Cashing in on education

It is no surprise: sending girls to school increases their chances to get employed. However, almost one out of two women in Latin America and the Caribbean is currently out of the labor market, and the participation gap between men and women is over 30 percentage points, one of the largest in the world (WDI, 2012). If girls are now accessing schools in most of Latin America and the Caribbean on equal terms with boys (even better in some cases), what lies behind bad labor market outcomes? The education system has some of the answers, but not all.

While spending time in school is important, it does not necessarily guarantee the acquisition of relevant skills. Differences in the type of skills gained in school can explain in part why women are concentrated in low productivity sectors. Yet, correcting the skill mismatch would not be enough on its own to eliminate labor market disparities between men and women.

The reason is that although the gap in participation in the labor market is present in the entire lifecycle, it widens during a woman’s childbearing years. The majority of the population out of the labor market in the region is women between the ages of 24 and 45. This is the largest share of the available pool of unused human capital countries have, and where mothers of young children are concentrated. The words of Katharine Zaleski, cofounder and CEO of PowertoFly, could very well describe the trade-offs faced by many working women:

“I was now a woman with two choices: go back to work like before and never see my baby; or pull back on my hours and give up the career I’d built over the last ten years. When I looked at my little girl, I knew I didn’t want her to feel trapped like me.”

Caring for younger children competes for women’s time to work, but also girls’ time to study as they step in to assist their mothers and female relatives. Estimates indicate that women spend on average three times as many hours as men in unpaid care work (McKinsey Global Institute, 2015). The opportunity costs of working are different for households with children: every hour spent in a paid job is an hour of care that needs to be outsourced, and the price they would pay might not be worth the wages they would earn. Childcare provision reduces this opportunity cost. Evidence from both developed and developing countries shows that access to childcare is positively and consistently related to increases in female labor force participation, and that exceptions arise when the system of incentives is not well designed or the service features are not adapted to the needs of most vulnerable households.

If the region really intends to stop underusing its human capital, countries need to make sure that what girls and boys learn in school is what the labor market needs, but they also need to provide care alternatives to reduce the opportunity costs of working for parents. More and better childcare constitutes a fundamental policy option to improve female labor supply, but, as argued in a recent IDB publication, countries need to pay particular attention to the design and features of these services.

Interested in this topic? Check out our most recent publication: Cashing in on Education : Women, Childcare, and Prosperity in Latin America and the Caribbean.