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Strong employment rates among prime-age Americans are essential for state finances, and recent trends show a significant increase in women’s contributions to the workforce. As more women secure jobs, they are helping to drive economic growth and influence the financial dynamics across the country.
In 2023, a higher percentage of women were employed compared to the 15-year averages from 2008 to 2022, particularly in Arizona, Washington, D.C., and Colorado.Â
While the gap between employed prime-age men and women has narrowed nationally, women still participate in the workforce at lower rates than men.
Changes in employment rates impact state budgets on both ends. Higher employment generally leads to increased tax revenues and reduced demand for public services.Â
Unlike the commonly referenced unemployment rate, the ratio of employed prime-age workers to the overall prime-age population offers a clearer picture of the labor market by factoring in retirement, education choices, and individuals not actively seeking work.
Growth in Women’s Employment Rates
In 2023, three-quarters of women aged 25 to 54 were employed, marking the highest rate on record—up from just 38% in 1955.Â
Arizona led the nation with 76.1% of prime-age women employed, a significant increase from the 67.5% average of the previous 15 years. Washington, D.C., and Colorado also reported gains of over six percentage points, according to Pew Trust.Â
Despite these trends, not all states experienced significant improvements. New Hampshire, Vermont, and Wisconsin saw only slight increases, while Maine and North Dakota’s employment rates for women remained largely unchanged from their long-term averages.
Although the COVID-19 pandemic disrupted employment trends, with a notable drop in the share of working prime-age women in 2020, recovery has varied by state.Â
Nevada, for instance, saw the 13th-largest gain in 2023 but still lagged behind pre-pandemic levels due to impacts on its leisure and hospitality sector, which relies heavily on female workers.
The long-term rise in female employment is largely attributed to increasing education levels among women. According to the Penn Wharton Budget Model, more women aged 25 to 54 hold college degrees now than two decades ago, contributing to higher employment rates.Â
This trend is particularly evident among college-educated mothers, many of whom maintained their jobs during the pandemic thanks to remote work options. Additionally, economic pressures like inflation have driven more women into the workforce.
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Narrowing Employment Gap
The trend of rising female employment also reflects a shrinking gap between men’s and women’s employment rates.Â
In states like Colorado and Arizona, where female employment surged in 2023, the gap narrowed significantly—by 5.4 and 4.5 percentage points, respectively.Â
Nationally, the employment gap between men and women in the prime working age group decreased to 11.2 percentage points, down 1.6 points from 2019.
Implications for State Budgets
The increase in working women has substantial implications for state finances; more employed women broaden the tax base, generating additional income tax revenue and enhancing consumer spending. Higher employment rates can also lower state expenses by reducing reliance on safety-net programs.Â
Engaging more prime-age women in the workforce is essential for addressing potential labor shortages and maintaining robust tax revenues amid an aging population.
To boost female employment, some states are implementing strategies such as expanding child care access, offering paid family leave, and providing flexible work arrangements for public employees.Â
While these initiatives benefit all workers, they particularly support women, who often shoulder more household and childcare responsibilities.
Overall, boosting employment among women is vital for economic growth, and addressing the persistent gap in employment rates indicates that there remains significant potential to tap into.
