Women, War and Wages: The Effect of Female Labor Supply on the Wage Structure at Mid-Century

Abstract

This paper investigates the effects of increased female labor supply on the labor market. To identify a source of exogenous variation in female labor supply, we exploit differences in female labor force participation before and after WWII. The War drew many women into the labor force as men left for overseas. The extent of mobilization for the War was not uniform across states, however. While in some states almost 55 percent of eligible males exited the labor market for military service, in other states the mobilization rate was just over 40 percent. We find that in states with greater mobilization of men, women worked substantially more in the immediate aftermath of the War and in 1950, though not in 1940. We interpret the differential growth in female labor force participation between 1940 and 1950 as corresponding to shifts in women's labor supply induced by the War, and use state mobilization rates as an instrument to study the consequences of greater female labor supply for the labor market. We find that greater female labor supply: (1) Leads to lower female wages; a 10 percent increase in female employment reduces female earnings by 7 to 11 percent; (2) Leads to lower male wages; a 10 percent increase in female employment reduces male earnings by 4 to 6 percent; (3) Increases the college premium and wage inequality among males generally. Our findings suggest that in the aftermath of WWII, women were closer substitutes to high school graduate and relatively low-skill males, but not to those with less than high school and the lowest skills.