(This essay was published in Hong Kong Economic Journal on 4 May 2016.)

 

The economic rise of women is spectacular when we compare the education and labor market accomplishments of men and women today with that of their past. More women now attend universities than men, and with higher graduation rates. Women’s wage rates are higher than men’s at the same age and education level before marriage. These huge strides by women are the result of multiple forces.

 

First, improvements in medical and health knowledge, conditions and access have reduced infant mortality rates. This has made it possible for women to have fewer births to attain the desired number of children successfully raised to maturity.

 

As a result, women are less constrained by the time-intensive activities of childbirth and childrearing that confine them to the household.

 

Second, new contraceptive knowledge has allowed both men and women to gain better control of their bodies and separate sexual pleasures from biological reproduction. Instances of accidental births are now better controlled.

 

Third, better health and longer life expectancies have increased the incentive of both men and women to invest in schooling and training because the gains from education can now be realized over a longer time horizon. Since women lead longer lives than men, the incentives to accumulate different forms of education capital are even higher for women.

 

Fourth, technological progress has reduced many traditional barriers that had disadvantaged women in joining the labor market. Furthermore, modern technologies have a growing demand for skilled labor and this has given additional incentives to women to invest in education. In many instances, the decline of manufacturing and the rise of service industries has played to women’s advantages in, for example, communications skills, interpersonal skills, etc.

 

The combined effects of the third and fourth factors have increased women’s rate of return to education more than men’s. Estimates of the rates of return to degree education using the General Household Survey data show women that during the period 1985-2000, women’s rates of return were on average 22.7% compared to 20.1% for men on average, and in the period 2001-15 rose to on average 26.0% compared to 24.7% on average for men.

 

Fifth, the rising labor market opportunities of women and increases in their wages have made it even more costly for them to have children. Raising children is so costly because it requires a great deal of childcare time, especially mother’s time. In the words of Professor Gary Becker, who pioneered the economic analysis of the family, childbirth and childrearing are intensive in mother’s time. As women’s time becomes increasingly valuable because of better education and growing labor market opportunities, families have reduced the number of children they want.

 

Throughout most of human history, the most important reason why women have been disadvantaged in the labor market and in education is the enormous amount of time they have to spend in the household giving birth to and raising children. The fraction of a woman’s lifetime spent in motherhood increases when infant mortality rates are high and life expectancy is low.

 

Young girls grow up realizing that they have to spend a significant fraction of their life with children. This discourages them from going to school and developing labor market skills. And even when they go to school they choose subjects that are complementary with household work. In this sense, girls learn to become mothers in childhood.

 

But, as I have described above, women became increasingly liberated from such a role as a result of a combination of falling infant mortality rates, rising life expectancies, growing education and labor market opportunities as a result of the acceptance of liberal republican values, and rising economic growth. This has resulted in them having fewer children and investing in raising higher quality children.

 

The tradeoff away from quantity towards quality has contributed to late marriages and even lower fertility rates. It has also led to greater investments in the next generation. A higher quality next generation is the prime driver of economic growth. So the liberation of women from household work has not only contributed to economic growth by enlarging the labor force, but also by improving its quality over time.

 

The entry of more women into the labor force has also contributed to greater household income inequality, even though individual income inequality within the adult population has become more equal.  This brings fresh concerns about widening intergenerational inequality depending on whether prosperity and poverty among families are highly correlated across generations.

 

Intergenerational economic mobility could be seriously compromised if well-off families make substantially more investments in their children than less well-off families – sufficient, for example, to offset the equalizing effects of publicly funded schooling and healthcare.

 

Why would women’s economic rise contribute to lower inequality and lower mobility? Two factors stand out – assortative mating and family breakdown.

 

Assortative Mating

 

In the past, well-educated men married less well-educated women simply because most women did not have the same opportunity to become well educated. Today, well-educated men marry well-educated women. So in a sense executives used to marry their secretaries, now they marry other executives.

 

This is positive sorting by attributes produces two results. First, there will be greater economic inequality across households at any moment in time. And over time, as more women become well-educated, more of them will be married to well-educated men and household inequality will rise further. This is a gradual process that will evolve slowly.

