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The Canada–U.S. gap in women’s labour market participation Insights on Canadian Society
The Canada–U.S. gap in women’s labour market participation

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by Marie Drolet, Sharanjit Uppal and Sébastien LaRochelle-Côté

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Introduction

Substantial increases in the labour force participation of women are a striking feature of the labour market developments in most Western nations.^{Note 1} While the growth in participation began at different times and has advanced at different rates, the quantitative changes in the North American labour market over the past three decades have been remarkable.

According to the Organisation for Economic Co-operation and Development (OECD), in 1990, women in Canada and the United States had the 5^th and 6^th highest labour force participation rates (LFPRs) among 22 Western economically advanced nations.^{Note 2} By 2014, however, both Canada and the United States saw their international rankings slip to 11^th and 20^th positions, respectively. This decline in rankings was due to the fact that the average LFPR of women in the other OECD countries grew faster than in Canada and the United States.^{Note 3}

Given the linked nature of the Canadian and American economies, comparisons between labour markets in Canada and the United States have garnered considerable attention. While the difference in the participation rate remained relatively small between  Canadian and U.S. men in recent years, the participation rate of females diverged between the two countries. Why is it that the labour force participation rate of Canadian women is so different from the rate of their American counterparts?

This article attempts to sort through various explanations to create a comprehensive picture of the Canada–U.S. gap in the labour force participation rates of prime-aged women (aged 25 to 54). Restricting the comparison to the core working age population simplifies the analysis, since it minimizes the potential impact of the changes in years of schooling and age of retirement that took place during the period studied.

In this paper, data from the Labour Force Survey (LFS) are used to study Canadian trends. The Current Population Survey (CPS) is the source of data for the United States. Both the LFS and the CPS are monthly household surveys that use similar methodologies. Throughout the paper, the results for Canada have been adjusted to make them comparable with the U.S. concepts (see Data sources, methods and definitions).

Diverging trends in labour force participation rates

Since the late 1990s, Canadian women have had relatively higher rates of labour force participation than American women (Chart 1). This contrasts with the 1970s and 1980s when participation rates in the United States were slightly higher than those in Canada. For example, in 1976 the LFPR was 52% for Canadian women compared with 57% for American women.

The labour force participation rate in both countries exhibited strong growth during the 1980s, although it increased at a faster pace in Canada. As a result, Canadian women caught up to their American counterparts by the late 1980s, and, in 1989, the labour force participation rate of women aged 25 to 54 in both countries was 74%.

An equally salient development was the stagnation in the women’s labour force participation rate in both Canada and the U.S. throughout the early to mid-1990s—when it hovered around 75%.

The slow growth during the 1990s led observers in both countries to consider whether the rising trend of women participating in the workforce was almost over. In a study from the late 1990s, it was predicted, at least in relation to Canada circa 1994, that “large increases in the participation and employment rates are clearly a thing of the past” and that “there is still room for a 2-3 percentage point increase in the rates if the macroeconomic situation continues to improve.”^{Note 4} The plateau reached in the female LFPR also led some pundits to believe that a “natural rate” of participation had been reached in the United States, although the rising participation of working mothers led others to question whether the data supported the evidence of such a natural rate.^{Note 5}

In the late 1990s, however, the data started contrasting with previous trends. The labour force participation of Canadian women continued its upward trend while the rate for American women began to decline.^{Note 6} After 1997, the LFPR of women in Canada always remained higher than that of their counterparts in the United States. Some observers in the U.S. concluded that the dip in the participation rate in the early 2000s was due to a sluggish labour market characterized by low employment growth.^{Note 7}

The divergence in the participation rates between Canada and the United States might partly reflect the relative strength of the Canadian labour market. While the recession of the late 2000s resulted in significant job losses in both countries, it has been described as the most severe recession of the post-war period in the United States^{Note 8} while, in Canada, it was considered less severe than recessions that began in 1981 and 1990.^{Note 9} Canada lost fewer jobs during the recession of the late 2000s and employment has grown at a faster rate since the recession ended.^{Note 10} By 2015, the labour force participation rate of Canadian women was 81% compared with 74% for American women.^{Note 11}

Canadian women have higher employment rates than their U.S. counterparts

The labour force consists of persons in the eligible population who participate in the labour market as either employed or unemployed. The employment rate—the proportion of the labour force that is employed during the reference week divided by the total working-age population—captures another perspective. Similar to the LFPR, the employment rate in the United States trended downwards after 2000 and through the last recession while, in Canada, it continued its upward trend. By 2015, the employment rate in Canada was 7 percentage points higher than in the U.S. (Chart 2).

Hours worked by those employed in the labour force is another key dimension that differs between Canada and the United States. Historically, the proportion of women aged 25 to 54 working full time (35 hours or more per week, in the main or only job)^{Note 12} has been higher in the United States than in Canada. In 1997, 58% of American women had a full-time job, compared with 48% of Canadian women.^{Note 13} In 2015, the gap was much smaller (55% in Canada versus 56% in the United States), largely because of an increase in the full-time employment rate of Canadian women.

