February 13, 2024

The 2023 Nobel Prize in Economics for Understanding Women’s Labor Market Outcomes

Thomas Krantz
Advisor to the Managing Director
WAIFC’s permanent agenda includes encouraging the advancement of women’s participation in the financial services sector. The ongoing underrepresentation of women in this industry translates to a vast loss of talent for society. There can be no better way to move this agenda ahead through better public policy choices than dipping into some of the multi-decade studies led by Professor Claudia Goldin of Harvard University, this year’s Nobel laureate for her work in the field.

The Royal Swedish Academy of Sciences Summary of Goldin’s Findings

WAIFC cannot do better than citing the Nobel Prize announcement directly:

“Women are vastly underrepresented in the global labor market and, when they work, they earn less than men. Claudia Goldin has trawled the archives and collected over 200 years of data from the US, allowing her to demonstrate how and why gender differences in earnings and employment rates have changed over time.

Goldin showed that female participation in the labor market did not have an upward trend over this entire period, but instead forms a U-shaped curve. The participation of married women decreased with the transition from an agrarian to an industrial society in the early nineteenth century, but then started to increase with the growth of the service sector in the early twentieth century. Goldin explained this pattern as the result of structural change and evolving social norms regarding women’s responsibilities for home and family.

During the twentieth century, women’s education levels continuously increased, and in most high-income countries they are now substantially higher than for men. Goldin demonstrated that access to the contraceptive pill played an important role in accelerating this revolutionary change by offering new opportunities for career planning.

Despite modernization, economic growth and rising proportions of employed women in the twentieth century, for a long period of time the earnings gap between women and men hardly closed. According to Goldin, part of the explanation is that educational decisions, which impact a lifetime of career opportunities, are made at a relatively young age. If the expectations of young women are formed by the experiences of previous generations – for instance, their mothers, who did not go back to work until the children had grown up – then development will be slow.

Historically, much of the gender gap in earnings could be explained by differences in education and occupational choices. However, Goldin has shown that the bulk of this earnings difference is now between men and women in the same occupation, and that it largely arises with the birth of the first child.”


A Deeper Look

Professor Goldin has had a tremendously productive career as a scholar[1], as well as a teacher.  Her articles and books deserve to be studied.  The breakout research came in 1990 with the publication by Oxford Press of the book that changed the understanding of women in work and society, at least in the US where she had a great deal of historical economic and social data to work with:  Understanding the Gender Gap: An Economic History of American Women.

The book put the spotlight on women who were entering the labor market in unprecedented numbers, yet these critically needed workers were still earning less than men and were given fewer opportunities for advancement. Goldin’s study traced the evolution of the female labor force in the US, addressing the question of gender distinction in the workplace and refuting the notion that women’s employment advances were a response to social revolution instead of long-run economic progress.  Her data series enabled her to combine information on employment, earnings, work experience, discrimination, and hours of work, thereby establishing how the economic status of women in the 1980s resulted from the gradual evolution over the last two centuries.


Homework for WAIFC

Underrepresentation of a significant percentage of society in the financial services workforce, in simple numbers as well as in their positions in the hierarchy, ultimately diminishes what this business sector needs to be accomplishing.  It is frustrating; it is a waste; and it is wrong. 

WAIFC is right to keep this as a question on its permanent agenda.  Where privacy laws allow, members might start tracking the trends in financial services in their jurisdictions.  Where the data cannot be tracked on an individual basis, perhaps surveys would provide some sense of progress being made, or the lack of it.  If the goal is constant improvement in the roles women should be playing in our segment, we will need numbers to see what is or is not happening.

This opinion opens with the cartoon drawing for Professor Goldin’s award was prepared by the Royal Swedish Academy of Sciences.  It shows a woman detective looking for information.  Like any serious cartoon, the message is that all of us, of whatever gender, need to be detectives as we progressively correct this wrong.  Call it the Goldin example.



[1] https://scholar.harvard.edu/goldin/biocv

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