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Women and Post-WWII Wages.

"Increases in female labor supply decreased both female and male wages, but had a stronger effect on women." In Women, War, and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century (NBER Working Paper No. 9013), authors Daron Acemoglu , David Autor , and David Lyle study the effect of womens work on wages, looking at the period before and after WWII. The authors focus on the growth of female employment from 1940 to shortly after the war, in 1950. In 1940, only 28 percent of women were working; by 1945, this figure exceeded 34 percent. In fact, the 1940s saw the largest proportional rise in female labor during the entire twentieth century. Although more than half of the women drawn into the workforce by the war left at the end of the decade, a significant number remained. The focus of the Acemoglu, Autor and Lyle study is the increase in female labor supply caused by the WWII mobilization. Using the cross-state changes in womens employment caused by the mobilization, the authors show that increases in female labor supply decreased both female and male wages, but had a stronger effect on womens wages. The impact of women working on male earnings was not uniform across male education levels, however: greater female labor participation led to increased earnings inequality between male college and high school graduates (that is, it lowered what a male high school graduate was paid relative to a college graduate) but reduced earnings inequality between male graduates of high school versus eighth-grade graduates. The authors results demonstrate a closer degree of substitutability between males and females in the labor force than has been suggested by previous economic analyses. Contrary to common belief, women do not substitute most closely for the least educated males, but rather for male high school graduates -- or at least that was the case at mid-century. Because rising female labor force participation raised inequality substantially in the top half of the male wage distribution and reduced it only slightly in the bottom half, the authors estimates suggest that its net effect on wage inequality was positive (that is, more inequality). However, the authors explain that education levels and characteristics of women who increased their labor supply during the 1940s differ substantially from those women increasing their labor supply today. The experience of the WWII era therefore provides an intriguing but imperfect guide to the effect of female labor supply on male earnings inequality in recent decades. The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.