The Responsiveness of Married Women's Labor Force Participation to Income and Wages: Recent Changes and Possible Explanations
One contributor to the twentieth century rise in married women's labor force participation was declining responsiveness to husbands' wages and other family income. Now that the rapid rise in married women's participation has slowed and even begun to reverse, this paper asks whether married women's cross-wage elasticities have continued to fall. Using the outgoing rotation group of the monthly Current Population Survey (CPS) and estimating coefficients separately for each year from 1994 through 2006, we find that the decline in responsiveness to husbands' wages has come to an end — at least for the time being — and even find evidence of rising responsiveness to husbands' wages. This increase in the cross-wage elasticity of participation occurs largely between 1997 and 2002 and is concentrated among younger women and women with children.
We also explore a number of possible explanations for this development. We conclude that declining divorce rates, rising child care costs, and the increasing prevalence of high work hours for high pay-all of which were more pronounced at the high end of the income distribution — along with rising income inequality may have played a role. Also possible is that some of the decline is an artifact of changes in the tax system and the way income is measured. In addition, we observe some backsliding in attitudes supportive of gender equality in the market and at home, and perhaps a change in lifecycle timing among Generation X women.