September 25, 2005
Women's Careers
Elite Universities and Women's Careers--Posner
An article in the New York Times of September 20 by Louise Story, entitled "Many Women at Elite Colleges Set Career Path to Motherhood," reports the results of surveys and interviews concerning career plans of women at the nation's most prestigious colleges, law schools, and business schools. Although not rigorously empirical, the article confirms--what everyone associated with such institutions has long known--that a vastly higher percentage of female than of male students will drop out of the work force to take care of their children. Some will resume full-time work at some point in the children's maturation; some will work part time; some will not work at all after their children are born, instead devoting their time to family and to civic activities. One survey of Yale alumni found that 90 percent of the male alumni in their 40s were still working, but only 56 percent of the female. A survey of Harvard Business School alumni found that 31 percent of the women who had graduated between 10 and 20 years earlier were no longer working at all, and another 31 percent were working part time.
What appears to be new is that these earlier vintages did not expect to drop out of the workforce at such a high rate (though they did), whereas current students do expect this. That is not surprising, since the current students observe the career paths of their predecessors. So, contrary to the implication of the article, there is no evidence that the drop-out rate will rise.
The article does not discuss the interesting policy issues presented by the disproportionate rate of exit of elite women from the workforce. Nor does it have much to say about why women drop out at the rate they do. The answer to the latter question seems pretty straightforward, however. Since like tend to marry like ("assortative mating"), women who attend elite educational institutions tend to marry men who attend such institutions (and for the further reason that marital search costs are at their minimum when the search is conducted within the same, coeducational institution). Those men have on average high expected incomes, probably higher than the expected incomes even of equally able women who have a full working career. Given diminishing marginal utility of income, a second, smaller income will often increase the welfare of a couple less than will the added household production if the person with the smaller income allocates all or most of her time to household production, freeing up more time for her spouse to work in the market. The reason that in most cases it is indeed the wife (hence my choice of pronoun) rather than the husband who gives up full-time work in favor of household production is not only that the husband is likely to have the higher expected earnings; it is also because, for reasons probably both biological and social, women on average have a greater taste and aptitude for taking care of children, and indeed for nonmarket activities generally, than men do.
But it is at this point that policy questions arise. Even at the current very high tuition rates, there is excess demand for places at the elite colleges and professional schools, as shown by the high ratio of applications to acceptances at those schools. Demand is excess--supply and demand are not in balance--because the colleges and professional schools do not raise tuition to the market-clearing level but instead ration places in their entering classes on the basis (largely) of ability, as proxied by grades, performance on standardized tests, and extracurricular activities. Since women do as well on these measures as men, the student body of an elite educational institution is usually about 50 percent female. Suppose for simplicity that in an entering class at an elite law school of 100 students, split evenly among men and women, 45 of the men but only 30 of the women will have full-time careers in law. Then 5 of the men and 20 of the women will be taking places that would otherwise be occupied by men (and a few women) who would have more productive careers, assuming realistically that the difference in ability between those admitted and those just below the cut off for admission is small. While well-educated mothers contribute more to the human capital of their offspring than mothers who are not well educated, it is doubtful that a woman who graduates from Harvard College and goes on to get a law degree from Yale will be a better mother than one who stopped after graduating from Harvard.
But I have to try to be precise about the meaning of "more productive" in this context. I mean only that if a man and woman of similar ability were competing for a place in the entering class of an elite professional school, the man would (on average) pay more for the place than the woman would; admission would create more "value added" for him than for her.
The principal effect of professional education of women who are not going to have full working careers is to reduce the contribution of professional schools to the output of professional services. Not that the professional education the women who drop out of the workforce receive is worthless; if it were, such women would not enroll. Whether the benefit these women derive consists of satisfying their intellectual curiosity, reducing marital search costs, obtaining an expected income from part-time work, or obtaining a hedge against divorce or other economic misfortune, it will be on average a smaller benefit than the person (usually a man) whose place she took who would have a full working career would obtain from the same education.
The professional schools worry about this phenomenon because the lower the aggregate lifetime incomes of their graduates, the lower the level of alumni donations the schools can expect to receive. (This is one reason medical schools are reluctant to admit applicants who are in their 40s or 50s.) The colleges worry for the same reason. But these particular worries have no significance for the welfare of society as a whole. In contrast, the fact that a significant percentage of places in the best professional schools are being occupied by individuals who are not going to obtain the maximum possible value from such an education is troubling from an overall economic standpoint. Education tends to confer external benefits, that is, benefits that the recipient of the education cannot fully capture in the higher income that the education enables him to obtain after graduation. This is true even of professional education, for while successful lawyers and businessmen command high incomes, those incomes often fall short of the contribution to economic welfare that such professionals make. This is clearest when the lawyer or businessman is an innovator, because producers of intellectual property are rarely able to appropriate the entire social gain from their production. Yet even noninnovative lawyers and businessmen, if successful--perhaps by virtue of the education they received at a top-flight professional school--do not capture their full social product in their income, at least if the income taxes they pay exceed the benefits they receive from government.
Suppose a professional school wanted to correct the labor-market distortion that I have been discussing. (For I am not suggesting that the distortion is so serious as to warrant government intervention.) It would be unlawful discrimination to refuse admission to these schools to all women, for many women will have full working careers and some men will not. It would be rational but impracticable to impose a monetary penalty on the drop-outs (regardless of gender)--making them pay, say, additional tuition retroactively at the very moment that they were giving up a market income. It would also be infeasible to base admission on an individualized determination of whether the applicant was likely to have a full working career.
