The labor market in Japan, 2000–2016: A role model for aging societies across the globe

IZAWOL385-chart1A new IZA World of Labor report looking at developments in the labor market in Japan since 2000 finds that despite a plummeting working-age population, Japan has sustained its labor force size, thanks to surging employment among women.

Aging populations pose challenges to the fiscal sustainability of many countries as a consequence of shrinking workforces and increasing costs for social insurance programs. As the third largest economy in the world and a precursor of global trends in population aging, Japan’s recent experiences provide important lessons regarding how demographic shifts affect the labor market and individuals’ economic well-being. According to IZA fellow Daiji Kawaguchi (University of Tokyo) and Hiroaki Mori (Hitotsubashi University), Japan’s experience exemplifies how rapid population aging affects the structure of the labor market through an expanding healthcare services industry.

Fast increase in female labor force participation

The two economists found that despite the sharp decline in the working-age population in Japan, between 2000 and 2016 by slightly less than 10 million, the size of the labor force remained relatively stable during this period. The stability of the labor force reflects the fast-increasing labor force participation rate (LFPR) among prime-age women (aged 25−54). While the LFPR among prime-age women was somewhat stagnant during the 1990s, it rose by nearly 10 percentage points, from 66.5% to 76.1%, between 2000 and 2016. It is particularly in the Health Care Industry that Women’s employment increased sharply, by about 2.5 million. Consequently, about 21.6% of female workers were employed in the healthcare services industry in 2016.

The fast-growing elderly population appears to be a main driver of the rising employment in the healthcare services industry. Traditionally, healthcare sectors in Japan, similarly to those of many other countries, tend to employ more women than men. As a consequence, female labor force participation is increasing and more than one in five female workers are currently employed in the healthcare services industry. Japan’s experience suggests that population aging may have profound influences not only on the labor supply but also on labor demand.

The growth of the healthcare sector is a foreseeable development in aging societies and one that politicians need to factor into their labor market policies. Securing an adequate supply of healthcare workers and childcare professionals (who enable women to work) is a key policy issue. Carefully designed interventions in those industries may facilitate an efficient division of labor and help dealing with the problem of an aging work force.

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Equality of opportunity – for what?

By Daniel Mahler and Xavi Ramos

The notion that individuals ought to have equal opportunities in life is popular among politicians, the general public, and philosophers alike. It is deeply embodied in the American Dream and has resonated with politicians ranging from Margaret Thatcher to Nelson Mandela.

Although there is wide agreement on the objective of providing equal opportunities, it is not altogether clear what, exactly, there ought to be equal opportunities for. The last decade has seen a rising discussion about whether we should go ‘beyond GDP’ – beyond income – when measuring societal well-being. This very same discussion can be applied to providing equal opportunities. Should individuals have equal opportunities for acquiring income? Or is there more to individuals’ well-being than just income? These discussions are not purely of theoretical interest; evidence shows that the concept of well-being we employ matters for assessments of both poverty and welfare.

By now, a sizable number of empirical studies have been carried out analyzing the extent to which individuals have equal opportunities for income acquisition (see Ferreira & Peragine (2016) for an excellent recent review). In general, these studies measure opportunities by predicting individuals’ income based on a range of factors outside the realm of personal responsibility, such as individuals’ gender, birth area, and their parents’ education. These predictions can be thought of as the opportunities of individuals; individuals with a high predicted value come from a fortunate background with high chances of succeeding, and vice versa. Under this interpretation, inequality of opportunity can be calculated as the inequality in the predicted incomes.

However, if there is more to life than just income, perhaps we need to rethink – and re-measure – what we ought to provide equal opportunities for.

In a new IZA discussion paper, we set out to do just that on German data. Besides looking at whether individuals have equal opportunities for acquiring income, we utilize three other measures of well-being: A multidimensional index, life satisfaction, and equivalent incomes. Based on this, we look at whether trends in inequality of opportunity over time and a characterization of the most opportunity-deprived depend on what we want to equalize opportunities for.

To our surprise, it doesn’t.

To illustrate this, suppose we rank a population according to their opportunities for acquiring income. The ones standing furthest to the left have the lowest opportunities (the lowest predicted income), while the ones standing furthest to the right have the highest opportunities. We then ask everyone whose father only had primary education to take one step forward. The more to the left these people stand, the lower opportunities for acquiring income individuals with a low educated father have. We can re-rank the population according to their opportunities for having a high life satisfaction, once again ask the ones whose father had a low education to take one step forward, and see where they rank. If they stand approximately the same place as before, then fathers’ education plays the same role in predicting opportunities regardless of whether we want to equalize opportunities for income or for life satisfaction.

