a recession: to find the 1.5 million women who have disappeared from our workforce
Want to make a soft landing? Try to stick to a gender equity agenda. By closing the gender equality gap in the US job market, we can achieve the coveted soft landing that political leaders are striving for. And in doing so, we can reap the $1.789 trillion of equity in the labor market.
Something fascinating happens when we look at the economy through the intersectional gender lens — that is, when we disaggregate economic data by gender plus race and ethnicity. Shortly before the outbreak of the pandemic, the female participation rate had risen to 59.2%. By the October 2022 job report, the rate had fallen to 58%. If we look at percentages driving population growth, it means that 1.549 million women have disappeared from the workforce since February 2020.
That bothers me, and not for reasons of fairness. I’m not an activist. I’m a gender economist – and our economy draws its strength from the plurality of the workforce. We need these millions of lost women to fuel our economic engine. Since 1970, women have added $2 trillion in value to the US economy by increasing their labor force participation.
A trillion dollar economic opportunity wiped out by the pandemic
Before the pandemic, closing the gender gap in labor force participation could have added about $789 billion to the US economy, on top of the $2 trillion we’ve already gained since 1970.
However, in the last two years, 29 years of progress towards gender equality in the labor market has been undone. This regression has cost the US$1.789 trillion in economic potential. In other words, closing the gender equality gap in the job market could boost the US economy by $1.789 trillion post-pandemic.
If we include the 1.549 million women missing from the labor market in the October unemployment figures, the real female unemployment rate would be 5.42%. The cropped lens makes the image look much gloomier. For black women, including the 328,000 of them missing from the labor market as of February 2020, the unemployment rate is 8.58%. For Latinas, including the 313,000 missing from the labor market as of February 2020, the unemployment rate is 6.03%. Not only do our policies not consider these women, we don’t know much about the reasons they left the labor market. The data is simply not available – but economists suspect that many of them went into the informal economy.
These staggering intersectional unemployment rates not only violate the Fed’s maximum employment mandate (whose target unemployment rate is between 4.1% and 4.7%), they also violate the principles of economic prosperity.
What if, instead of raising interest rates to cool the economy, we devised solutions to get these women back into the workforce? This would result in a three-pronged solution to the soft landing challenge: it would stabilize prices, promote equitable employment, and boost sustainable economic growth.
Gender equality is the key to a soft landing
A soft landing is followed by a three-step dance. Let’s check the choreography.
First, the economy is heating up and inflation is rising. In October, prices increased by 7.7% compared to the previous year.
Second, the Fed is raising interest rates to cool the economy. The Fed has hiked the federal funds rate by 375 basis points in just eight months.
Third, prices stabilize and the economy avoids a recession. If we choose to get those 1.549 million women back into the workforce, we can hope for a soft landing. Here’s why.
The economic benefits of equitable employment
Our economy has about two vacancies for every job seeker. An expanded workforce would close the employee-to-vacancy gap by almost 33%. More workers chasing fewer jobs would keep inflation in check by mitigating the damaging effects of the wage-price spiral.
To avoid a recession, we need to keep unemployment within the maximum employment range of 4.1% and 4.7% for all intersectional cohorts. As data disaggregated by gender and race show, a meaningful return of Black and Latino women to the workforce would ensure we don’t see a protracted K-shaped recovery in a country that is already showing some of its most egregious levels of economic stratification.
Further rate hikes do not bode well for fair employment levels in general. Tighter monetary policy is causing companies to consolidate their workforces on a last hire, first fired basis. And that means women and black employees are usually the first to be circumcised.
Recent research suggests that the upside potential of $1.789 trillion in labor fairness is a conservative projection because the models used to calculate that figure are based on what is known as an employee count. It treats every “head” equally. A worker is a worker.
However, women and men are not perfect substitutes in the labor market. Increasing the gender diversity of a given business unit leads to improved financial performance of the company in ways that are not captured by the models.
For example, my company’s research shows that every 10% increase in intersectional gender equity results in a 1-2% increase in sales. If models take gender equality into account, the economic gains from female labor force participation could be up to one-fifth greater.
Katica Roy is CEO of Pipelinee.
The opinions expressed in Fortune.com comments are solely the views of their authors and do not necessarily reflect the opinions and beliefs of wealth.
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