Macroeconomics, gender, and labour markets

James Heintz, PERI, University of MassachusettsExpert Consultation on Women’s Economic

EmpowermentSOAS, University of London, Jan. 26-27, 2012

Rethinking the Role of Labour MarketsBroadening the conceptual framework: how

is labour exchanged?Demand-side constraints and informalityThe inherent imperfection of labour marketsMacroeconomics, growth, and labour

Common Approaches Labour economics: often based on wage employment.

Focus: determinants of earnings. Mincer-type wage equations. Gender frequently enters as a dummy variable.

Enterprise-based approaches: focuses on self-employment. Estimate production functions: labor, capital (human & fixed) as productive factors. Abstracts from other constraints, including gender-based constraints.

Limited productive capital in many such enterprises (working capital may be more important). Particularly true for women's enterprises/activities.

Individuals exchange labour through a variety of markets. A range of institutions/constraints affect this exchange.

How is labour exchanged? Broadening the concept of labour markets.Consider women’s self-employment. With few

capital inputs, women are effectively selling their labour, but the exchange is frequently mediated by other markets (suppliers, consumer markets).

Better understood by including these markets and related institution into a consideration of ‘labour markets’.

These details are lost in a narrow labour-based or enterprise-based approach.

Unpaid care work – also critical.

Demand-side of the ‘labour market’Labour demand constraints affect labour market

outcomes: informality, either overly short or overly long hours of work, open unemployment, etc.

But the standard downward sloping labour demand curve is overly narrow (wage employment, labour cost focus)

Examples of sources of demand constraints:Lack of access to markets (including domestic markets)Insufficient investment/capital accumulation in formal

sectorMacroeconomic environmentSelf-employment and the importance of derived demand

Gender and labour demandDue to segregation of activities, unequal

demand for women's market labour relative to men's labour (e.g. women crowded into activities in which demand may be 'saturated').

Affects returns to women’s market (remunerative) labour.

Inherent imperfectionsGetting labour markets to approximate a perfectly

competitive ideal is not as good of a strategy as getting labour markets to work better.

Many sources: information asymmetries, social norms, barriers to perfect mobility, transactions costs, market power, contested exchanges, and gender dynamics.

Goal: labor market institutions which enhance individual choices, provide adequate income/living standards, address unequal market power (social protections), and develop human resources.

Gender perspective critical.

Allocation of labour as a macro issueLabour is a critical factor of production & the

functioning of labour markets matters for macroeconomic outcomes (Solow, Akerlof, Yellen, Keynes)

The allocation of labor in the economy affects overall performance. Concentration in high risk, low-productivity activities harms aggregate outcomes & development dynamics.

Gender segmentation has been shown to be highly costly, not only to women, but to the economy as a whole.

Labour as a produced factor of productionGrowth models/policies often do not pay adequate

attention to how labour is produced. Fertility, unpaid care work, non-market aspects of human capital.

Some exceptions (e.g. Becker and Barro, 1989). However, non-market factors essential to make growth work. Altruism in the B&B model. Others have stressed non-market processes, gender roles, bargaining, a role for the state, etc.

Need to consider a broader allocation of labour. Market and non-market activities essential for growth.

Rethinking labour markets involves a rethinking of the allocation of ALL labor and how the development of human resources is coordinated.