On Her Account: Can Strengthening Women’s Financial Control Boost Female Labor Supply? With Simone Schaner

As financial inclusion and FinTech have taken on greater prominence, governments must grapple with how to best enable women’s economic empowerment. This week’s WAPPP seminar featured Simone Schaner, Assistant Professor of Economics at Dartmouth, as she presented the results of a randomized controlled trial to assess how financial inclusion coupled with targeted benefit payments impact women's labor force participation and economic welfare in India.

Professor Schaner began with a central question: Why aren’t women in emerging economies participating in the labor force? Female labor force participation has been basically stagnant despite sustained economic growth in India. However, 34% of rural non-working women say that they would like to work, and employing these women would increase female labor force participation by 80%. What is keeping them out of the formal labor force?

When we think about labor force participation, we often think about demand-side constraints – are there jobs available for those who want them? However, in this case supply-side constraints may be especially important. Women face strong gender norms and limited household bargaining power that curtails their ability to participate in the labor force. Economists think of these social constraints within a utility model: individuals may experience a utility loss if they violate a gendered behavioral norm that is upheld by the community. In the Indian context, if a woman works, it may signal that her husband has failed as a breadwinner. Even if women want to participate in the labor force, this threat of utility loss may keep them out. Data from the World Values Survey demonstrates that female labor force participation correlates with men’s and women’s attitudes toward female work. Where both men and women are supportive of working women, we see greater female labor force participation; as the gap between male and female attitude increases, female labor force participation decreases.

This particular research project focuses on poor, married couples in India who are potential beneficiaries of the public workfare program NREGS. The community exhibits strong norms against female work and mobility—only 38% of women report having gone to village market by themselves in last year. NREGS guarantees every rural Indian household 100 days of paid work at a fixed minimum wage facilitated by the local government. When these women participate in the NREGS workfare program, their wages are paid into their husbands via bank transfers. This study investigates whether strengthening women’s control of NREGS wages can increase female participation in the NREGS program and in the labor force more broadly.

STUDY DESIGN

Women in the field experiment were divided into five groups with two “flavors” of financial inclusion.  In the “Accounts Basic” group, the study team opened low-cost, no-frills bank accounts at community banking kiosks. After their paperwork was processed, the women in this group were taken back to the kiosks to demonstrate deposits and withdrawals. In the “Accounts Plus” group, the women also received a group-based training session that emphasized what a bank account is and what can be done with it (receiving benefits transfers like NREGS, the importance of saving, and how money kept in a bank account is safe). In two additional groups “Accounts Basic Linking” and “Accounts Plus Linking,” the women received the same services described above, but their accounts were configured such that their NREGS wages were paid directly into their accounts, rather than their husbands’. The fifth group, a control, received no financial inclusion services or training. This design allowed the research team to examine how control over NREGS wages impacts female labor force participation while holding financial inclusion (including access to banking services) constant.

MAIN RESULTS

Initial survey data revealed that women in the study had opened accounts, but rarely used them. In the Accounts Basic group, 17% of women had been to the bank in the last six months, compared to 10% in the control group. While this figure was somewhat higher in the Accounts Plus and the Accounts Plus Linking groups, these accounts were only used occasionally. However, this intervention had a major impact on women’s bank balances. For women who received NREGS payments, they received an average of $61 – 26% of a woman’s non-NREGS average annual income. While it’s not clear that this additional income is sufficient to change household bargaining power, the intervention certainly increased women’s control of assets. Women in the Accounts Plus Linking group also increased their labor force participation – they did more work in the NREGS program and also did more work in the private market.

MECHANISMS

One possible mechanism for this shift is that the intervention increased a woman’s effective NREGS wages – while the official wage didn’t change, their increased control over their wages may have made NREGS work more attractive. However, if this were the case, we wouldn’t expect to see an increase in private sector work as well; NREGS work would have been more attractive at the expense of private sector work paid in cash. Similarly, when women’s bargaining power increases, economic models say that they will consume in terms of consumption and leisure, so we wouldn’t see the increase in both NREGS work and private labor. However, this standard model completely ignores the importance of norms – specifically here, the male preference that their wives don’t work. If men hold these preferences and yet women’s bargaining power increases, then we would expect to see this across-the-board increase in female labor force participation. Indeed, these effects are stronger for women who were constrained (not working) before the study began.

