The Cato Institute

Markets Empower Women

Market-driven technological and scientific innovations heighten women’s material standard of living, promote individual empowerment, reduce sexism and other forms of collective prejudice, and foster cultural change…

Over the last 200 years, economic progress has helped to bring about both dramatically better standards of living and the extension of individual dignity to women in the developed world. Today the same story of market-driven empowerment is repeating itself in developing countries.

Competitive markets empower women in at least two interrelated ways. First, market-driven technological and scientific innovations disproportionately benefit women. Timesaving household devices, for example, help women in particular because they typically perform the majority of housework. Healthcare advances reduce maternal and infant mortality rates, allowing for smaller family sizes and expansion of women’s life options. Second, labor market participation offers women economic independence and increased bargaining power in society. Factory work, despite its poor reputation, has proven particularly important in that regard.

In these ways, markets heighten women’s material standard of living and foster cultural change. Markets promote individual empowerment, reducing sexism and other forms of collective prejudice.

Women’s empowerment in many developing countries is in its early phases, but the right policies can set women everywhere on a path toward the same prosperity and freedom enjoyed by women in today’s advanced countries.

Learn more…

Support for Federal Paid Leave Program Depends on Cost

Americans aren’t willing to cut spending, increase the deficit, have fewer employer-provided benefits, or reduce the number of female managers in the workforce in exchange for federal paid leave…

The new Cato 2018 Paid Leave Survey of 1,700 adults finds that nearly three-fourths (74%) of Americans support a new federal government program to provide 12 weeks of paid leave to new parents or to people to deal with their own or a family member’s serious medical condition. A quarter (25%) oppose establishing a federal paid leave program. Support slips and consensus fractures for a federal paid leave program, however, after costs are considered.

The survey found 54% of Americans would be willing to pay $200 a year in higher taxes, a low-end estimate for a 12-week federal paid leave program. However, majorities of Americans would oppose establishing a federal paid leave program if it cost them $450 a year in higher taxes (52% opposed) or $1,200 a year in higher taxes (56% opposed), the mid-range and high-range cost estimates respectively.

These low-, mid-, and high-range cost estimates are based on the most high-profile federal paid leave program proposed to date: The Family and Medical Insurance Leave Act (FAMILY Act).

The survey also did not ask questions about what paid leave policies Americans would like to see offered at private companies. Instead, the Cato 2018 Paid Leave Survey focuses on what people think about establishing a government-provided paid family leave program at the federal level.

Learn more…

The Unfortunate Truth About Government-Supported Paid Family Leave

Could government-mandated paid family leave make women more equal at home and in the workplace? The data suggests no…

Paid parental leave provides workers with financial compensation during temporary absences following the birth or adoption of a child. Private companies often provide paid leave and the federal government mandates 12 weeks of job-protected unpaid leave, but recently policymakers and advocates have become dissatisfied with the status quo.

Proponents of federal intervention argue that the private market does not or cannot provide sufficient paid leave. Moreover, proponents believe government supported leave would improve labor market outcomes and reduce gender and labor-market inequality.

However, the evidence that suggests otherwise…

First, ample data show that the private market provides paid leave at rates about 30 to 50 percentage points higher than proponents claim. Private paid leave provision has grown three- or fourfold over 50 years and continues to grow. This trend indicates industry is responsive to employee demands.

Second, workers may not be better off under federal paid leave and may be worse off. Government intervention provides new incentives, and individuals are likely to adapt accordingly. Evidence suggests government supported leave may result in wage or benefit reductions, female unemployment, or reduced professional opportunities for women.

Government intervention is also unlikely to correct gender or labor-market inequality in ways proponents desire. For example, families may respond to the policy by increasing women’s household work contributions relative to men’s. Redistributive effects of government intervention are likely to harm workers.

Policymakers should not adopt paid parental leave policies. Instead, they should consider improving workers’ lives through reforms that increase economic efficiency, remove barriers to flexible work, and increase choice.

Learn more…

Nordic Gender Equality Policies Reinforce the Glass Ceiling

The Nordic countries are widely regarded as world leaders in gender equality, but several aspects of Nordic social policies have contributed to a glass ceiling…

The rise of the Nordic welfare state has been a double-edged sword: creating some benefits for women’s careers, but also creating barriers to women’s professional progress. 

Although Finland, Sweden, Denmark, Norway, and Iceland have high female employment rates and an unusually gender-equal history, these Nordic countries also feature disappointingly low numbers of women managers, executives, and business owners. For example, in Denmark a mere 28% of women are employed as managers, whereas in the U.S. 43% are.

A common view is that the gender equality reflects the social welfare policies of these nations. However, in actuality, the lack of women’s professional progression is due to the welfare state.

State-enforced ender quotas have been ineffective and several aspects of Nordic social policies have negatively affected women’s career progress.

Nordic gender quotas laws have gained international attention in recent years, with policymakers advocating for similar legislation as Norway’s 2003 law requiring 40% of board members of public companies to be women. However, once the law went into effect in 2006, a challenge became apparent: there was a shortage of experienced individuals to fill the positions. Gender quotas led to less experienced board members, greater company leverage, higher company acquisition rates, and declining operating performance. Meanwhile, gender quotas have not meaningfully improved Nordic women’s professional outcomes in terms of leadership rates, pay, or career goals, and if anything act merely as a symbol of these countries shattering the glass ceiling.

Nordic public monopolies in female-dominated sectors such as health care, child care, and elderly care reduce development in the parts of the labor market that women generally occupy. Since the wages in government monopolies are flat, the women who make up these industries have less incentive to work. And although there are some public-sector managerial positions, opportunities for individualized careers and business ownership are comparatively limited.

High tax rates are another obstacle for women’s career progression, as they reduce incentives for paid work by reducing take-home pay. Unfortunately, women’s “opportunity cost” is often perceived to be higher because they could otherwise use the time on other productive untaxed domestic activities. Additionally, high taxes reduce women’s ability to purchase service substitutes for household work. Even when the government provides welfare subsidies for public services that can encourage women to work, high taxes discourage them from working more.

National paid and unpaid leave policies, work entitlements, and other family benefits encourage women to work part-time rather than full-time, hindering their ability to climb the career ladder. Generous childcare and maternity leave policies make reducing work hours attractive, but can disqualify women from top jobs.

Reforms that enable women to climb the professional ladder organically provide a better approach than governmental policies and legislation. For example, more women reach executive positions in Iceland, the Nordic country with the smallest welfare state, than in Denmark, a Nordic country with an unusually large one.

The Nordic Gender Equality Paradox is important to keep in mind in countries such as the United States, where Nordic-style welfare policies are routinely touted as a way of promoting gender equality without tradeoffs.

Learn more…