The unemployment rate—the proportion of the labour force that is unemployed during the reference week—provides useful additional information. Labour force participation can be responsive to changes in overall unemployment, and, in some instances, when the unemployment rate is high, some of the unemployed might stop looking for work and drop out of the labour force.

Between 1977 and 2007, the unemployment rate among prime-aged women in Canada was consistently higher than the rate in the U.S. (Chart 3). However, the gap started closing in the mid-1990s and, following the recession of the late 2000s—from 2008 to 2014—the unemployment rate in the U.S. exceeded that in Canada. Recently, however, the U.S. rate declined while the Canadian rate remained relatively stable. In 2015, the two countries had a similar unemployment rate.^{Note 14}

The next section investigates the recent divergence in the labour force participation rates in both countries, using 1997 as a starting point. The age groups that contributed the most to the difference are examined first, followed by the potential role played by rising levels of women’s educational attainment in both countries.

Labour force participation on the rise among older Canadian women

In 1997, the female labour market participation rates in Canada and the United States were half a percentage point apart. Over the next 18 years, the LFPR rose by 5 percentage points in Canada and declined by 3 percentage points in the United States. The decline in the U.S. took place mostly after 2007—in the aftermath of the 2008-09 recession. In Canada, most of the increase took place from 1997 to 2007.

To gain a better understanding of the source of the Canada–U.S. LFPR divergence that occurred after 1997, it is important to identify the age groups that have contributed the most to changes in both countries.

In Canada, the overall participation rate increased largely because of women aged 45 to 54, for whom the participation rate increased from 72% to 82% over the period. In fact, more than one-half of the overall increase was due to an increase in the LFPR of women aged 45 to 54 in Canada (Table 1).^{Note 15}

In the United States, most of the decline was due to a decrease in the LFPR of women aged 25 to 44.^{Note 16} Between 1997 and 2015, the participation of U.S. women in this age group fell by three percentage points, from 77% to 74%. This compared with a Canadian increase of three percentage points among women in the same age group (from 78% to 81%).

The changes in labour force participation varied by level of education

Within age groups, there were differences across education levels. In general, differences were more pronounced among less-educated women.

Among Canadian women aged 45 to 54, the largest increase took place in the two lowest educational attainment categories (Table 2). Among women with a high school diploma or less, the rate increased by 8 percentage points (from 64% to 72%), and among those with a college-level education, the rate increased by 7 percentage points (from 78% to 85%). University graduates also recorded a gain, but of a smaller magnitude.

In contrast, the participation rate of U.S. women aged 45 to 54 declined most among those who were in the two lowest categories of educational attainment. For those with at most a high school diploma, the LFPR declined from 68% to 64%; similarly, the LFPR declined from 81% to 76% for those with a college-level education.

Similar trends were found in the case of younger women. In the United States, the decline in the LFPR of younger women (aged 25 to 44) was especially more pronounced among those in the two lowest categories of educational attainment—by a margin of 9 percentage points for those with a high school diploma or less and 4 percentage points for those with a college-level education.^{Note 17} The participation rates of those with a university degree also declined, but by a smaller margin (2 percentage points).

In comparison, the LFPR of Canadian women aged 25 to 44 who had at most a high school diploma also declined, but by a smaller margin than their U.S. counterparts (3 percentage points). Canadian women in this age group who had a college-level education recorded a small increase, while the LFPR of those who had a university degree changed little.

By 2015, Canadian women in all age and education categories were thus more likely to participate in the labour market than their U.S. counterparts (Chart 4). This represents a change from 1997, when only Canadian women aged 25 to 44 with a university degree or college education were more likely to participate in the labour market than their American counterparts.

The magnitude of the change was especially large in the case of women aged 45 to 54 with a high school diploma or a college education. In 1997, for example, U.S. women in this age group who had a high school education were 5 percentage points more likely than their counterparts in Canada to participate in the labour market. In 2015, Canadian women were more likely to participate—by a margin of 8 percentage points.

Rising levels of educational attainment contributed positively to the LFPR of women in both countries

Between 1997 and 2015, the level of educational attainment of women rose in Canada and in the United States. The proportion of women with a university degree nearly doubled in Canada, as it increased from 18% to 35%. In the United States, the proportion also rose—albeit less rapidly—from 26% to 38% (Table 3).

The increase was larger in the case of women aged 25 to 44, especially in Canada. The proportion of Canadian women aged 25 to 44 with a university degree increased nearly twofold over the period, from 20% to 39%. In the United States, women in this age group were more likely than Canadian women to have a university degree in 1997 (27%), but were about as likely as their Canadian counterparts to have a degree in 2015 (40%).

