In labor market downturns, women hired into leadership decreases

After observing globally the slow, but constant, progress in the share of women hired into new leadership roles from 2016 until 2022, we’ve seen that trend has now halted or reversed its growth. In a recent working paper, my colleague Matthew Baird and I examine the relationship between labor market conditions and the proportion of women hired into Director-level or above roles, revealing eye-opening insights for organizations and policymakers alike.

Share of women hired into leadership roles. The 2024 datapoint only considers January data.


Our analysis indicates that fluctuations in labor market tightness (LMT), defined as the ratio of job postings to active applicants, play a pivotal role in shaping the gender composition of leadership hires. The figure below visually suggests that, when labor markets weaken, with fewer job opportunities available per applicant (lowering LMT), there is a decrease in the share of women entering leadership positions. For example, in Australia, as the ratio between job postings and applicants (LMT) increases from around 0.2 in early 2020 to 0.6 in early 2022, similarly, the share of women hired into leadership also steeply increases from 36% to 41% in the same period. Our statistical analysis quantifies this relationship, revealing that a transition from a robust labor market with three job postings per every two applicants to a slack market with only one posting per two applicants correlates with a 2% decline in the representation of women in leadership roles. This decline is equivalent to reversing three years of progress in a stable labor market environment, explaining the recent downturn in the share of leadership hires down above.

Share of women hired into leadership vs. labor market tightness (LMT) by country

Interestingly, industries with a higher share of women in the workforce exhibit greater resilience to fluctuations in labor market conditions concerning the hiring of women into leadership roles. This suggests that industries with a more balanced gender composition may be less susceptible to cyclical variations in gender dynamics in leadership hires. This underscores the importance of targeted interventions to address gender disparities at all levels, not just at senior leadership.

Crucially, this decline in female leadership representation during downturns is not attributable to a decrease in female applicants to those leadership positions. On the contrary, women are more inclined to apply for leadership positions during economic downturns relative to men, particularly in industries traditionally where women are the majority of the workforce. This underscores the significance of examining the actions and decisions of hirers in shaping hiring outcomes. We could conclude that this shift in hiring more men than women is influenced by pressure on companies in an economic downturn that prompts them to revert to more inequitable hiring practices. 

To address and mitigate adverse trends, policies aimed at increasing the representation of women in leadership roles should focus on enhancing the practices and decision making of hirers, rather than solely on increasing the number of female applicants. One such strategy is adopting skills-first hiring, rather than relying on previously-held titles or educational background. Our previous research found that in occupations where women are underrepresented, such as in leadership, hiring based on skills increases the talent pool for women by 24% more than for men. Further, by implementing strategies that promote gender diversity at all levels of an organization through improved internal mobility and flexible working, companies can foster more inclusive and resilient workplaces. While prioritizing gender diversity should be an evergreen goal, our research underscores its increased importance during times of economic downturn, so that fluctuations in the labor market do not reverse these hard-earned gains.

Methodology:

Gender Classification: Gender identity isn’t binary, and we recognize that some LinkedIn members identify beyond the traditional gender constructs of “man” and “woman.” If not explicitly self-identified, we have inferred the gender of members included in this analysis either by the pronouns used on their LinkedIn profiles or inferred on the basis of first name. Members whose gender could not be inferred as either man or woman were excluded from this analysis.

Share of Women Hired in Leadership: The share of women hired into leadership roles is measured by calculating the share of women out of all the members who started a new occupation that month within that country and industry with a title that can be attributed to a seniority of Director, VP, Partner, or C-Suite, for each given month.

Share of leadership applicants who are women:  An application is counted when a member either completes the application process on the LinkedIn platform, or clicks the “Apply” button that redirects to an application form outside the platform. We calculate the monthly share of applications coming from members by inferred gender.

Labor Market Tightness: Tightness is measured as the number of active job openings on LinkedIn divided by the total number of applicants in a given month. We measure active job openings as the stock of open job positions on the last business day of the month multiplied by an index of recruiting intensity. The idea behind recruiting intensity is to measure how actively employers are looking to fill vacant jobs.