 

Second, there will be a higher propensity for household inequality to be passed onto the next generation. The most important driver of the intergenerational transmission of inequality is not household wealth, but the quality and amount of time mothers spend with their children, especially when they are young. A well-known result that demonstrates the power of this effect is that the earnings of men and women found in many countries are very highly correlated with their mothers’ education, but not with either their fathers’ education or household wealth.

 

Women balance various tradeoffs between working in the household taking care of children versus staying in the labor market. Well-educated women earn more in the labor market, but are also more productive in taking care of children. Hired domestic help are often imperfect substitutes for mothers’ quality time. As a consequence, well-educated women often struggle with keeping two jobs – one in the labor market and the other at home.

 

The competing demands for mothers’ time reduce the career development of women in the labor market. For this reason, although women nowadays often make more money than men do when they are single, they often lose to men over time as they enter motherhood.

 

In the past, women in wealthy families hired governesses to educate their children; Winston Churchill had a governess who is known to have had an important influence on him. But the market for governesses has disappeared nowadays as women with good education no longer seek such jobs. Today well-educated women in wealthy families often have to withdraw from the labor market during their motherhood years despite their higher earnings potential.

 

Family Breakdown

 

The other factor that has contributed to greater household economic inequality is the breakdown of the family institution. The incidence of divorce is much higher among low-income families than high-income families. The cost of divorce is lower for low-income families than high-income families primarily because there are fewer assets to be contested.

 

Since women spend more time with their children, their labor market skills often deteriorate with years of motherhood. In the past, women were more willing to put up with unhappy marriages, especially among the less well-educated and in low-income families.

 

As women have become better educated, the fear of divorce has become less of a concern, even among less well-educated women because they can now return to the labor market with greater ease. Moreover, many governments are now giving welfare support to single parents with dependent children in low-income families.

 

Courts often mandate husbands to make alimony payments and fathers to pay for child support (because child custody was usually awarded to mothers in divorce cases). However, the enforcement of such mandates among low-income families is often ineffective.

 

The spread of no-fault divorce has also made these mandates a less compelling concern of the courts. Interestingly, the courts of Hong Kong were urged to implement such mandates in recently-proposed legal reform measures. This was perhaps in response to skyrocketing local divorce rates, especially among low-income families.

 

This increase in divorce among low-income families has contributed to the increase of inequality of household income. As more low-income families break up into two even lower-income families, the measured income inequality increases.

 

Rising household income inequality in Hong Kong is therefore partly a reflection of the rising divorce rate. The percentage of divorced households among households in the lowest income quartile increased from 2.8% in 1981 to 25.6% in 2011, while those in the highest income quartile increased from1.0% in 1981 to 4.4% in 2011. The percentage of single parent households with dependent children increased from 8.8% in 1981 to 29.0% in 2011 in the lowest income quartile, but dropped from 4.2% in 1981 to 3.4% in 2011 in the highest income quartile.

 

If the gaps in family investments in children across households are sufficiently large, then the liberal republican promise of equality of opportunity will begin to ring hollow with the reappearance of successful hereditary families in a globalized world.

 

All in all, the improvements in education for women have contributed to increasing household income inequality in the population. Well-educated women are keeping their marriages together more effectively and their children are even better prepared for life’s challenges. Less well-educated women are facing more marital breakdowns and their children are less prepared as a result.

 

It is necessary to point out that the spread of women’s education is not the only factor that is contributing to household income inequality in today’s society, but it is an important factor that has unfortunately been underappreciated and ignored. More significantly, it has important consequences for the intergenerational transmission of inequality.

 

It is also one of the factors whose consequences will be extremely difficult to correct and will take a long time to do so. Corrective measures will entail legal reforms to divorce arrangements, better approaches to pre-marital and marriage counseling, early childhood intervention in low-income families (particularly single-parent households), and improving neighborhoods in low-income communities. These interventions will intrude into what has traditionally been regarded as the private domain of family lives, and challenge traditional liberal republican values concerning the division of these spheres of life.

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