Unit 3 Doing the best you can: Scarcity, wellbeing, and working hours

3.11 Explaining our working hours: Gender and working time

Almost everywhere in the world, women are less likely than men to do paid work. Women who work for pay do fewer hours than men, on average. According to data collected for 30 higher-income countries, working-age women spend an average of three hours 38 minutes per day undertaking either paid work or study. The average time for men is five hours 18 minutes.

We know from our model that wages are an important factor in workers’ decisions on working hours. It is possible that women make different choices because their rewards from undertaking paid work are lower, due to discrimination in the labour market. Although many countries now have equal pay laws, requiring that men and women receive the same wages for similar work, there is still a substantial gender wage gap. Figure 3.19 shows the gender gaps in both paid work and wages for five countries.

Could the gender wage gap explain why women do less paid work?

We have seen that higher wages can lead to lower or higher working hours, depending on preferences. Lower wages for women give them a reduced incentive to work (the substitution effect), but the income effect works in the opposite direction. If the substitution effect dominates, it is possible that lower wages could lead women to choose lower hours. But even the large changes in wages over the twentieth century led to a smaller difference in working hours than the difference in hours between men and women—and in that case lower wages were associated with higher hours. It seems unlikely that the wage gap alone could explain the hours gap.

For a more plausible explanation, we need to take account of the reasons people value free time. In our model, ‘hours of work’ is time spent in ‘market work’—that is, work done in return for an income. ‘Free time’ is everything else; its value to different people will depend not only on their opportunities for social and leisure activities, but on how much time they need for other, unpaid work—such as cooking, cleaning, shopping, and childcare.

Researchers have found that big differences between men’s and women’s work emerge when they have children. Women’s earnings fall substantially when their first child is born, and remain permanently lower than they were before. But the birth of a child makes almost no difference to the earnings of men.

gender division of labour

The ways men and women differ in how they spend their (paid and unpaid) work time.

This suggests that we may observe a gender division of labour in families, with women more likely to undertake domestic work, particularly childcare. Figure 3.20 shows evidence from time use studies, in which people are asked to keep detailed time diaries recording their activities throughout the day. In every country for which we have data, men spend more time on paid work than women, but women spend more time on unpaid work than men.

Modelling paid and unpaid work in the household

In search of an explanation for gender differences in patterns of work, we will apply our model of working hours to the case of a couple (Ana and Luis) with two young children. Suppose they have the same preferences and similar skills, and can both find employment at the same wage, $30 per hour. They have worked out that the household needs 14 hours of domestic work, including childcare, per day.

Together, the couple have 48 hours in total per day, to allocate between paid work, domestic work, and other (non-work) activities. They agree that total consumption should be shared equally, and that they should both spend the same amount of time working, whether paid or unpaid. They both want to have time for other activities, including rest and relaxation.

The axes in Figure 3.21 show the two goods they value: household consumption and non-working time. Since they both have the same preferences and share goods equally, we can easily work out the household’s preferences and draw the indifference curves. For example, to work out how the household values the combination of 20 hours of non-working time and $300 of consumption relative to other points, we just need to ask the parents how they individually value ten hours of working time and $150 of consumption.

If they have \(t\) hours of non-working time, and spend 14 hours on domestic work, their hours of paid work will be \(h = 48 - 14 - t\). With an hourly wage \(w\), they will have total consumption \(c = wh\). Hence their budget constraint is given by:

\[c = w(34 - t)\]

Figure 3.21 shows the household’s feasible set, and preferred choice of consumption and non-working time, when the hourly wage is $30. The household obtains greatest utility at point B where the indifference curve is tangent to the feasible frontier: the marginal rate of substitution between consumption and non-working time is equal to the wage.

At B, the household has 22 non-working hours. In addition to the 14 hours required for domestic work it does 12 hours of paid work, so it has $360 of consumption. Individually, the parents can each do six hours of paid work and seven hours of unpaid work, and have $180 for consumption, as shown in the table.

How would their choice be different if Ana faced gender discrimination, and was only able to find employment at a wage of $17? In this situation, for a given amount of paid work, the household could increase its consumption and utility if Luis did more of the paid hours, and fewer of the unpaid hours. We will assume, however, that it is not possible for Luis to do more than 8 hours of paid work per day (for example, because of a law regulating working time).

Work through Figure 3.22 to see how the feasible set changes in this situation, and the effect on the household’s choice.

The new preferred choice is at point D, with 24 hours of non-working time. Luis does eight hours of paid work and Ana two hours. As before they share total hours of work and consumption equally, so now Ana does much more of the domestic work. The table shows the outcome for each parent.

Not only does the lower wage reduce Ana’s hours of paid work and lead to an unequal distribution of time between the two parents, it also reduces the total amount of paid work they do. The household’s overall consumption is lower not only because Ana’s wage is low, but because they choose to do less paid work altogether.

The lower wage for Ana has a substitution effect: the opportunity cost of an hour of non-working time is now only $17, reducing the incentive to work and increasing the amount of non-working time. As usual, it also has an income effect in the opposite direction: lower earnings lead the household to reduce the amounts of both goods. But in this household model, with two wage-earners, the income effect is small: the change in Ana’s wage has no effect on the income from the eight hours worked by Luis. That is why the substitution effect dominates, and the paid hours worked by Ana fall from six to two.

This analysis shows how gender discrimination in the labour market combined with joint household decisions on working time could lead to a gender division of labour, with women working fewer hours for pay. It cannot be the whole story, however, because the model assumes an equal distribution of consumption and total work time within households. It doesn’t explain why in most countries (those shown in Figure 3.20) women work more hours in total than men. To explain that we would need to explore other possibilities, such as differences in preferences between men and women, imbalance of power within households, and social gender norms that limit the choices available to women.