Wage and Employment Uncertainty and the Labor Force Participation Decisions of Married Women

Over the past 30 years, research on married women's labor force participation has concluded virtually without exception that the principal source of labor force participation rate growth for married women has been the concurrent growth of women's real wages. The experience of the 1970's suggests, however, that real wage growth cannot account for the increase In participation rates that occurred during that period. His paper argues that an Important determinant of married women's current participation decisions is the level of uncertainty associated with expectations of future wages, and that high levels of uncertainty during the 1970's may have contributed substantially to the growth in participation that occurred during that time. Engle's model of autoregressive conditional heteroscedasticity (ARCH) Is apply led to aggregate time series data covering the years 1956-1986 to measure the level of uncertainty at each point In time. Our estimates Indicate support for the basic hypothesis that the level of uncertainty is an important determinant of labor force participation decisions for married women.