The Disparate Impact of Uncertainty Shocks on Labor Market Outcomes for Men and Women

This study examines whether innovations to macroeconomic uncertainty affect labor market outcomes for men and women differently. Three measures of uncertainty are utilized in turn within a vector autoregression (VAR) and the dynamic responses of various labor market ratios to uncertainty shocks are analyzed. These labor market ratios are the ratio of men’s to women’s median earnings, the ratio of men’s to women’s labor force participation, and the ratio of men’s to women’s unemployment. Findings reveal that increases in macroeconomic uncertainty lead to recessionary outcomes, with the unemployment rate for men rising higher than that for women. There is evidence that men’s labor force participation declines more than women’s during such shocks, but the ratio of real earnings is largely unchanged. When uncertainty is proxied by stock market volatility, most of the increase in men’s unemployment relative to women’s is due to uncertainty’s adverse impact on real GDP growth. When uncertainty is related to economic policy uncertainty, however, it is uncertainty itself that drives the higher relative unemployment rate for men. Halting the estimation at 2019Q4 and generating out of sample forecasts show that the COVID-19 recession reversed this trend, as women were more disproportionately affected than men.