Gender Employment Disparities, Financialization, and Profitability Dynamics on the Eve of Italy's Post-2008 Crisis

Abstract

This study explores aggregate profitability in Italy from 1994 to 2008 in its connection with structural change and gender employment disparities. Using decomposition analysis, the study finds that aggregate profit rate declined, but the profit share did not. Male variables – such as earnings, output, employment, and working hours – tended to have more weight than female ones in explaining aggregate outcomes. Structural change also played a major role, as the economy specialized in sectors with falling real wages and wage shares, especially the financial sector and construction. Further falls in the wage share and widening wage gaps may not guarantee a rise in profitability. This result entails that “neo-mercantilist” approaches to solve the crisis might only prepare the next crisis, while a coordinated expansion of demand could be more successful. Moreover, gender issues should not be neglected in terms of favoring women's employment and entrepreneurship.

Keywords:

• Decomposition
• earnings differential
• economics of gender
• feminization of the labor force
• gender wage gap

JEL Codes::

• B50
• E25
• J16

NOTES ON CONTRIBUTORS

Alice Tescari holds a BA in International Trade and an MA in Economics of International Firms and Markets from the University of Verona. After working in various positions in the private sector, she is currently Sales and Marketing Assistant at Language in Group, London, UK.

Andrea Vaona is Assistant Professor at the University of Verona and part-time Researcher at the Kiel Institute for the World Economy. He studied economics at the universities of Trento, Durham, and Turin. He holds a PhD in Economics from Birkbeck College. He was Research Fellow at American University, Washington, DC. He has held various positions at different universities in Europe: Birkbeck College, University College of London, University of Trento, University of Lugano, and University of Pavia. He has published widely in journals such as International Review of Applied Economics, Journal of Post Keynesian Economics, Regional Studies, and Structural Change and Economic Dynamics.

ACKNOWLEDGMENTS

The authors thank Ajit Zacharias, an associate editor, and three anonymous referees for insightful comments. The usual disclaimer applies.

Notes

1 The choice of our period of observation is often limited to 2005 by the availability of data on the unadjusted gender wage gap. However, note that the years 1994 and 2005 were similar regarding their business cycle position as the economy was recovering from economic recessions. Therefore we focused on those years for decomposition analyses in order to highlight long-term trends. We use the phrasing “prolonged recession” as a synonym for depression.

2 For a similar point of view, see also Annamaria Simonazzi (2012).

3 Studies on the dynamics of the aggregate profit rate have been recently extensively reviewed in Vaona (2011).

4 Philip Arestis, Aurelie Charles, and Giuseppe Fontana (2013) also emphasize the importance of gender and race in recent US structural change, though they use different methods. Their main finding is that financialization benefited white men most, by securing them managerial and well-paid positions in the financial sector.

5 The Italian national statistical office complies with the 1995 European System of National Accounts (ISTAT 2011), which is characterized by an effort to distinguish between changes in prices and volumes. However, for financial services, this distinction can be arbitrary (Eurostat 1996).

6 For theoretical arguments about properly measuring profit rates, see, for instance, Dennis C. Mueller (1990), Anwar Shaikh (1999), and Gérard Duménil and Dominique Lévy (2002a, 2002b). Wolff (2003) also finds similar trends regarding gross and net profit rates for the US.

7 Eurostat offers this definition: “The unadjusted Gender Pay Gap (GPG) represents the difference between average gross hourly earnings of male paid employees and of female paid employees as a percentage of average gross hourly earnings of male paid employees.” GPG data are based on the Structure of Earnings Survey (SES). They are released about twelve months after the end of the reference period.

8 We consider the same sectors used to compute the aggregate profit rate, namely sectors from A to K of the revision 1.1 of NACE (Nomenclature des Activités Économiques dans la Communauté Européenne). The acronym of the specific Eurostat series is “lfsa_ewhuna.”

9 The adjusted gender wage gap did not have completely different orders of magnitude and dynamics than the unadjusted one (see Silvia Dal Prete 2012).

10 Mita Marra (2012) provides further data on labor market issues by gender in Italy.

11 Zacharias and Mahoney (2009) also provide counterfactual analyses by keeping the gender wage gap and the share of women in total working hours at their initial level. Alice Tescari (2012) performs similar exercises; however, since these variables did not markedly change over the period of observation, actual results are not dramatically different from counterfactual ones.

12 A similar pattern emerges also when considering the rate of surplus value instead of the wage share of income; see Table A1 in Appendix 1. Therefore, our results would not seem to be biased by possible measurement errors of the output of financial activities.

13 The decrease in labor costs in the financial sector was common to major European countries during the period under analysis (ABI 2004).