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Parenthood Impact on Wages: Economics Study

Explore research on parenthood's effect on wages, leave-taking, and family-friendly policies. Data analysis and methodology explained. Learn about family gap and work-life balance.

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Parenthood Impact on Wages: Economics Study

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  1. Parents in the labour market March 18, 2009 Economics of the Family Helena Skyt Nielsen, Aarhus University A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  2. Outline (1) Tour through this field of research • The effect of parenthood on wages • Skipper and Simonsen (2006) • The effect of leave-taking on wages • Albrecht et al. (1999) • What drives the family-gap for women? • Nielsen, Verner and Simonsen (2004) • Family-friendly policies to reduce the family-gap • Datta Gupta, Verner and Smith (2008) • Simonsen (2008) • Nielsen (2009) (2) More details about • Causes and consequences of fathers’ child leave • Nielsen (2009) A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  3. The effect of parenthood on wages • Simonsen and Skipper (2006) • Data • Use a 5%-sample of the Danish population • Select 20-40 year-old men and women • Methodology: propensity score matching • Main Assumptions • CIA - Conditional independence • (distr.of outcome had he/she not had children=non-parent w/ same obs.char.) • P<1 – ’Common support’ • (prob to have a child<1) • Result • Average treatment effect on the treated • An estimate of the net effect of parenthood • …. incl the effect of childbearing on leave-taking, occupation etc A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  4. The effect of parenthood on wages • The propensity score should include variables influencing • Wages • Selection into parenthood • The propensity score depends on • Age • Detailed education categories • Education of the parents (in particular the mother) • The propensity score predicts parenthood quite well A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  5. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  6. The effect of parenthood on wages • Result • Mothers earn 7.4% less than non-mothers • Fathers earn 6.0% more than non-fathers • Interpretation • Mothers (!) • …take long spells of leave in connection with child birth • …spend more time per day in home production • Fathers (?) • …providers work more? Work harder? Specialize in market work? • …providers have better outside opportunities? A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  7. The effect of leave-taking on wages • Albrecht et al. (1999) • Swedish data is well suited • Month-by-month event histories -> distinguish time out by reason • Parental leave -> both men and women take leave in Sweden • Coupled with employer reported wages • Data • Survey based information about cohorts 1949,54,59,64,69 • Information about 1600 women/600 men as of 1991/92. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  8. The effect of leave-taking on wages • Albrecht et al. (1999) • Hypothesis: A negative effect of leave-taking is not only explained by skill depreciation, if • … different types of time out of work have different effects • … effects vary by gender • Methodology • Cross section estimation • Panel data estimations (to correct for omitted variable bias) • Results • The percentage reduction in wages as a consequence of X months of time out for reason Y • Coefficient estimates for the parameters of main interest… A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  9. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  10. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  11. The effect of leave-taking on wages • Results • Cross section • Different types of leave have different effects • Effects vary by gender • Panel data • Effects vary by gender • Interpretation • Consistent with a signaling game • Men – separating equilibrium • Women – pooling equilibrium A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  12. What drives the family-gap? • Nielsen, Simonsen, and Verner (2004) • Data • Like Simonsen and Skipper (2006) • Hypotheses • The family-gap is larger in the non family-friendly sector than in the family-friendly sector • Women who expect to have children self-select into the family-friendly sector to avoid the penalty A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  13. What drives the family-gap? • Methodology • Endogenous switching model A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  14. What drives the family-gap? • Channels • Experience foregone • actual experience, actual experience squared • Child penalty • mother dummy (plus interactions w/education) • Human capital depreciation • Duration of leave • Catch-up • Indicator variables for time since last birth-related leave A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  15. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  16. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  17. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  18. What drives the family-gap? • Conclusion • Family-friendly policies drive the family-gap • Temporary family-gap in the public sector • Permanent family-gap in the private sector (not realised) • Who self-selects into the family-friendly sector? • Selection on observables (into the public sector) • Women who plan to become mothers • Women who would have been penalised much from having children in the private sector (may change sector later!) • Selection on unobservables • Postive selection • Sector choice based on comparative advantages • If the sector selection is ignored, the estimated family-gap is biased (overestimated) A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  19. Family-friendly policies to reduce the family-gap • Datta-Gupta, Verner and Smith (2008) • Nordic countries’ family-friendly policies • creates a ’system-based glass ceiling’ • no evidence of trade-off between child/family welfare and long leave • Family-friendly policies • Long maternity leave periods • High compensation rates • Job protection • Subsidized child care • Consequences • Positive effects • High LFP of women • Negative ’boomerang effects’ • Stagnation of the gender wage gap (widening at the top of the distribution) • Gender segregation • More detailed empirical analyses… A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  20. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  21. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  22. Family-friendly policies to reduce the family-gap • Simonsen (2008) • Purpose • Analyze the effect of • price of high quality daycare • guaranteed access to daycare • On female employment 5-15 months after birth • Data • 10% of Danish women, year 2001. • Income > ceiling for meanstesting of child care subsidy • Methodology • Estimation of employment probits month 5,6,..15 • Identification relies on variation in price and availability of child care across municipalities • Conclusion • Price and availability of daycare affects employment after birth A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  23. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  24. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  25. A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  26. Family-friendly policies to reduce the family-gap • Ekberg, Eriksson and Friebel (2005) • Daddy month • => fathers take two more weeks of leave on average • => mothers return 3-4 weeks faster to work • Advantage • Stronger incentive/force fathers to take leave if the household wants a leave period of a certain lenght • Disadvantage • Difficult to implement w/o increasing the total leave period • Nielsen (2009) • Economic incentives • => fathers take more leave • Advantage • Costless for the state as the total eligibility needs not change • Long-run social costs are ambiguous • Pos?: Children? Female careers? Gender equality gains? Work organization? • Neg?: Men vs. Women out of work? Intrahousehold welfare effects? A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

  27. Conclusion • Mothers loose and fathers gain from parenthood • Fathers are penalized more for child leave than mothers • Optimal design of family-friendly policies • Child care • -> important for short run employment (return to work) • Duration of leave • -> important for long run employment and career • Economic incentives • -> important for leave-sharing A A R H U S U N I V E R S I T Y S c h o o l o f E c o n o m i c s a n d M a n a g e m e n t

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