The Recovery of the SHEconomy

If you graphed women’s economic progress over recent history, you’d see their share of the U.S. labour force rose slowly, from 30% in 1950 to 47% today.¹ You’d see them surpassing men in 2017 by 10 percentage points when it comes to earning college degrees.² Even the wage gap between men and women—though stubborn since the 1990s—continued to tighten.

And then came 2020.

The COVID-19 crisis disproportionately impacted women in the workforce. “When the pandemic hit, women’s labour-force participation rates fell much more so than men,” Morgan Stanley Chief U.S. Economist Ellen Zentner said at the fourth annual Morgan Stanley Private Wealth Management and International Wealth Management Women’s Summit in June 2021. 

Why did this happen and how has it affected the progress of women of all races, ethnicities and career paths? More to the point: How can women recover from the pandemic and reclaim the power of the SHEconomy? This was the subject of the Women’s Summit talk led by Zentner and hosted by Morgan Stanley Head of Private Wealth Management Liz Dennis. 

For decades, behavioral and societal changes have been fueling women’s growing economic clout, Zentner noted. Some of those changes include: “delayed marriage, increased access to birth control, having fewer children on average and having children later in life,” Zentner said.  The average age at marriage was 25 in 2000; by 2020, it was 28, and by 2030, it’s expected to be nearly 30.³  Such demographic trends have been the “primary driver of how you get increased income, increased wealth, and increased labour-force participation rates on the part of women,” Zentner said.

The population of single women has also grown. By 2030,  MS economists forecast that 45% of women ages 25-44 will be single, up from 41% in 2018.⁴  This would make single women the fastest growing cohort in the U.S. Staying single gives women more time and opportunity to build their careers—a key driver of the rising labour-force participation rate among single women. 

The pandemic upended the labour market, but particularly for women. Here are three factors that impacted women’s employment trends:  

Forced lockdowns that shuttered schools, childcare centers, and businesses affected women exponentially more than men, primarily due to a few critical factors. First, Zentner pointed out, women make up a greater share of labour in the low-wage-paying segments of the service economy, including leisure and hospitality, restaurants and retail—all of which were among the hardest hit by lockdowns and other prolonged restrictions. 

Historically, women, including working mothers, have generally shouldered more of the work of childcare than men. Overnight, the pandemic took away their support system, when daycare centers and other programs closed. Not only that, women who were able to work from home had the double burden of helping school-aged children with virtual-learning curriculums. During 2020, one in four women considered leaving the workforce versus one in five men.⁵ Women with children under age 10 considered leaving the workforce at a rate of 10 percentage points higher than men.⁶ All told, from February 2020 to February 2021, about 2.4 million women left the U.S. labour force, compared to 1.8 million men.⁷

Other groups also felt the pain. The data show that the pandemic disproportionately hurt Black and Latinx workers, with labour-force participation rates dropping the most among Hispanic women.⁸ “We really want to be sure that this does not turn into lasting damage, because the longer someone stays out of the labour market, the lower the probability that they ever return to the labour market,” Zentner said. Such outcomes would not only be bad for women as a labour cohort, but could also damage the economy overall because a shrinking labour pool can stunt long-term economic growth.

The pandemic has shaped expectations of the labour market. As we look to understand how women can regain ground in the workforce, here are some tips to consider: 

The tide of the pandemic should read like this: The tide of the pandemic has turned. School reopenings helped more women return to work, especially those who couldn't work from home. Meanwhile, “the reservation wage—the minimum wage a worker will accept to go back to work—has risen in the specific sectors where women have lost the most jobs—and it must continue to rise to draw back more women,” said Zentner, adding: “In terms of what it will take to get women back to work in particular sectors, it's going to take businesses paying up.”

Beyond the pandemic, other changes must take place. Employers need to strive for equal representation for women and people of color at all levels of their organisation, including management and on boards of directors, Zentner said. It’s critical for employers to take action to revamp and restore lasting gender equity across their organisations. 

Zentner also believes that the next generation of women can be a driving force for that change. “Watch Generation Z,” Zentner said. This cohort, born in 1997 or after,⁹ are the most diverse generation to date and the first generation with barely a majority (52%) of non-Hispanic white people.¹⁰ “Not only is the female Hispanic cohort the fastest growing in that generation, they demand diversity in the companies that they want to work for, the companies that they invest in, and the community banks that they want to deal with,” Zentner said.

“We are optimistic about Gen Z, and we're really optimistic about our clients who are helping women make economic gains,” said Liz Dennis. She noted that Morgan Stanley is proud to be empowering women, as they continue to participate in the workforce in greater numbers and to create the diversity that younger generations demand.

Learn more about Morgan Stanley’s efforts to create opportunities for women in their careers, their wealth planning and their communities. Plus, more Ideas from Morgan Stanley's thought leaders.