According to a headline blaring on the front page of one of America’s leading newspapers, “Women Rejoin the Workforce, Adding Strength to Economy.” This is wrong in more ways than you can shake a stick at. Strangely enough, written exactly as is, it is also entirely correct. Let me explain.
Will women who join, or rejoin, the workforce strengthen the economy? Of course they will, at least in the ex ante sense (looking ahead). But all of human action “strengthens the economy.” A man purchases a shirt for $20. At what rate did he value this shirt when he bought it? Not at $20. Then, there would have been no profit in the transaction for him. Why bestir himself in this manner if he couldn’t even imagine thereby improving his economic well-being? He must have valued this article of clothing at more than $20, say, $25, so there would have been a $5 profit in it for him. Well, I speak too quickly. His main motive in so doing might have been to get a date with the attractive female seller. So, all we can say is that there was something about this transaction, the shirt or something else, or maybe a combination of the two, that he ranked more highly than the sale price. All that of course is ex ante, in anticipation. Ex post (looking back), this may or may not have been true. After the fact, he may rue his purchase; the shirt was not that much to his liking, the woman refused his offer of dinner.
The same applies to women rejoining the labor force. They would not have done so, did they not prefer this course of action to all others open to them, such as enjoying leisure, entering college, engaging in child care, etc. The economy necessarily improved, again, necessarily ex ante, but as upon all such occasions, it is by no means certain that this occurred ex post as well.
Now consider an alternative headline: “Women Quit the Workforce, Adding Strength to Economy.” The same identical analysis applies! Females would not have quit their jobs did they not contemplate thereby an improvement in their economic welfare. Perhaps they ranked child care, or leisure, or education, etc. more highly than the money they garnered from their jobs. They necessarily gained, again, ex ante from this decision of theirs, and may or may not have also done so ex post depending upon how they looked upon it after the fact.
The point is, whatever they did, quit, join, rejoin, the workforce, they improved the economy in general, because their own well-being was boosted. So the headline was problematic in that it strongly implied that work, not any of these other alternatives, was the path to economic improvement.
What, then, are the unmitigated benefits of laboring that do not apply to any of these other options? When women, or anyone else for that matter, engage in work, they increase GDP, and only GDP. What is GDP? It is a dollar amount generated by adding up the dollar value of each and every transaction that occurs in the marketplace. When a man marries his housekeeper, GDP falls, since her services, which we assume arguendo are the same before the marriage, are no longer counted. They are not bought and sold anymore. When he divorces her as his wife, but keeps her on as his housekeeper (don’t ask; we’re talking economics here; this is the dismal science), then, once again, GDP rises, since he now, once again, pays her for her services which he did not do when he was married to her. Was the economy better off in the cases where GDP was higher? Perhaps, but one can hardly be certain.
Consider four more headlines, misleading in much the same manner as the actual one which appeared in this newspaper: “Children Rejoin (or Quit) the Workforce, Adding Strength to Economy.” “Retirees Rejoin (or Quit) the Workforce, Adding Strength to Economy.”
Again, the identical analysis applies. Yes, the economy is strengthened in all four cases, ex ante, for sure, and quite possibly ex post too, but not necessarily so. But this says no more than whenever anyone engages in any voluntary act, working or purchasing a shirt, the economy is boosted. However, the headline gives the false impression that there is something unique about work in the market that accomplishes this goal. Yes, GDP changes, but who gives a rat’s rear end about that.
Reprinted with the author’s permission.
The post What the Wall Street Journal Headline About the Economic Implications of ‘Women Rejoining the Workforce’ Gets Wrong—and Right appeared first on LewRockwell.