After taking an unprecedented blow at the onset of the crisis, prime-aged women saw their labour force participation rate not only recover but soar to a record 84 percent in 2021. And as COVID-19 shone a brighter light on labour market inequities, Ottawa took a historic step forward on women's behalf: establishing the Canada-wide Early Learning and Childcare Plan in cooperation with the provinces and territories.

The plan—which in many ways mirrors the Quebec Family Policy introduced in 1997—is poised to push Canada further toward closing labour force participation gaps. But as the Quebec experience shows, it won't happen overnight. It took eight years for the women's prime-age labour force participation in Quebec to rise 7.3 percentage points—enough to match the Canadian average of 81.5 percent, before ultimately surpassing it. And in that province and across the country, a stubborn wage gap and chronic underrepresentation of women in executive-level jobs persists.

As we pursue our post-pandemic recovery, closing these gaps continues to stand as an unparalleled economic opportunity. If women's wages were equal to men's in comparable jobs, we could see an $18 billion boost to Canadian household income, an increase of 1.5 percent.

But a return to business as usual won't be enough to get us there. Even as Ottawa's affordable childcare policy is making its mark on the economy, a range of longstanding issues merit our ongoing attention. These include creating more opportunities for upskilling, recruiting more women into the skilled trades and building pathways for women into senior roles. In addition,

Canada should explore different approaches to lowering the financial burden of parental leave and building more parity between maternity and paternity leave.

Women continue to earn less and occupy fewer senior leadership positions

After plummeting to a three-decade low at the onset of the crisis, women's labour force participation rate rebounded just as sharply.

Still, there remains a nearly eight percentage point disparity between working-age men's and women's participation rates—a gap that's twice as wide for parents with young children. And while more women are entering higher-paying industries, the gap between men's and women's pay remains virtually unchanged from before the pandemic. This wage differential is largely driven by mothers of prime working age (ages 25-54). Women with young children under age 6 earned 87 cents for every dollar earned by fathers with children of the same age.

Worryingly, this disparity widens as kids get older. Women with children between the ages of six and 12 earned 82 cents for every dollar earned by men with children in the same age group. And for women, the earnings penalty (or 'Baby Penalty') spans well past a child's first few years of life. By contrast, for men, having children is associated with an increase in earnings.

Though narrower, a gap for women without children also exists. This group earned 93 cents for every dollar earned by men without children.

Throughout the pandemic, more women have entered higher-paying industries such as finance, insurance, real estate and professional, scientific, and technical services. But since more men have entered these industries too, women's representation hasn't moved much. Women still account for only 43 percent of those in professional, scientific, and technical services (finance, insurance, and real estate are more balanced). And we have yet to see women move the needle when it comes to representation in senior leadership positions, particularly in private sector industries.

Today, women occupy just under one-third of senior leadership roles overall, a figure that has not moved much since the late 90s.

Affordable childcare is critical, but not a silver bullet

Affordable childcare options alongside greater workplace flexibility have been shown to boost women's labour force participation. Before the Family Policy was enacted in Quebec, women's participation in the labour market was well below the Canadian average at 74.2 percent. But by the early 2000s, it surpassed Canadian levels. And today, the gap between mothers' and fathers' participation rates in Quebec is much narrower than in the rest of the country. In 2021, women's participation rate in Quebec stood at 86.9 percent (for women of prime working age) compared to 83.9 percent nationally.Nationwide affordable childcare is a powerful step toward closing wage and participation gaps. The challenge now is to seize on the momentum it has created by identifying and acting on what we need to do next. Indeed, even alongside pay equity legislation, the wage gap in Quebec has yet to close—although it is certainly narrower than outside of the province. In Quebec, women between the ages of 25 and 54 earn 92 cents for every dollar earned by men. Outside of the province, the gap is 87 cents.

And parents aren't the only group encountering adverse labour market outcomes. An 8.1 percentage point gap exists between men's and women's participation rates among visible minorities. This gap is 6.3 percentage points for those that are not Indigenous and are not a visible minority. At the same time, mature women (aged 55 and older) account for a disproportionate share of long-term unemployment. And women who are lower-income earners continue to bear the brunt of job losses, specifically those in high-contact services. While women in higher earnings brackets who own a greater share of assets have benefited from surging residential real estate values and higher asset prices, those in lower-income positions will face higher debt servicing costs as interest rates rise.