The figure below shows that individuals stand approximately the same place, regardless of which of our four well-being measures we utilize. This applies not only to fathers’ education, but also to a range of other factors outside the realm of personal responsibility. Individuals with low educated parents, individuals whose father was a blue-collar worker or unemployed, individuals who grew up on the countryside, and (for the most part) women, are always opportunity-deprived.

Based on IZA Discussion Paper No. 10940, Figure 2, p. 28.

So why does the measure of well-being hardly matter for equality of opportunity, when previous studies have shown that how we measure well-being matters greatly in a range of other contexts? We believe the intuition is straightforward. Some people may have a high income but a low satisfaction with life, and vice versa. However, for any plausible account of well-being, we always expect individuals coming from a poor background with uneducated parents to have lower levels of well-being. Regardless of what we want to equalize opportunities for, the individuals with the lowest opportunities will, broadly speaking, be the same.

Perhaps this is good news. Whereas the debates about how to measure societal well-being are long and intricate, we may be able to sidestep this whole discussion if our policy objective is to provide equal opportunities.

Download the complete paper (IZA DP No. 10940):

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Gender bias in teaching evaluations by economics students

female-profIn an ongoing heated debate on sexism in the economic profession, sparked by an analysis by Alice Wu of sexist speech in an anonymous online forum, economists see themselves accused of discrimination against women in the profession. Indeed, female professors are scarce. Although the share of female students enrolling in graduate programs has increased over the last decades, the proportion of women who continue their careers in academia remains low.

A new IZA discussion paper contributes to this discussion by providing empirical evidence on gender bias in academia, this time studying how economics and business students evaluate female teachers different from their male counterparts.

Using data on about 20,000 evaluations of instructors from the School of Business and Economics at Maastricht University, a leading business school in Europe, Friederike Mengel, Jan Sauermann and Ulf Zölitz demonstrate a systematic bias against women in end-of-class teaching evaluations.

Relying on random assignment of students to instructors teaching within the same type of courses, the authors pin down the causal impact of instructor gender on evaluations, grades and future performance.

The results are worrying. Female faculty receive systematically lower teaching evaluations than their male colleagues despite the fact that neither students’ current or future grades nor the effort they put into studying are affected by the gender of the instructor.

The lower teaching evaluations of female faculty stem mostly from male students, but female students also tend to give lower evaluations to their female teachers, albeit to a lower degree. Strikingly, even text books and other teaching material, such as the online learning platform – clearly independent of the gender of the teacher – receive lower evaluations if a course is taught by a female teacher.

In the competitive world of academia, student evaluations are an important and frequently used assessment criterion for faculty performance. Gender bias in teaching evaluations affects hiring, tenure and promotion decisions and, thus, is likely to have a strong impact on career progression of women in academia.

Read the complete paper (IZA DP No. 11000):

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Transitioning across gender is related to greater life and job satisfaction

Trans-people-labor-market-outcomesA new IZA World of Labor report finds that after transitioning, trans people experience better mental health, and greater life and job satisfaction. Furthermore, studies show that while becoming a man is related to a small rise in wages, trans-women experience a significant fall in earnings.

Trans people have a gender identity that differs from their assigned sex. In the EU and the US there is a growing population of trans people who start their transition in order to align their inner gender identities with their outward appearance.

IZA fellow Nick Drydakis of Anglia Ruskin University summarizes a number of recent studies on trans identity. Due to transphobia, trans people are exposed to extremely high levels of bias.

Fear of discrimination and violence

Between 2008 and 2016 the number of murders of trans people globally increased by 96%. Furthermore, in the US, it has been found that trans people face twice the unemployment rate of the general population. A study from the National Center for Transgender Equality reports that 90% of trans or gender non-conforming people reported experiencing harassment or mistreatment at their place of work. In addition, the study states that 71% of trans employees attempted to hide their gender transitions and 57% delayed their transitions to avoid workplace discrimination.

However, trans employees, after having reached the point of passing to their inner gender identity, do not generally experience the bullying and harassment to which they were subjected before transitioning. They experience less depression as well as less psychological distress. Further benefits trans people associate with being trans and accepting their gender identity are: personal growth and resiliency, improvements in their relationships with others, and being inspired to engage in social justice causes.

