Future Treasury Secretary Janet Yellen Faces COVID-Induced Economic Crisis

The selection of Janet Yellen as the first woman to serve at the helm of Treasury and oversee the biggest economy in the world is noteworthy. But Yellen’s appointment is in keeping with research that shows women are especially likely to be selected for leadership in the middle of crises. Is she being set up to fail?

Future Treasury Secretary Janet Yellen Faces COVID-Induced Economic Crisis
Janet Yellen, May 2015. (Paul Morigi / Brookings Institution)

Yesterday President-Elect Joe Biden announced that Janet Yellen, former chief of the Federal Reserve, will be the first woman secretary of the Treasury.

This is a major victory for women. In the United States, the Treasury secretary is widely regarded as one of the most important Cabinet posts, and it’s one of three remaining Cabinet positions that have been exclusively held by men (alongside Defense and Veterans Affairs). The selection of Yellen to serve at the helm of Treasury is especially noteworthy—both because the U.S. is the biggest economy in the world, and because she will be expected to navigate a major economic crisis.

Globally, Women Remain Excluded from Finance Ministries

Though the U.S. often lags behind other countries with respect to women’s representation, the fact that we’ve never had a woman in the secretary of the Treasury post is consistent with global trends. Worldwide, women have held similar posts in only about a quarter of countries. And, our research shows that women rarely get this Cabinet position in large economies

With Biden’s selection of Yellen for the Treasury secretary, the U.S. breaks with this trend—joining France and Canada as the only G7 countries to ever allow a woman to oversee the economy. This is a rare instance of the U.S. leading the way with respect to women’s representation.

Women Become Finance Ministers in Times of Crisis

In terms of thinking about where women are appointed to head the finance ministry, Yellen’s nomination is unique: Few women oversee major economies. But, in terms of when women are selected for these roles, her nomination is consistent with broader patterns. 

Our research finds that globally, women are especially likely to be selected for this type of Cabinet post during financial and corruption crises. Since women are stereotyped as more risk averse, chief executives looking to restore confidence in the economy may appoint a woman to signal that a cautious leader is at the helm. This is especially important in the wake of a financial crisis. 

In this regard, Yellen’s appointment during perhaps the “worst economic crisis of our lifetimes” is consistent with broader global trends.  And, so far she seems to be restoring faith in the economy. The stock market on Monday in response to news of Yellen’s selection.

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Is Yellen Being Set Up to Fail?

Given that worldwide women are more likely to be appointed to economic posts during precarious times, such as financial crises, is Yellen being set up to fail? Being nominated during a crisis does shorten finance ministers’ time in office.  But, it’s not a gendered effect. Our work suggests that the women who get these finance posts serve for as long as men. 

Future Treasury Secretary Janet Yellen Faces COVID-Induced Economic Crisis
Then-Federal Reserve Chairman Janet Yellen testifies before the House Finance Committee Tuesday, Feb. 11, 2014 in D.C. at the Rayburn House Office Building. (Sharon Farmer / sfphotoworks)

This may be because the women who are able to shatter this glass ceiling—like many women in politics more generally—are exceptionally well-qualified for the post. And, Yellen certainly fits that bill. Her extensive qualifications include a Ph.D. in economics from Yale University, and experience as chair of both the Federal Reserve and also the White House Council of Economic Advisers. 

Yellen may end up serving for less time in the post than her male predecessors. But, that’s more likely to be attributable to the circumstances under which she came into office, rather than the fact that she’s a woman. 

Do Women in Cabinets Govern Differently? 

Of course, it’s not just who Yellen is that matters, but what she will do with the position. Does the fact that Yellen is a woman matter for her financial policies?  

The research on whether women Cabinet appointees behave differently than their male counterparts is promising. Some scholars find that women’s presence does seem to matter—especially with respect to government spending on family benefits and female-friendly labor policy. And, women’s presence in treasury posts is associated with more gender equal tariff policies.  

With Yellen, we don’t expect major departures from the Democratic party status quo, since she is a previous Clinton and Obama appointee. But, we might observe more subtle shifts, as her nomination brings new perspectives and approaches.

In fact, Yellen herself reasoned that women’s exclusion from top economic positions “likely constrains the range of issues addressed and limits our ability to understand familiar issues from new and innovative perspectives.” Given that women experience the economy differently than men, Yellen may be poised to make innovative contributions during this rapidly evolving economic climate.

Indeed, Yellen’s unique perspective is especially important in light of our current economic downturn. Financial crises have gendered and racial implications, and their consequences are felt differently by men and women. In particular, women and people of color are more likely to be adversely affected by growing economic inequality. For this reason, diversity in leadership is especially important as the Biden administration tries to shepherd America’s economy out of the pandemic. This is a difficult task, particularly in a time of hyper-partisanship and a likely divided government.

Yellen is facing significant constraints.  But, her background and qualifications—combined with her distinct point of view—make her the right woman, and the right person, for the job.

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About and

Tiffany D. Barnes is an associate professor of political science at the University of Kentucky. You can learn more about her at her website or follow her on Twitter at @tiffanydbarnes.
Diana Z. O’Brien is the Albert Thomas associate professor of political science at Rice University. You can learn more about her at her website or follow her on Twitter at @dianazobrien.