Job Opportunities, the Offered Wage, and the Labor Supply of Married Women

The major difference between segmented labor market and human capital theories about the labor force behavior of women lies in the attention paid to micro vs. market-wide or macro variables. In a study such as James Heckman's (1976) which includes no market variables, the demand for the labor of married women in any given education-experience (and hence offered wage) class is implicitly assumed to be infinitely elastic. Thus the observed differences in the labor force behavior of individual women are attributed entirely to differences in supply characteristics such as education and child status. On the other hand in segmented labor force analyses, such as Barbara Bergmann's and lrma Adelman's study, the macro phenomenon of occupational segregation by sex is seen as the major factor affecting the participation, wage rates, and hours of work of women. These two types of studies lead to different explanations of why the labor force participation of women has increased in recent years. Different sets of government policies aimed at improving the labor force situation of women are also implied. In this paper we present a model of the labor force behavior of married women in which both individual and family decision making, and macro labor market conditions are found to play important roles. An unemployment variable and an index summarizing the ratio of expected available local job slots for women to the potential female labor force population are incorporated into a marginal utility analysis of the labor force behavior of married women in Canada. The inclusion of the local opportunity for jobs variable is supported by detailed evidence on the labor force segregation of women in Canada. Consistent estimation results are presented for eleven age groups in a probit analysis of whether or not a married woman works, and for eight age groups in equations estimating the offered wage rates and annual hours of work of married women who do work. One unexpected finding is that working wives in Canada tend to work fewer hours per year when paid more per hour. This is contrary to the findings of other researchers for the United States, and has important policy implications. Although it is possible that our results differ from those of other researchers solely because we have analyzed data for another country, we argue in Section V of this paper that the difference in results is more likely due to differences in the form in which the labor supply function for wives is estimated and the choice of the variables which are used to control for child status. Our resulting uncompensated wage elasticities of hours of work are shown to be very similar to those reported by other researchers for men. The data base used in this study is the Family File of the first Public Use Sample to be made available from a Canadian census. Combined grouped R2s are presented showing the extent to which our equations explain the observed macro variations in the labor force behavior of married women classified by various characteristics. Finally we use our estimated model to see what changes we would expect in the labor force behavior of a hypothetical 41-year-old wife living in a small city in New Brunswick given a variety of changes *Faculty of Business Adminstration and Commerce, University of Alberta. For further computational results and theoretical arguments supporting various statements in this paper, see our book. The work for this paper was supported in part by the Statistics Canada-SSRCC Programme of 1971 Census Analytical Studies, and by the Faculties of Graduate Studies and Research and of Business Administration and Commerce of the University of Alberta. The empirical results in this paper are primarily based on Public Use Sample Data derived from the 1971 Canadian Census of Population supplied by Statistics Canada. The responsibility for the use and interpretation of these data is entirely ours. We would like to thank T. Daniel, K. Gupta, anonymous referees, and the managing editor for their helpful comments, and James Heckman for making available to us some of his work which had not yet been published.