Women well-placed to make further gains as they emerge from the pandemic

Women are emerging from the pandemic in a favourable position. To begin with, they are more educated than ever before, with a greater proportion of young women holding university degrees than their male peers. Half of women aged 25 to 29 have at least a bachelor's degree (up from 25 percent in 1997), compared to 36 percent of men in the same age bracket. And these women are finding opportunities in high-skill industries. As of 2021, women represented 57 percent of professional occupations in business and finance, up from 47 percent in 1997. What's more, 50 percent of women were able to work from home during the pandemic compared to 35 percent of men. A greater share of highly-educated women participating in the workforce signals a larger talent pool for senior positions in the future.

If the newfound flexibility introduced by the pandemic continues, women will be better able to balance their careers alongside caregiving responsibilities. Meantime, the federal government's affordable childcare policy is poised to reduce childcare fees for the average family by 50 percent by the end of 2022. Over time, the policy could also boost GDP by $30 billion annually, if the national female-to-male labour force participation gap converges with Quebec's. These factors bode well for women's participation to rise in the coming decade.

More tools are needed to close gaps in wage and labour force participation rates

Despite significant gains, we'll need to do more to level the playing field for women. Exploring ways to build greater parity between maternity and paternity leave would help mitigate the Baby Penalty. And reducing the financial burden of taking parental leave could encourage more fathers to take advantage of this time.

With skilled tradespeople in severe short supply throughout the Canadian economy, finding ways to recruit more women  into these careers is now urgent. Though the share of women entering male-dominated trades has increased over the last decade, it was still only five percent of apprenticeship registrations in 2019. Policymakers and industry leaders can support women by promoting the trades and working to eliminate stigmas and preconceived ideas about them. Expanded childcare options, with flexible hours, are also critical to women in these careers.

Meantime, policies that remove obstacles to adult education by creating more flexible opportunities for women (and particularly mothers) to upgrade skills are key to creating a pipeline of female talent to fill senior and managerial roles. And since Canadian women in rural areas are the least likely  to have post-secondary degrees, policies to promote online and micro-credentialing will be needed too.

Training our focus on these issues today could establish the pandemic as a turning point for Canadian women.

How other countries are pursuing labour force equity for women

In Sweden, parents are entitled to 480 days of parental leave per child. To encourage more fathers to take the time, shift cultural norms and promote a more equal distribution of unpaid household work, 90 days are reserved for each parent. These cannot be transferred and are forfeited if left unused. A 2019 study showed approximately 90 percent of eligible Swedish fathers claimed paternity leave. And Sweden's labour force participation rate for women is one of the highest in the OECD (and six percent above Canada's). The gender wage gap is narrower too—women's average wages were seven percent below those of men in 2020 (compared to OECD average of 12.5 percent).

In Iceland—where gender and wage gaps are also among the narrowest in the world—parents are paid roughly 80percent of average salaries during significant portions of parental leave. In Norway, the figure is even higher. This increases the incentive for higher earners (often fathers) to take leave and reduces the overall burden on the family. As the pandemic heightens concerns about demographic challenges, looming declines in populations and shrinking birth rates, these Nordic countries all experienced an increase in birth rates—an outcome attributed partly to parenting policies. In Canada, parents are paid 55 percent of their salaries to a maximum amount of $638 per week. The Canadian crude birth rate fell during the pandemic.

As RBC’s Deputy Chief Economist, Dawn Desjardins contributes to the macroeconomic and interest rate forecasts for Canada and the U.S. Before joining RBC, Dawn worked as a reporter for Bloomberg Financial News in Toronto covering the Canadian bond and currency markets. She was also the Canadian bond market strategist for a major U.S. bank for ten years. Dawn is a graduate of the University of Toronto.

Carrie Freestone is an economist at RBC. She provides labour market analysis, and is a member of the regional analysis group, contributing to the provincial macro outlook.

Rannella Billy-Ochieng’ joined the RBC Economics team in 2017 as an economist. She holds a Bachelor of Science (Honours) in Economics & Accounting from University of the West Indies, Master of Research in Money, and Banking & Finance from Lancaster University and a Master of Arts in Economics from the University of Guelph.

Naomi Powell is the Managing Editor of Economics and Thought Leadership at RBC. Prior to joining RBC, she worked as a business journalist in Canada and Europe, most recently reporting on international trade and economics for the Financial Post.