The US is leaving economic growth on the table by failing to close gender gaps in pay and hiring, Moody's says

• Failure to close gender gaps in the US dampens growth and hurts recovery, Moody's said Monday.
• The pandemic erased years of progress for prime working-age women participating in the labor force.
• Closing the labor-participation gap between men and women can lift GDP by 5%, according to the IMF.

Closing gender gaps in the US labor market can accelerate the economic recovery and provide a lasting boost to overall output, Moody's Investors Service said Monday.

Gender disparities are nothing new to the US economy. Women earned less than men on average before the pandemic, and, during it, a lack of family-leave benefits forced many women out of the labor force as they assumed caretaking roles.

The gaps weighed on productivity before the pandemic, and the health crisis has only exacerbated the problems, the team led by Shahdiya Kureshi said.

For one, pursuing gender equality can swiftly lift gross domestic product. Closing the labor-participation gap by just 25% in the US would increase output by 2%, according to the International Labor Organization. Fully erasing the disparity would boost GDP by 5%, the International Monetary Fund estimated.

The recovery so far hasn't been promising. Employment gains for both men and women were roughly the same from May 2020 to January 2021. Yet where men have retraced more than half of their decline in labor-force participation, women have only recovered 40% of their slump. This difference "weakened household consumption and financial stability" late in the pandemic, Moody's said.

Within the prime working-age population of Americans 25 to 54 years old, labor-force participation among women plummeted and reversed years of steady gains. The rate peaked at 76.9% in January 2020 before plummeting as low as 73.5%.

The rate stood at roughly 75.5% at the start of 2021, the same level seen in January 2018.

One driving factor behind the harsher fallout is women's overrepresentation in sectors hit hardest by the pandemic. Pay in the food preparation, personal care, sales, and education industries - where women make up the majority of workers - is between 18% and 40% below the average median weekly earnings for women. These sectors also saw significant pay disparities between men and women, according to government data cited by Moody's.

Mothers have also shouldered a heavier burden through the health crisis. Women aged between 24 and 44 who weren't employed in July 2020 were nearly three times more likely than men to name childcare responsibilities for their lack of work, according to Census Bureau data.

Where Congress can step in

There are already a few clear steps policymakers can take to close the aforementioned gaps, Moody's said. Passing national family- and maternity-leave policies can iron out differences seen across various state programs, the team said.

"As women assume most of the family caretaking role, dependent care responsibilities that are not subsidized or compensated can pose a significant barrier for women's entry into the workforce," they added.

Childcare costs have also surged in recent years, making the lack of sufficient leave policies even more taxing for women. Married couples with children under age 5 spend 10% of their average monthly income on care for a single child. That sum exceeds the 7% level deemed affordable by the Health and Human Services Department, Moody's said.

There's also legislation that can quickly narrow the gender pay gap. The Paycheck Fairness Act has recently been reintroduced and aims to improve pay transparency at companies. Taking up such legislation and other pay-equity measures can elevate women in the workplace, improve employee retention, and productivity, Moody's said.

Some promising legislation is on the brink of passage. The $1.9 trillion stimulus bill likely to be passed on Wednesday includes a child tax credit for parents to receive up to $3,600 per child. President Joe Biden has indicated he aims to make such a credit permanent. That would revolutionize how the government assists parents and could counter the pressures women feel to pass up work for caretaking.