Comment on Careers of Educated Women-BECKER

Up to the early 1960's, less educated women were more likely to work than highly educated women. The trend sharply reversed during the past several decades, so that now propensity to work and education are positively related for women (as well as men). This is partly because highly educated women have a lower tendency to marry, but the labor force trend by education achievement holds also for married women. The Times article gives the impression that this education-work trend has reversed again in recent years, but although the trend has flattened, there is no evidence of reversal (I had the input of Casey Mulligan and Kevin Murphy, two colleagues who have worked extensively on labor force participation rates of women). Highly educated men continue to work full time much more than highly educated women, although the difference between these propensities has declined during the past several decades. The Times article and Posner concentrate on different work propensities of male and female graduates of elite professional schools, but the difference between the sexes also holds for graduates of other professional schools. Indeed, the gap in the propensities to work of men and women are probably greater for the lesser schools since female graduates of elite colleges and professional schools are less likely to marry than female graduates of lesser institutions. As Posner indicates, the main reason for this difference is that women drop out of the labor force, or work only part time, in order to care for their young children. Women rather than men do most of the child-care for various reasons, including biological ones, but I will not go over the different explanations. The division of labor between men and women is discussed systematically in my A Treatise on the Family. Posner goes on to ask: should admission policies of schools take into account the fact that female graduates of elite (and I would add other professional schools) work full time much less than male graduates? That question was openly discussed at departmental meetings when I was a young faculty member at Columbia University. Even though female students did at least as well in the economics program as male students, the issue was whether graduate fellowships should be less readily given to women since they were then so much less likely to work full time later on. I am proud that many of our female students went on to distinguished careers in economics, but the overall female labor force drop out rate was higher than that of male graduates. In discussing what professional schools should do with respect to admissions of female applicants, Posner claims a difference between the private interests of professional schools, and the social benefits from graduates-an externality in the language of economists. However, I believe that differences between private and social benefits are small in the two types of professional schools he highlights: business and law schools. They generally get almost no direct support from the federal government, and relatively little from state governments. Moreover, the private gain to a working lawyer or MBA graduate seems to capture pretty much all the social gain from their work. Posner stresses the potential innovations produced by these graduates, and the taxes they pay. But major innovations from graduates of these schools are surely rare, and taxes affect the incentives of everyone, not only professional school graduates. Moreover, taxes would generally have little affect on the incentive to get additional schooling if say the income tax rate is pretty flat. I believe it is partly because externalities from graduates of law and business schools are so small that little taxpayer money goes into subsidizing these programs, although I should add that economists have had difficulty finding major externalities from most types of education. Since the market for applicants to professional schools is highly competitive, and since external benefits from the work of their graduates are probably not important (except possibly in medicine), the best policy would seem to be to allow the market to continue to work in determining admissions of male and female applicants. Schools might be recognizing that even though female graduates work less, male students prefer having many female classmates, and visa versa, that female graduates who do not work in the labor force are still active in fund-raising activities for their alma maters, or there may be other gains from having smart female students along with smart males. To be sure, the market in admissions is regulated since affirmative action pressures in the guise of anti-discrimination policies prevent schools from taking male applicants in preference to female applicants with equal or even better school records. Posner recognizes that the logic of his position implies that a relevant measure of discrimination might also include their propensity to work after graduation. He takes an anti-"profiling" stance by claiming that using potential work experience along with the school records of male and female applicants in determining admissions would be "offensive”"since many women graduates work full time, and some men do not. Yet not all top students at Harvard College do well at Yale Law School, while some students with poor grades would do well if given the opportunity, but surely he would not want to abandon using grades and performance at Harvard or other schools as one of the predictors of their performance at professional schools, and hence as an important determinant of admissions? Posner would like professional schools to give female graduates (and men too presumably) a bonus if they work and earn a lot. That is hardly more practical than penalizing women and men who drop-out of the labor force. Would graduates who succeed in another field also merit a bonus (or penalty)? Should female graduates who do not work full time in order to care for their children get a bonus if the children do unusually well in school? For these and other reasons I cannot get excited about this proposal. Given the strong competition among law and business schools, and the absence of significant external benefits, I do not believe we can do better than allowing these professional schools to decide on admissions using college records and special exams as the major guide. For various reasons, even without current anti-discrimination laws, I doubt whether the fraction of female applicants who are admitted to elite and other professional schools would change very much.

Comments

[Dave Thompson]

There is a pretty strong critique of the methodology (or lack thereof) underlying the article on Slate's "Pressbox" column. Good coverage here too.

[Celeste]

I suspect the labor market where some professional degree is relevant would be better suited to correct for "latent homemakers" than the schools awarding degrees. If the expected tenure of a degree holder was questionable, employer scholarships or education reimbursements could be (and are) structured with incentives for workforce participation.

Also, by deterring some of their qualified prospective students with a tuition rebate scheme, would elite schools stand to erode the competitiveness of their applicant pools and the quality of their entering class?

[jim]

Becker's analysis, is mistaken in valuing only what he can measure (wage income). Education is an investment in the future; child care is an investment in the future. Those investments in future outcomes may not be measureable. Education and child care are goods without value. The price you pay is distinct from the value created. We no longer have children in order to rely upon them during retirement or disability. Future outcomes are changed, quality of life is changed, wage income may not change.

Universities might well consider the economic power of women who are trustees, or passive investors of their households' savings. Women who are not the wage earners might well be the partners of the wage earner, enabling marginally greater wage earnings, and minimizing unproductive behaviors.

