The Power of the Pill to Increase Women’s Wages

If you were to guess the macroeconomic variable that had the widest impact on sexual behavior over the past fifty years, what would you choose? Personally, I would choose the one that increased the age of marriage, reduced teen pregnancy rates, gave women more control of their relationships, and more – relative female wages.

While the ability of women to financially support themselves has, for the past half century, changed the incentives that influence sexual decision-making, it appears that sexual decision-making has also increased the ability of women to be financially self-sufficient.

It is fairly obvious that access to birth control should increase the time that women spend in the labor force by both increasing the age at which they become mothers and decreasing their total number of children. If this were the only affect of contraceptives, however, women’s wages should have been falling as their labor supply increased (think of the labor supply curve shifting up over a stable labor demand curve).

Over the period that women have been increasing the time they spend in the workforce, however, women’s wages have also been increasing relative to men’s wages.

For example, over the 1980s the labor force participation rate of women increased from 51% to 57% while over the same period the ratio of the average woman’s earning to the average man’s earning (both working full time all year) increased from 60% to 69%.

According to new research, birth control has not only increased women’s labor supply but has increased the productivity of female workers to such a high degree that any downward pressure on wages created by increasing labor supply has been more than offset by increasing labor demand.

The argument goes something like this: Women who had early access to contraceptives adjusted their expectation of having children in the future. That change in expectation of childbearing increased their expected return to investing in their careers. In response to these incentives women increased their career investment and became more productive workers being paid higher wages.

The Pill, according to this evidence, is responsible for 10% of the increase in women’s wages relative to men’s in the 1980s and 30% in the 1990s. Furthermore, women living in states that allowed legal access to oral contraceptives early benefited from an 8% higher wage by the time they were fifty relative to women living in states that delayed legalizing contraceptives.

One third of this Pill-induced change in wages is the result of women investing more in education and choosing different occupations while two thirds comes from on the job experience.

The most important conclusions we can take from this research is that at least one of the factors that has been increasing women’s wages relative to men’s has already run its course – it has been literally decades since women began their work lives believing that their productivity would be limited by their fertility.  That means that any hope of closing the existing gap between women’s and men’s earnings (currently at 77%) is going to have to come from a different source.  

Might I suggest falling marriage rates as a candidate?

References:

Bailey, Martha; Brad Hershbein ; and Amalia Miller (2012). “The Opt-In Revolution: Contraception and the Gender Gap in Wages“ American Economic Journal Applied Economics Vol. 4(3) .