CONCLUSIONS

Strengthening women’s control over government workfare benefits increases participation in workfare and increases work on the private market. There is some evidence of increased female mobility and no evidence of male backlash in terms of reduced decision-making power, gender-based violence, or negatively impacted mental health. The broader implication of this study is that the impacts of female empowerment on female labor force participation may vary depending upon the extent to which men and women internalize gender norms and social constraints. The study team is planning a richer data collection to come, and we look forward to hearing additional results!

Corporate Boardrooms: Where are the Women?

Op-Ed
By Amanda Clayton, WAPPP Fellow, Postdoctoral Fellow, Free University of Berlin

During the global financial crisis, several public figures asked: would we be here if Lehman Brothers had been Lehman Sisters? This question resurfaced in late 2013 when Twitter went public with an all-male corporate board The New York Times columnist Nicholas Kristof to wryly point out if Twitter added three women, “its board would still have as many men named Peter as women.”

The lack of women in business leadership is shocking. Despite an increase in female MBA students, women currently account for 17% of Fortune 500 board members and just 4% of CEOs.

So why include women in the boardroom? A Transparency International study notes that women tend to be less corrupt than men in business and government. Women are also more risk-adverse according to a UC Santa Barbara study.  Moreover, a Catalyst report shows that women's representation on corporate boards is associated with better financial performance.

Although encouraging, this line of research is unsettling for some gender scholars. Labeling women as more risk-adverse and less corrupt not only sets unreasonable expectations for women, but also can digress into essentialist arguments - similar to espousing men as naturally better leaders.

This issue is not about women saving Wall Street -- it's about fairness. Research presented by Shelley Correll at Stanford University's Clayman Institute for Gender Research explains how largely implicit gender biases still hold women back in the workplace. Similar research reveals that managers hire applicants they feel will be a good “cultural match” (read: white men) and, once hired, these don't leave.

The persistence of this uneven playing field recently caused Harvard Business School to seriously reevaluate its organizational culture. Similarly, ten countries have adopted quotas for women on publicly traded company boards to fast track gender equality.

What are the benefits here? A recent study in Science co-authored by WAPPP faculty affiliate, Rohini Pande, shows that seeing female leaders increases girls' career aspirations and educational attainment. That is, letting women into the boardroom not only remedies current inequalities, it encourages future generations of young women to throw their hats in the ring.

The Gender Pay Gap among Stockbrokers

Wharton professor Janice Fanning Madden proves once again that solid social science research can settle lawsuits and chip away at discrimination. Asked to testify in class-action law-suits of female stockbrokers against two large firms, she used company data to tease out the evidence of gender bias and demonstrate that the firms’ arguments had no basis in fact.

Stockbrokers are the highest paid sales occupation, yet it has the largest gender pay gap. Female stockbrokers earn 54-60% of their male counterparts. Since stockbroker compensation is based almost entirely on commission, the obvious explanation for the pay gap is that women simply generate fewer sales.

The trading firms were convinced that this was a matter of sales capacity – low-performing female stockbrokers stayed while low-performing males left, and women worked less intensely due to household responsibilities and other factors. Professor Madden proved their arguments wrong. Through statistical analysis of account records tied to each stockbroker, she demonstrated that when men and women received equivalent clients and accounts, they generated equivalent sales. Yet she found that on the whole women were being given inferior accounts, which led to lower commissions.

The point is not to accuse male managers of blatant sexism. In most cases, their biases were likely unconscious. Decision-making research demonstrates that people are bad at predicting performance, and that in instances where the workplace is overwhelmingly male, the manager is more likely to have a subjective “hunch” that a man might do better than a woman. So if women start off with inferior accounts, they will generate lower sales and become less and less likely to receive a lucrative account.  

The firms protested this explanation. They claimed that the better accounts went to more experienced brokers, who happened to be male, a disparity that would go away as the female workforce matured. That is where Dr. Fanning Madden really surprised them. The company records demonstrated that when a broker left, the managers redistributed more accounts to the newer, “hungrier” brokers, not those with more experience and an already heavy client base.

Thus both the “experience” and the “sales capacity” arguments of the financial giants fell apart, the lawsuits were settled and the women received substantial damage pay. Yet female stockbrokers are still earning less than men, unconscious biases are still shaping practice, and there is not enough pressure for systemic change. 

The challenge as I see it is to take powerful research about the causes of the pay gap beyond academia and federal court, and put it into the hands of managers, operations professionals and HR staff the world over.