Jerome H. Powell, Chairman of the Federal Reserve, suggested Wednesday that improving government policies to support child care could help attract more women to the workforce.
The Fed chief carefully avoided commenting on specific government policy proposals during three hours of high profile testimony before the House financial services committee. But he acknowledged, in response to a question, that enabling better options for affordable child care is an “area worth considering” for Congress.
“Our peers, our competitors, the democracies with advanced economies, have a more developed function for childcare, and they end up having a significantly higher labor force participation for women,” Mr. Powell, answering a question from Rep. Cindy Axne, a Democrat from Iowa. “We used to dominate the world when it comes to women’s participation in the workforce a quarter of a century ago, and we don’t anymore. It may just be that these policies have put us behind schedule. “
The Fed chairman, who also testified before the Senate Banking Committee on Tuesday, has repeatedly refused to weigh in on the $ 1.9 trillion spending package proposed by the Biden administration or any of its individual arrangements. The central bank is independent from politics and tries to avoid getting involved in partisan debates.
But Mr Powell expressed qualified support for a few broader ideas – like exploring better childcare options – and he stressed that in the short term, helping workers who have been displaced is essential. of their employment during the pandemic. He made it clear that the job market was far from being healed, that the economic fallout from the pandemic had disproportionately affected women and minorities, and that Congress and the central bank had a role to play in supporting vulnerable families until the economy recovers more fully.
“Some parts of the economy have a long way to go,” he said on Wednesday.
The participation of women in the labor force had climbed for decades in the United States before stagnating – and then falling slightly – from the 1990s. As Mr. Powell mentioned, adult women in the United States hold jobs. jobs or seek them at lower rates than women in some other major advanced economies, such as Canada or Germany.
Research has suggested that the divergence could be related to child care policies. In a 2018 article that asked why the share of Canadians working or looking for a job increased even as the participation rate in the United States declined, researchers at the Federal Reserve Bank of San Francisco noted that the major part of the difference was due to different results for women. And they pointed to differences in care policy as a likely culprit.
“Parental leave policies in Canada provide a strong incentive to stay attached to the workforce after the arrival of a new child,” said the document, written by San Francisco Fed President Mary C. Daly and her colleagues. co-authors. “The contrast between the incentives that Canada and the United States offer prime-age workers to stay attached to the workforce is clear.
The fact that childcare responsibilities weigh heavily on women in the United States has come under the spotlight during the pandemic, which has closed schools and disproportionately left women with additional childcare responsibilities. children during the traditional working day.
While women lost fewer jobs than men during the 2009 recession, their employment rate declined about as much as that of men during the pandemic crisis. And when it comes to labor market participation, which measures the proportion of people who are working or looking, women have lost more ground.
Women’s participation fell 2.1 percentage points to 55.7% in January, from February 2020, while men’s participation fell 1.7 points to 67.5%.
Mr Powell noted the disproportionate impact on Wednesday, saying that “women have taken on more childcare duties than men at a time when the children are going to be home, they are not going to school in a lot of places. “
Throughout his tenure as Fed chairman, Mr. Powell has focused heavily on the job market. During the pandemic recession, he repeatedly said that monetary and fiscal policymakers should support displaced workers so that they can find jobs when the economy reopens.
While the Fed can help the economy and the job market improve overall, helping individual groups in targeted ways is usually left to elected officials, who can create more specific programs. This includes opening a clearer path to the labor market for mothers, which would fall primarily to Congress and the White House.
Nonetheless, the Fed can help foster conditions for strong overall economic growth, which attracts people to the workforce and helps pave the way for higher wages.
The authorities attempt to do this by keeping interest rates low and buying large amounts of government guaranteed bonds in order to keep many types of credit cheap, policies that can fuel both loans and loans. expenses. The Fed’s explicit goal is to achieve both maximum employment and slow but steady inflation, averaging 2% over time.
Mr Powell signaled on Wednesday that interest rates, which have been at their lowest since March 2020, will likely stay there for years to come. He also suggested that the Fed would be patient in slowing down its bond purchases, waiting to see further “substantial” progress before changing this policy.
Mr Powell has been promising for 11 months that the Fed would use his policies to help the economy weather the pandemic, but his comments have become newsworthy at a time when some lawmakers – especially Republicans – are concerned about it. great government. spending could fuel an economic overheating that would lead to rapid inflation.
The Fed is responsible for controlling price gains. But its officials have made it clear that small price gains, not uncontrollable gains, are the problem of the modern age. Central bankers are trying to keep price gains from falling further and further, as disinflation can be economically damaging.
Mr Powell reiterated that message on Wednesday.
“We live in an age where there are significant disinflationary pressures in the world,” he said, and officials are therefore trying to support prices. “We believe we can do it, we believe we will. It may take more than three years. “
The Fed has tweaked its approach to monetary policy in 2020, saying it will aim for periods of slightly higher inflation and no longer seek to cool the economy simply because the unemployment rate is falling – an approach taken by policymakers for decades. as careful. Mr. Powell’s colleague, Fed Governor Lael Brainard, explained the reflection in remarks during an economics class at Harvard on Wednesday morning.
“Preventively removing accommodations as overall unemployment hits low levels in anticipation of inflationary pressures that may not materialize can result in an unwarranted loss of opportunity for many Americans,” said Brainard. “This can hold back the progress of racial and ethnic groups who have faced systemic challenges in the labor market.”
The Fed has been relatively patient in raising interest rates after the 2007-2009 recession – leaving them near zero until 2015, then slowly raising them. As they proceeded with caution and unemployment fell to its lowest level in 50 years, the workers who had been counted began to reenter the labor market and employers began to go to greater lengths to recruit and train talents.
“At very low unemployment levels,” the United States “has seen benefits go to those on the lower end of the spectrum – which disproportionately means African Americans, other minorities and women Mr. Powell said. “With our tools, what we can do is try to bring ourselves back to this place.”