Female hysteresis

Women have been the big winners from the boom. But they will lose out most in the bust
March 1, 2009

Recessions are always painful for those who lose their jobs. For most, life goes on sooner or later: the economy recovers and they get a job similar to the one that they had held before. But for others life does not go back to normal. Their job turns

out to be gone for good. Skills and experience that were once valuable are no longer, and if they get another job it is not as good. Think of the former steel workers stripping in The Full Monty. Economists call this "hysteresis": it means that a recession can be more than a cyclical phenomenon, and have long-lasting effects.

This happened in the early 1980s, when the recession increased the number of industrial workers losing their jobs so much that the economy could not generate enough new jobs for all of them.

At first sight, the threat of hysteresis looks smaller this time. Although finance is under pressure at the moment, there is no reason to think that it is in permanent decline. In any case, although it generates a big proportion of GDP, finance's share of employment is relatively low: less than 10 per cent of the total workforce. And most people in finance are well-educated, and likely to be able to find other work.

Recent declines in other parts of the economy are cyclical. The laid-off Nissan workers have not been laid-off because they are bad at making cars, but because the number of people buying cars has gone down. When we get out of the recession, most of these jobs will return.

Yet there is still reason to worry. Women seem to be losing jobs faster than men in the downturn. Recent figures from the Trade Union Congress suggest that female rates of redundancy went up by 2.5 per cent in 2008, double the rate for men.

Such figures can be misleading, in part because one of the big changes in recent decades has been the rise of female employment. Not only are women working, but they are pursuing careers to an extent that was unthinkable a generation ago.

But although women compete on similar terms with men straight out of college, their careers diverge thereafter. For better or for worse (and probably for better and for worse) women continue to be the primary carers in the home. One effect is that a significant proportion of mothers with degrees choose to work part time.

Most good employers offer relatively generous conditions to women who wish to work part time. Employers accept that mothers are more likely to take time off at short notice when their kids are ill. They accept that mothers are more likely to leave "on the dot" in order to pick up the kids from school or nursery and so on.

It is one thing to offer such good conditions to women you already employ who want to work part time. But it is quite another to take on women who already have young children and want to work part time. Very few employers do this: even when the economy was booming few investment banks and law firms recruited graduate level part-time workers.

This, then, creates the possibility of hysteresis for women. Both men and women will lose their jobs in the downturn—and it is too early to be clear on the proportions. But while men who want to work full time are likely to get a similar job in the future, women who want to work part time may not. They can go back to their careers if they are prepared to work full time. Or they can work in low wage jobs that offer more part-time positions, or opt out of paid employment.

We can already see anecdotal evidence of this. One woman I know lost her part-time job in a law firm. Wanting to be around for her son, she now works in a supermarket. "We need the money," she said, "so I have to work somewhere, and it is all you can get if you can only work part time." When such women lose their jobs, they lose their careers. But they also lose some of their skills, while their experience goes out of date. Even when their children grow up, they will find it hard to return to their previous careers. That is hysteresis—and it means that, far from being temporary, falls in national income caused by the crisis now may prove to be permanent.