Nobel Prize in Economics 2023- Explained Pointwise

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Nobel Prize in Economics 2023 has been awarded to Claudia Goldin. Claudia Goldin’s work has uncovered the key drivers of  gender difference in the labour market. Goldin is individually the first and only the third woman in history to win this honour. 

What are the observations of Claudia Goldin’s research work that has been awarded the Nobel Prize in Economics 2023?

Claudia Goldin collected over 200 years of data from the US for her research work. According to Goldin, women are vastly underrepresented in the global labour market. Women are paid less than men. 

Claudia Goldin has demonstrated the gender differences in employment rates and earnings. She has provided the explanation for her observations.

1.Women’s Labour Force Participation(LFP) Rate

What is Goldin’s Observation- The participation of married women decreased with the transition from an agrarian to an industrial society in the early nineteenth century, but then started to increase with the growth of the service sector in the early twentieth century. There is a U-shaped relationship between economic development and women’s Labour Force Participation(LFP).

Goldin’s Explanation of the observation-According to Goldin, in the agrarian economies, women had a higher Labour Force participation, as women could fulfill both her domestic responsibilities and her duties on the farm. However, industrialisation made it harder for married women to work from home since they were unable to balance the demands of family and work. But with the growth of service sector and rise in women education levels in the 20th century, Labour force participation of women has increased.

2.Earning gap between women and men

What is Goldin’s Observation- Despite modernisation, economic growth and rising proportions of employed women in the twentieth century, there still exits significant gap between the earnings of men and women.

Goldin’s Explanation of the observation- Goldin has attributed the existing gap in the wages of men and Women to three factors-
1.Occupational segregation– Women work in stereo typically feminine jobs that are lower paying.
2.”Greedy Jobs” and “Mommy Track“- “Greedy jobs” have massive wage premiums but, in return, require long work hours, networking, late-night meetings, travel. “Mommy track” jobs are less paying & less demanding jobs, which allows taking care of the kids’ school, homework, sports, music lessons, and doctor visits. According to Goldin, in most families, the man is in the greedy job and the woman is on mommy track. This creates a large pay gap between men and women.
3.Role of Expectations and Career Choices– Women are expected to play a mother’s role and raise children. Thus their educational decisions and career choices are impacted by the future expectations from them as mothers. Hence, women settle for low paying careers from childhood itself.

3.Marriage Barriers in Employment

What is Goldin’s observation- By the beginning of the 20th century, while around 20% of women were gainfully employed, the share of married women was only 5%.

Goldin’s Explanation of the observation- Goldin has attributed this low share of married women participation in the workforce to two factors.
1.“Marriage bars”- the practice of firing and not hiring women once married.
2.”Long and uninterrupted careers” in the service sector led to the exclusion of married women from the workforce.
These two factors explain why the average employment level for women increased by so little, despite the massive influx of women into the labour market in the latter half of the century.

4.Role of Contraceptive Pills

What is Goldin’s observation- Use of easy-to-use contraceptive pills by the end of the 1960s led to an increase in the female labour force participation rate.

Goldin’s Explanation of the observation- Contraceptive pills allowed women to exercise greater control over childbirth and plan their careers and motherhood. This led to more women studying subjects like law, economics and medicine and entering various fields of employment.

5. Bias in hiring of female candidates

What is the research- In her work, “Orchestrating Impartiality: The impact of blind auditions on female musicians”, Goldin showed that auditions for symphony orchestras done behind a screen, where the jury cannot see the candidate, resulted in greater hiring and advancement of women.

What is Goldin’s Explanation- Goldin has attributed the low women labour force participation rate, to lower hiring of women due to the patriarchal bias of the recruiter. The patriarchal bias of the recruiter leaves the deserving women out of the workforce.

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What is the significance of the research awarded the Nobel Prize in Economics 2023?

The research of Claudia Goldin has provided significant insights on the status, role and participation of women in the workforce. This has a lot of significance which are mentioned below-

Making all economic analysis and policy-making gender sensitive- The research of Goldin can be applied in making the Government policies more gender sensitive. It can also be used to design special policies for women employment.

Provides knowledge about underlying barriers hindering women employment– Goldin’s work has made us aware about various barriers like “marriage bars”, “mommy track”, “greedy jobs” phenomena, which hinders women employment in modern economies. India which is transitioning into a modern economy, must remove these barriers to reap rich economic dividends.

Effective implementation of birth control Programmes- Goldin’s work has demonstrated how the use of birth control pills gave women the choice and agency to shape their careers. India must promote and effectively implement its Antara programme, to increase the use of oral contraceptive pills.

Increase in the investment in women education- Goldin has pointed at the role of Women education in propelling economic growth and increasing individual productivity. There is a strong link between the “American Century” and the “Human Capital Century”. Developing countries like India, must also commensurately invest in women education so as to make it the “Indian century“.

What is the application of the research in the Indian context?

1) Paradox of Female LFPR in India: With development and education, LFPR has gone upwards in most economies. In India, both economic growth and female educational attainment had increased rapidly between 2004-05 and 2011-12. However, during the same period, Female LFPR in the Indian labour market declined. The trend in FLFPR has not followed the increasing pattern estimated and forecast by Goldin. 

Application of Goldin’s research: The accompanying table shows that regardless of the definition, FLFPR estimates for 2022-23 are very close to the 1993-94 estimates, thus confirming the Goldin ‘U’-shaped curve. 

Source: Times of India 

2) Wage gap in India: For ages 25-64, the gender wage gap is 30%. However, this wage gap does not adjust for education. For all unmarried college degree workers, the wage gap is almost non-existent – only 3% (lower than the USA). For all college educated workers, the wage gap is just 16% (again, lower than in the USA). 

Conclusion

There had always been a widespread prevalence, of the acutely unfounded notion that economic growth alone can automatically reduce gender differences in the labour market. Many developing countries like India, need to study this issue more closely to develop better women centric labour policies. 

Source- Indian Express

UPSC Syllabus- Inclusive Growth and issues arising from it