To what extent have changes in the LFPR of both countries been impacted by the rising educational attainment of women in both countries? This question can be answered by isolating the changes related to education from those related to other factors by estimating a series of regression models.^{Note 18} Because the highly educated are more likely to be employed than those with lower levels of education, it is likely that rising levels of education played a positive role in increasing the LFPR in both countries between 1997 and 2015.

While the increase in educational attainment contributed to the increase in the LFPR of Canadian women over the period, its role varied across age groups. Among those aged 25 to 44, the entire increase of 3 percentage points in the LFPR of Canadian women between 1997 and 2015 was due to their rising level of educational attainment (Chart 5). Changes in educational attainment explained one-third of the 10 percentage point increase in the LFPR for those aged 45 to 54, indicating that two-thirds of the increase was due to other factors.

In addition, even though the rising educational attainment of women in the United States had a positive effect on the LFPR, that effect was more than offset by declines in the LFPR within educational categories. In fact, without the positive contribution of rising educational attainment, the LFPR would have declined by 5 percentage points among women aged 25 to 44, and by 4 percentage points among those aged 45 to 54.

If educational differences do not fully explain the rising divergence of the LFPR in both countries—particularly among those aged 45 to 54—then there might be other factors driving the increase in the LFPR of Canadian women, such as increased demand for labour in female-dominated occupations or differences in earnings growth.

More full-time and private sector jobs among Canadian women aged 45 to 54

Additional insight can be gained by examining the characteristics of jobs held by Canadian women aged 45 to 54—particularly among those with a high school education or less and those with a college-level education.

From 1997 to 2007, for instance, the number of employed women aged 45 to 54 with at most a high school diploma rose by more than 120,000 in Canada. More than one-half of these additional jobs were sales and service occupations (such as customer and sales representatives, light duty cleaners and cashiers), the vast majority of which were full-time jobs in the private sector.

Over the same period, the number of employed college-educated women in this age group increased by approximately 333,000. Again, the vast majority of these jobs were private sector and full-time jobs. More than one-third of these additional jobs were business, finance and administration occupations, and another quarter were sales and service occupations.

The labour force participation of Canadian women might also have been stimulated by a faster growth in real earnings (expressed in 2014 constant dollars).^{Note 19} From 1997 to 2014, the median weekly earnings of women aged 25 and over who were working full time increased by 14% in Canada compared with 11% in the United States.^{Note 20} In the U.S., however, one-third of the increase took place between 1997 and 1998. From 1998 to 2014, weekly earnings grew by 14% in Canada, compared with 7% in the United States.

The gender gap in participation rates declined faster in Canada

A comparison with the relative status of men provides a clearer picture of the trends in women’s labour force participation in Canada and the United States—rising women’s labour force participation rates, coupled with a slow but steady decline in men’s participation, has caused the gap in the LFPRs of men and women to narrow.

From 1990 to 2015, the LFPR of men aged 25 to 54 dropped 2 percentage points in Canada and 5 percentage points in the United States. In Canada, the LFPR gender gap narrowed from 18 percentage points in 1990 to 9 percentage points by 2015. In the U.S., it decreased from 19 to 14 percentage points during the same period (Chart 6).

Taken together, the overall decline in the Canadian LFPR gender gap resulted more from women’s increasing LFPR than the drop in men’s participation rate. The opposite holds true for the United States—the decline in the gender gap since 1990 resulted more from the decline in men’s LFPR than changes in women’s LFPR.

Conclusion

This article presents a set of indicators on the state of the labour market participation of women in Canada and the United States. Through comparative analysis, the recent trends in the LFPR show that Canadian women aged 25 to 54 are more likely to participate in the labour market than their American counterparts. In the past two decades, the LFPR of Canadian women increased slightly, while the LFPR of American women declined.

In Canada, most of the increase in the LFPR of women could be attributed to a significant increase in the labour market participation of women aged 45 to 54, especially for those with lower levels of education. In the United States, despite the positive impact of increasing education, labour market participation decreased for women in both age groups (25 to 44 and 45 to 54), especially for younger women with lower levels of education. However, women in the U.S. were slightly more likely to work full time than their Canadian counterparts.

The increase in the labour market participation of women aged 45 to 54 in Canada remains a topic for further research. However, the fact that the increase mainly took place during a period of sustained economic growth prior to the downturn of the late 2000s—and that women with lower levels of education were behind the push in Canadian LFPRs—suggests that labour market conditions might have played a role.

In contrast, the United States was hit by the worst recession in decades in the late 2000s, which likely stymied employment opportunities for women—especially those with lower levels of education. Canada was also hit by a recession but did not experience the same drop in the LFPR of women during those years.

Marie Drolet is a senior researcher with the Labour Statistics Division at Statistics Canada, Sharanjit Uppal is senior researcher with Insights on Canadian Society and Sébastien LaRochelle-Côté is Editor-in-Chief of Insights on Canadian Society.

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