Research finds that transitioning negatively affects wages for trans women. A study that utilizes US data suggests that becoming a trans woman brings a reduction in hourly earnings of about 32%. Also, an EU study, based on Dutch data, shows a reduction in annual earnings, on the order of 23%. On the other hand, becoming a trans man might positively affect wages.

Legal hurdles

More than half of the EU member states require by law that trans people undergo sex reassignment surgery which entails sterilization before their gender identity is officially recognized. Trans individuals continue to experience severe exclusions when they are unable to obtain identity documents that reflect their gender identity. Many trans people are either not keen on surgery or don’t have the financial means to pay for it.

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Nick Drydakis

Drydakis says: “Having to choose between sex recognition and potential sterilization, which occurs in sex reassignment surgeries that include genital reconstruction, is a human rights violation. Trans people should be able to change gender identification on official documents without having to undergo sex reassignment surgery. This policy would minimize employment and societal exclusions for those who are not keen, ready, or financially able to undergo such a surgical procedure. Explicit legal employment protections against discrimination on the grounds of gender identity should become mandatory.”

Read the full IZA World of Labor article:

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Who are the women in the top 1% and how do they make their money?

A lot of attention has been given to rising inequality and, in particular, to the increasing income share going to the top of the distribution in many countries. Researchers have studied many aspects of this development, such as the importance of distinguishing between different sources of income and also to look carefully at the diverse developments across different groups within the top of the income distribution.

However, one aspect that has received little attention is that of gender. How many in the top are women? How has this share developed over time? Are their differences in income composition between top income men and women? Are they different in terms of observable characteristics and in terms of family status?

A new IZA Discussion Paper by Anne Boschini (SOFI, Stockholm University) Kristin Gunnarsson (Uppsala University) and Jesper Roine (SITE, Stockholm School of Economics and IZA) studies these questions for the case of Sweden over the past four decades. Starting in 1974, the authors analyze how the share of women, and the composition of their incomes, in the top of the income distribution has changed over time. Using the longitudinal information, they are also able to study gender differences in mobility in the top as well as how top income men and women differ with respect to age, education, wealth, family status, etc.

Share of women increased, but far from equal

The start of the studied period corresponds to when female labor force participation really took off in Sweden and when a number of reforms aimed at equalizing opportunities for men and women were put in place. The overarching question of the paper is how the process of gradually increased gender equality since the early 1970s has played out in the top of the income distribution.

The authors’ main conclusion is that the presence of women has increased steadily in all top groups since the 1970s, but the share of women is still far from that of men. In the top 10, the share of women has more than doubled from about 12% to 28% while in the top 1 the increase is from about 8% to 16% (excluding realized capital gains; including them increases the share of women significantly). Most of this change is due to more women getting to higher paid jobs.

Capital share less important for women

In terms of income composition, the study finds interesting gender differences. In the 1970s about 30% of total income for women in the top 1 group was based on capital. That share remains about the same today. Relative to men, however, the trend is that capital is becoming less important for women because the importance of capital incomes for men has grown over time.

When studying the share of top income men and women who rely primarily on either labor income or on capital income, it turns out that the relative share of capital-rich women has gone down and the relative share of working-rich women has increased. This pattern is present in all parts of the top decile. In general, top income women also have more wealth than top income men, but this difference has also gone down over time.

The researchers also find gender differences in mobility. Top income women are less likely to stay in the top from one period to the next. This is especially pronounced when including realized capital gains, as these turn out to be of a more transitory nature for women than for men. Over time, though, the mobility differences between top income men and women have decreased.

Most rich women also have rich husbands

Top income men and women are not markedly different in age or education, but there are large difference in terms of family formation. Almost all men in the top 1 group were married in the 1970s, and this is still true today for about 75% of top 1 men. Looking at the income of their partners, most of them were in the P0-60 group in the 1970s. And even though this share has gone down, it remains true that most partners of top income men are not themselves in the top decile group.

Top income women, on the other hand, look very different in these respects. The share of married top women was about 50% in the 1970s and has increased over time to about 60% today. The share of widows has decreased over time from about 20% to 10%, and the share of divorced has increased slightly. In terms of who the top income women are married to, this is almost a mirror image of men’s situation; about 3 in 4 out of the married top 1 women are married to men who are in the top decile group and about 40% have a partner also in the top 1. Almost none of the married top 1 women have a partner with low income (in the P0-60 group).

