Federal Reserve chairman Jerome H. Powell suggested on Wednesday that improved government policies to support childcare could help attract more women into the labor market.
The Fed chief diligently avoided commenting on certain proposals of government policy during three hours of far-reaching statements before the House Financial Services Committee. In response to a question, however, he admitted that enabling better options for affordable childcare was an “area to look at” for Congress.
“Our colleagues, our competitors, and advanced business democracies have a more developed childcare function, and they end up having a much higher labor force participation rate for women,” Powell answered a question from Representative Cindy Axne Iowa Democrat. “A quarter of a century ago we were the world leader in women’s labor force participation, and we don’t anymore. It can only be that these guidelines have left us behind. “
The Fed chairman, who also testified before the Senate Banking Committee on Tuesday, repeatedly refused to weigh up the Biden administration’s proposed spending package of $ 1.9 trillion or any of its individual provisions. The central bank is independent of politics and tries to avoid getting involved in partisan debates.
However, Mr Powell advocated some broader ideas – for example, research into better childcare options – and stressed the importance of helping workers displaced from their jobs during the pandemic in the short term. He made it clear that the labor market is far from healed, that the economic consequences of the pandemic have disproportionately harmed women and minorities, and that both Congress and the central bank must play a role in supporting vulnerable families until the economy recovers Has.
“Some parts of the economy still have a long way to go,” he said on Wednesday.
Women’s labor force participation in the United States had increased for decades before it stalled – and then actually declined slightly – from the 1990s. As Mr Powell has indicated, adult women in the US have jobs or seek them at lower rates than women in some other large advanced economies, such as Canada or Germany.
Research has shown that the divergence is related to childcare policy. In a 2018 paper that asked why the proportion of Canadians working or looking for work has increased even though US labor retention has decreased, researchers at the San Francisco Federal Reserve Bank pointed out that most of the gap is due to mixed results in women. And they pointed out that differences in care policy are a likely culprit.
“Canada’s parental leave guidelines provide strong incentives to remain attached to the labor force after the arrival of a new child,” said the paper, written by San Francisco Fed President Mary C. Daly and co-authors. “The contrast between the incentives Canada and the United States offer prime-age workers to retain the workforce is clear.”
The fact that responsibility for childcare in the US is heavily dependent on women has come to the fore during the pandemic that closed schools and caused women disproportionately to take on additional childcare responsibilities during the traditional work day.
While women lost their jobs less dramatically than men during the 2009 recession, their employment rate fell by about as much as that of men during the pandemic crisis. And when it comes to labor force participation, which measures the percentage of people who are either working or looking, women have lost more ground.
The participation of women decreased in January compared to February 2020 by 2.1 percentage points to 55.7 percent, while the participation of men decreased by 1.7 percentage points to 67.5 percent.
Mr. Powell noted the disproportionate impact on Wednesday, saying, “Women have taken on more childcare responsibilities than men at a time when children will be at home, in many cases they will not attend school sets.”
During his tenure as Fed chairman, Mr. Powell has been heavily focused on the labor market. During the downturn in the pandemic, he has repeatedly stated that both monetary and fiscal policies should support displaced workers so that they can find work again after the economy reopens.
While the Fed can help the economy and the labor market generally improve, targeted support to individual groups is generally left to elected officials who can create more precise programs. This includes giving mothers a clearer path to the labor market, which is largely a matter for Congress and the White House.
Still, the Fed can help promote the conditions for strong overall economic growth, attracting people to the labor market and creating the conditions for higher wages.
Officials try to do this by keeping interest rates low and buying large amounts of government bonds to keep many types of credit cheap. This policy can fuel both lending and spending. The Fed’s explicit goal is to achieve both maximum employment and slow but steady inflation that averages 2 percent over time.
Mr Powell signaled on Wednesday that interest rates, which have been at their lowest levels since March 2020, are likely to stay there for years. He also suggested that the Fed would be patient with slowing its bond purchases and wait to see “substantial” further progress before changing that policy.
Mr Powell has pledged for the past 11 months that the Fed would use its policies to help the economy get out of the pandemic, but his comments have become notable at a time when some lawmakers – Republicans especially – are concerned about This major government spending could lead to economic overheating that leads to rapid inflation.
The Fed’s job is to keep price gains under control. However, it was clear to officials that weak price gains, not out of control, are the problem of the modern age. Central bankers try to prevent price gains from decreasing as inflation can be economically damaging.
Mr. Powell repeated the news on Wednesday.
“We live in a time when there is significant inflationary pressures around the world,” he said, and that’s why officials are trying to prop up prices. “We believe we can do it, we believe we can do it. It can take more than three years. “
The Fed tweaked its monetary policy approach in 2020, stating that it would target periods of slightly higher inflation and no longer try to cool the economy down just because the unemployment rate was falling – an approach that monetary policy has taken as prudent for decades. Mr Powell’s colleague, Fed Governor Lael Brainard, explained the considerations in remarks made Wednesday morning on an economics course at Harvard.
“The preventive removal of shelters as overall unemployment lowers in anticipation of inflationary pressures that may not materialize can lead to an unjustified loss of opportunity for many Americans,” Ms. Brainard said. “It could constrain progress for racial and ethnic groups facing systemic workforce challenges.”
The Fed was relatively patient with raising interest rates after the 2007-09 recession – they stayed near zero until 2015 and then slowly increased them. As they proceeded cautiously and unemployment fell to a 50-year low, the counted workers began re-entering the labor market, and employers made greater efforts to recruit and train talent.
“With very low unemployment,” the United States saw benefits for those on the lower end of the spectrum – meaning African Americans, other minorities, and women are disproportionate, “Powell said.” With our tools we can try to bring ourselves back to this place. “