Women’s overrepresentation in the informal economy is not surprising, given their disproportionate presence in low-quality jobs in the formal labor market. While headline unemployment rates may seem favorable for women, with the rate for women close to or lower than the rate for men in recent decades, they fail to capture the true extent of gender disparity in job market outcomes. According to LISEP’s metrics, the female TRU at 26.8% in October 2023 is one of the lowest rates recorded for women since 1995. However, it is still 7.8 percentage points higher than the male TRU at 19.0%. This discrepancy highlights the challenges women face in accessing decent and formal employment.
TRU Reveals Gender Disparities in Functional Unemployment Masked by BLS Stats
January 1995–October 2023
Moreover, LISEP’s True Weekly Earnings (TWE) metric, which considers median wages for the entire workforce instead of just full-time workers, reveals a significant wage gap. The median female worker earns 79 cents for every dollar a male worker makes, wider than the headline earnings gap of 83 cents on the dollar. This disparity exposes the pervasive gender inequality driving many women to seek employment in the informal sector.
True Weekly Earnings by Sex
Women are more likely to earn near-poverty wages and to settle for part-time jobs when seeking full-time employment. A 2021 study finds women have “50% higher odds relative to men of working part-time involuntarily” and individuals in female-dominated occupations such as childcare workers, nurses or teachers are much more likely to involuntarily work part-time hours than individuals in male-dominated occupations such as engineers or manufacturing workers.2 LISEP’s analysis found those working part-time for economic reasons, including because of problems finding childcare, made up 16.5% of informal workers, compared to 9.9% of the overall population, a 67% difference.
Female-dominated, low-paying, part-time occupations are overrepresented among informal workers who also have a formal job. For example, low wages and underemployment drive essential care workers, such as nurses and childcare workers, to the informal economy. Despite having college degrees and earning more than the national median, education workers such as teachers or librarians, 73% of whom are women, disproportionately turn to the informal economy.3 They are more likely to work part-time involuntarily and receive a wage penalty compared to other college-educated workers, earning 26.4% less in 2022.4 Personal Care and Service and Healthcare Support occupations such as hairdressers and home health aides, making up 3.5% and 2.3% of all employment during the period, respectively, are both female-dominated occupations that pay at least 30% less than the national median wage. However, they comprise 10.9% and 3.2% of informal workers, respectively.
Female-dominated Occupations with Low Wages or High Rates of Involuntary Part-time Are Overrepresented Among Informal Workers
Women’s disproportionate participation in the informal economy can also be explained by the greater burden of unpaid household responsibilities they often bear. Analysis from Pew Research Center shows mothers aged 25 to 44 have lower labor force participation rates and work fewer hours than childless women of the same age, while fathers tend to work more and for longer periods than their childless peers.5 In 2021, working mothers with children under 18 earned just 61.7 cents for every dollar a father made. Much wider than the overall gender wage gap, this difference highlights both the motherhood penalty and the fatherhood premium occurring in the labor market.6
Given the lack of affordable childcare options in the United States, many women forego formal employment where they cannot generate enough income to cover childcare expenses.7 The sporadic and entrepreneurial nature of informal work allows caregivers to earn additional income while still fulfilling their family obligations. This can take various forms, such as taking on gig work for a few hours per week, selling goods as street vendors while accompanied by their children, or providing “off-the-books” group childcare services.
The International Labour Organization documents that mothers globally participate more than fathers in the informal economy due to childcare responsibilities, especially in countries without support for workers’ family responsibilities.8 In the United States, mothers are much more likely than fathers to work in jobs that resemble informal employment, with irregular schedules, low pay, and lack of protections.9 This type of nonstandard work can help them better balance family responsibilities than traditional jobs with inflexible schedules but better pay.10
Examining the informal economy sheds light on the systemic gender inequalities that persist in all types of modern work. The TRU focuses the picture, helping us understand the challenges faced by these workers better. Assessing the quality of formal job opportunities reveals that low wages and underemployment drive these workers to the informal sector. Specifically, the wage and occupation disadvantages women experience in the formal job market contribute to their overrepresentation as informal workers. And given low earnings, informal work is far from offsetting the significant gender disparities in the labor market.