Overall, the results regarding differences in the role of capital, but also the results showing very different family compositions for top income men and women, both suggest that many of the findings in the top income literature have a clear gender component and that understanding gender equality in the top of the distribution requires studying not only earnings and labor market outcomes, but also other aspects of top income men and women.

Download the paper (IZA DP No. 10979):

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Do managers need more masculine or more feminine skills?

Among top business managers women are still a rare sight. The reasons are complex and subject to heated debates. One controversial explanation suggests that a successful corporate manager needs to have “male” attributes and skills such as risk-taking and competitive behavior. Those who should know best what it takes to excel in top executive positions are the managers themselves.

A recent IZA Discussion Paper by Aarhus University researchers Tor Eriksson, Nina Smith and Valdemar Smith therefore uses data from a survey conducted among managers to examine gender stereotypes and self-stereotyping.

Based on a large field study of around 3,000 Danish managers at all levels (from CEOs to managers at low levels), the authors calculate two measures of gender stereotyping behavior among the managers: (i) Gender stereotyping with respect to what is takes to be a successful manager and (ii) gender self-stereotypes with respect to own managerial abilities. For both measures the researchers tested for eleven items and distinguished between male (determined, have self-control, willing to take risk, competitive, self-confident), female (helpful, social skills, dialogue-oriented), and neutral items (result-oriented, visionary, innovative), which they could rate on a scale from 1 to 5.

Male managers are more masculine gender stereotyping

Among the results are that male managers tend to be significantly more masculine gender stereotyping than their female peers with respect to the role as a successful manager. However, this is not the case for managers who reach the top. Female CEOs have more gender stereotype attitudes than their CEO male colleagues and significantly more masculine stereotypes than other female managers when controlling for other background characteristics. Companies with a stronger focus on work-life-balance policies tend to have less gender-stereotyping managers, regardless of gender.

Moreover, the authors observe “self-stereotyping“, which means that that female managers tend to rate themselves lower than their male peers on the masculine management traits and higher on the feminine management traits. At the same time female managers have stronger beliefs in their “feminine” management skills and weaker beliefs in their “masculine” skills. For the males the authors observe the opposite pattern. An exception are top executives of both genders, who rate themselves higher than other managers on most managerial traits.

According to the authors’ estimates, however, beliefs about own ability accounts for less than ten percent of the observed gender difference in the occupancy of C-level positions. So, what could explain the rest of the gap? The results point to one obvious candidate: the gender-stereotype attitudes of the decision makers in hiring and promotions. Here the study finds clear indications of masculine stereotyping, especially among male managers, both at top executive levels (excluding CEOs) and at lower managerial levels. The authors stress, however, that this is pure speculation, as long as no clear evidence is found that this is an important mechanism.

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IZA appoints Thomas Dohmen as Research Director

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Thomas Dohmen

We warmly welcome Thomas J. Dohmen, who will become Research Director at IZA as of September 1, 2017. Professor Dohmen will retain his chair at the University of Bonn while taking leave to strategically advise IZA and devote more time to his own research. Holger Bonin will continue, also in the function of a Research Director, to coordinate the policy research and advisory activities at IZA, which is headed by Hilmar Schneider.

Thomas Dohmen is an internationally renowned scholar in behavioral and organizational economics. From 2003 to 2007, he was a Senior Research Associate at IZA before serving as Director of the Research Center for Education and Labor Market (ROA) at the University of Maastricht. Since January 2013, he has been a Professor of Applied Microeconomics at the University of Bonn.

“Thomas has been closely affiliated with IZA for many years. Given his in-depth knowledge of the institute and his extensive leadership experience at Maastricht, he is ideally suited to meet the unique challenges of a research institute that aims at reconciling academic excellence with practical relevance,” says Schneider. “He will also play a key role in mentoring our junior researchers, whose career development is immensely important to us.”

Dohmen’s new role will also strengthen IZA’s ties with the University of Bonn and create additional opportunities for joint research activities. “Both sides have a lot to offer. Our closer collaboration will clearly be mutually beneficial,” believes Professor Jürgen von Hagen, Vice Dean of the Faculty of Law and Economics and spokesperson of the economists at the University of Bonn.

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