A better idea, though counterintuitive, might be to raise tuition to all students but couple the raise with a program of rebates for graduates who work full time. For example, they might be rebated 1 percent of their tuition for each year they worked full time. Probably the graduates working full time at good jobs would not take the rebate but instead would convert it into a donation. The real significance of the plan would be the higher tuition, which would discourage applicants who were not planning to have full working careers (including applicants of advanced age and professional graduate students). This would open up places to applicants who will use their professional education more productively; they are the more deserving applicants.
Although women continue to complain about discrimination, sometimes quite justly, the gender-neutral policies that govern admission to the elite professional schools illustrate discrimination in favor of women. Were admission to such schools based on a prediction of the social value of the education offered, fewer women would be admitted.
Comment on Careers of Educated Women-BECKER
Up to the early 1960's, less educated women were more likely to work than highly educated women. The trend sharply reversed during the past several decades, so that now propensity to work and education are positively related for women (as well as men). This is partly because highly educated women have a lower tendency to marry, but the labor force trend by education achievement holds also for married women. The Times article gives the impression that this education-work trend has reversed again in recent years, but although the trend has flattened, there is no evidence of reversal (I had the input of Casey Mulligan and Kevin Murphy, two colleagues who have worked extensively on labor force participation rates of women).
Highly educated men continue to work full time much more than highly educated women, although the difference between these propensities has declined during the past several decades. The Times article and Posner concentrate on different work propensities of male and female graduates of elite professional schools, but the difference between the sexes also holds for graduates of other professional schools. Indeed, the gap in the propensities to work of men and women are probably greater for the lesser schools since female graduates of elite colleges and professional schools are less likely to marry than female graduates of lesser institutions.
As Posner indicates, the main reason for this difference is that women drop out of the labor force, or work only part time, in order to care for their young children. Women rather than men do most of the child-care for various reasons, including biological ones, but I will not go over the different explanations. The division of labor between men and women is discussed systematically in my A Treatise on the Family.
Posner goes on to ask: should admission policies of schools take into account the fact that female graduates of elite (and I would add other professional schools) work full time much less than male graduates? That question was openly discussed at departmental meetings when I was a young faculty member at Columbia University. Even though female students did at least as well in the economics program as male students, the issue was whether graduate fellowships should be less readily given to women since they were then so much less likely to work full time later on. I am proud that many of our female students went on to distinguished careers in economics, but the overall female labor force drop out rate was higher than that of male graduates.
In discussing what professional schools should do with respect to admissions of female applicants, Posner claims a difference between the private interests of professional schools, and the social benefits from graduates-an externality in the language of economists. However, I believe that differences between private and social benefits are small in the two types of professional schools he highlights: business and law schools. They generally get almost no direct support from the federal government, and relatively little from state governments.
Moreover, the private gain to a working lawyer or MBA graduate seems to capture pretty much all the social gain from their work. Posner stresses the potential innovations produced by these graduates, and the taxes they pay. But major innovations from graduates of these schools are surely rare, and taxes affect the incentives of everyone, not only professional school graduates. Moreover, taxes would generally have little affect on the incentive to get additional schooling if say the income tax rate is pretty flat. I believe it is partly because externalities from graduates of law and business schools are so small that little taxpayer money goes into subsidizing these programs, although I should add that economists have had difficulty finding major externalities from most types of education.
Since the market for applicants to professional schools is highly competitive, and since external benefits from the work of their graduates are probably not important (except possibly in medicine), the best policy would seem to be to allow the market to continue to work in determining admissions of male and female applicants. Schools might be recognizing that even though female graduates work less, male students prefer having many female classmates, and visa versa, that female graduates who do not work in the labor force are still active in fund-raising activities for their alma maters, or there may be other gains from having smart female students along with smart males.
To be sure, the market in admissions is regulated since affirmative action pressures in the guise of anti-discrimination policies prevent schools from taking male applicants in preference to female applicants with equal or even better school records. Posner recognizes that the logic of his position implies that a relevant measure of discrimination might also include their propensity to work after graduation.
He takes an anti-"profiling" stance by claiming that using potential work experience along with the school records of male and female applicants in determining admissions would be "offensive""since many women graduates work full time, and some men do not. Yet not all top students at Harvard College do well at Yale Law School, while some students with poor grades would do well if given the opportunity, but surely he would not want to abandon using grades and performance at Harvard or other schools as one of the predictors of their performance at professional schools, and hence as an important determinant of admissions?
Posner would like professional schools to give female graduates (and men too presumably) a bonus if they work and earn a lot. That is hardly more practical than penalizing women and men who drop-out of the labor force. Would graduates who succeed in another field also merit a bonus (or penalty)? Should female graduates who do not work full time in order to care for their children get a bonus if the children do unusually well in school? For these and other reasons I cannot get excited about this proposal.
Given the strong competition among law and business schools, and the absence of significant external benefits, I do not believe we can do better than allowing these professional schools to decide on admissions using college records and special exams as the major guide. For various reasons, even without current anti-discrimination laws, I doubt whether the fraction of female applicants who are admitted to elite and other professional schools would change very much.