George Magnus, senior economic advisor at UBS has always been fond of demographics. In fact, he's always warned the world about the dangerous side-effects of an ageing society, with specific reference to the case of Japan. As he reminds us in a note on Wednesday: The suggestion of causality running from demographic tipping points to major economic crisis is, of course, provocative. But even if there are more proximate causes and explanations, the fingerprints of demographics are indisputable. All periods of rapid economic growth, credit expansion, technological advance and financial euphoria are invariably followed by a sombre hangover. Japan blazed this trail a little earlier, but other Western economies followed in the 1990s and 2000s. These trends were unquestionably driven in part by the so-called demographic dividend, or the phase in which the baby boomers reached the age range associated with a change in savings and consumption behaviour. The demographic dividend has now turned into a drag. But Magnus now takes a closer look at the role of women are playing in that ageing demographic story. And one chart from his paper stands out more than most. It's this one: This leaves the reader with the distinct impression that the rising participation of women in the US workforce was helping to counteract an opposite (stagnant or falling) trend in the male workforce until about 2001, when suddenly both female and male participation rates began to stagnate or descend. In 2008 and 2009, the decline in the combined participation rates accelerated. Now, the obvious interpretation is that this decline is linked to boomers using the financial crisis as a good excuse to exit the workforce permanently. But, says Magnus, that may be too simplistic an interpretation. An important consideration is both the role of women and technology. He notes, for example that demography and technology have always been important interlinked drivers of the decline in both categories of people. When it comes to women, however, the interesting thing is that the US experience is fairly contradictory to what's happening in the rest of the world, where female participation is still rising - with the exception of Japan: One of the reasons for this, Magnus suggests, may be linked to the fact that it's much harder to be a working mum both in the United States (and Japan): The US position seems to have faltered relative to Europe, for example, because of relative deficiencies in paid parental leave, benefits and protection against discrimination in part-time work, and the availability and affordability of child care services. These weaknesses have become increasingly troublesome in the light of changes in household structures. Since 1960, for example, the proportion of US households with children under the age of 18 years and where the mother was the sole or principal earner, rose from 11% to 40%. In this universe of almost 13 million households, with a median income of $57,100, about 37% comprised married mothers earning more than their spouses and with a median income of $80,000. The remaining 63% were single mothers with a median income of $23,000. Worth noting, while the US female participation rate was the sixth highest among 22 industrial countries in 1990, by 2010 it had slipped to the fifth from bottom, says Magnus. Juxtapose that with Japan, where the overall female participation rate is even lower, especially relative to the overall female population. Japan's female participation rate is strongly overshadowed by the male participation rate of 83%, and by the exceptionally high participation rate of older workers. For example, in the 55-64 year old age group, Japan's participation rate is over 68%, above the US and Germany at about 64% and 58%, respectively, and well in excess of the OECD average of 57.8%. Many European countries have rates of about 50% or below, including Italy at just below 40%. So, if Japan has a demographic vein to tap, it is women. As Magnus also notes, low participation in Japan derives from weak or tenuous links between Japanese women and the labour force, some of which are related to traditional Japanese social values: Only a third of Japanese mothers, for example, are in the labour force, there is a 70% drop-out rate of women from the labour force after their first (or only) child, and those that want to and succeed in returning to work tend to take up lower paying, non-regular employment. Otherwise the weak links span a range of issues that are in keeping with the experience of some other countries, namely, life-work balance choices, the unfavourable tax treatment of second earners, and importantly, the limited opportunities and high costs of child care. Public spending on child care and early education services in Japan lies in the bottom quartile of OECD countries. More detail on this in a post coming later by Cardiff. The real challenge for Abenomics, and arguably the US government as well, is therefore getting more of the female population to participate in the labour economy, and not have to give up motherhood in the process of doing so. This could most easily be done by having the government provide affordable child care services and support flexible working arrangements and hours, which remain a rarity in Japanese employment practices. While Magnus doesn't explicitly conclude this, it does seem that one of the key problems here is that female labour participation increasingly comes at the cost of being a mother. But on that basis, one might also conclude that a post-crisis decline in the female participation rate should encourage more children to be born? Unfortunately, as noted above, that's unlikely if the bulk of the permanently withdrawn female labour is from the boomer generation. And what to make of the rising female participation elsewhere then? One interesting theory in this regard comes from Claudia Olivetti at Boston University, who speculates in a paper out this month that this may have something to do with the economies" transition towards a knowledge and service-based economy, which gives female labour participants something of an advantage: The idea is that production of goods is relatively intensive in the use of `brawn" while the production of services is relatively intensive in the use of `brain." Since men and women may have different endowments of these factors, with women having a comparative advantage in `brain" activities, the historical growth in the service sector may impact female participation in the labor market. Related links: Robots, China and demographics - FT Alphaville