[birdwin98]

I cannot even imagine the difficulties that would be inherent in the implementation of a "profiling" program to pre-screen for future labor market drop-outs.

As a recent female graduate (2002) from one of these elite graduate programs, I can honestly say that I've been startled to discover so many of my female classmates leaving their careers to raise children. In many cases, these very same women were the most ambitious and driven in the class.

So how do you determine which ones are likely to continue working and which ones are likely to drop out? The earning potential of the spouse could be one factor, but screening would be nearly impossible, since female students are often still single during the application process.

A better factor may be how the student intends to finance her education. I have some anecdotal evidence in this area from former classmates. When female students pay 100% of their graduate school costs through loans they must repay, they tend to stay in the workforce. When female students pay for graduate school through scholarships or through personal wealth (either their own or their parents), they are more likely to drop out of the workforce. This makes intuitive sense- if you invest ~$100,000 in your education and you have to repay it, the odds are pretty good that you'll continue working to repay it. If you are independently wealthy and pay upfront, you may view the investment ex-post as a sunk cost and you could move on. If your parents or a scholarship fund make the investment, then you have free riding issues.

As far as child-raising is concerned, I always thought there was a straightforward decision process- say I decide to have a child, then I can either: i) stay at home and give up my after-tax income, or ii) hire a full-time childcare provider and pay her salary. I would compare these options to determine the incremental value from working as compared to staying at home. For example, say my after-tax income is $120,000 and I can pay a full-time nanny $60,000 (including my portion of the payroll tax). The incremental value from working would be $60,000 annually. I would have to consider whether the benefits of spending additional time with my child are worth $60,000 annually. How does the value of mother/child time compare with the incremental income, and do I want to consume this time at that price?

The decision doesn't end there, though. If I decide to drop out of the labor market for several years and then resume work, I have to account for the fact that my earning potential will be significantly lower than it would otherwise be had I continued working. My mental math would have to include both the near-term incremental income plus the future incremental income for the two scenarios.

This approach may sound cold-hearted, but is a reality, particularly for those graduates like me that have a baby on the way... and also have many years remaining on our graduate school loans.

[albatross]

How much would tuition have to rise to incentivize Harvard law school graduates not to drop out of the work force (or not to attend Harvard if they intended to)? It looks to me like the student who graduates with a law degree from Harvard has a pretty nice earning potential. If she (in this discussion, probably she) decides not to stay in the workforce, she's already giving up what is probably a substantial income. I'm having a hard time seeing how the tuition could rise enough to match that.

Assume you're giving up $150,000 per year for 20 years by your decision to drop out of the workforce. At 5% interest rates, that's got a present value of almost two million dollars. Unless I'm missing something, that's the present value of what she is giving up now by planning to drop out of the work force for 20 years. So, it seems like the added tuition is going to have to be at least some large fraction of that cost, in order to have much effect. And I just don't see how tuition, even for Ivy League law schools, could go up by that much. (I'll admit I don't know what tuition is for Harvard law school.)

It's certainly possible to come up with a more sophisticated model for this, but I think it's always going to be the case that the decision of a professional woman with a first rate education to leave the job market is going to be much more expensive that what we could reasonably add to her tuition at the beginning.

What am I missing?

[M.]

If discrimination in the labor market is responsible for even a small fraction of the discrepancy between male and female labor force participation rates, "profiling" is not a good option (since you folks don't seem to like talking about ethics, consider that discrimination against women may diminish in future, upsetting your calculations).

Note also that almost as many men as women say they would drop out of the labor force, if they could.

[M.]

If discrimination in the labor market is responsible for even a small fraction of the discrepancy between male and female labor force participation rates, "profiling" is not a good option (since you folks don't seem to like talking about ethics, consider that discrimination against women may diminish in future, upsetting your calculations).

Note also that almost as many men as women say they would drop out of the labor force, if they could.

[albatross]

I think there are two pretty good reasons to expect that women will always be more likely to drop out of the labor force than men to take care of children, all else being equal:

a. Pregnancy and childbirth already involve a big disruption to work, since the mother *has* to miss some time for childbirth, and since there are a bunch of things that can happen with reasonable probability during pregnancy to put her on bedrest or otherwise disrupt her work (like travel restrictions for the last month of the pregnancy, nausea during the first trimester, etc.)

b. Breastfeeding is a big win for the baby, and it's enormously easier and more convenient for the mother to do this directly most of the time, than to do the whole pumping, storing, and bottle-feeding routine that's otherwise necessary.

That is, even if men are as inclined to stay home with kids as women, and even if economic prospects are the same for the mom as for the dad, I think it's going to be easier for the mom to disrupt her career than for the dad to do the same.

[Michael Martin]

There are female trial lawyers out there who are actively innovating in methods for communicating with judges and jurors (many of whom are female). Some methods of argument and cross-examination could be characterized as more "male" along the lines of the social/biological differences that Posner aludes to. Those methods often are less effective in communicating with female decisionmakers.

As someone who has worked at a professional level in both the physical sciences (currently still very male-dominated) and law, I think I can say with some degree of assurance that the positive externalities of having a female minority in the work force more than makes up for their propensity to have to take time off to have kids. Even married, I would be less inclined to enroll at a law school with the policy that Posner proposes than a law school that did things the way they are done now.

[Seth Ayarza]

Professor Becker,
Do you think it would be a good idea for all universities to set admissions policies that would max out at the market clearing level?

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