Friday, 22 November 2013

Fertile employment

One potential explanation for lower female wages: employers fear that female employees will take maternity leave and condition wage and employment offers on that risk. I'm not saying it's a good thing. It's almost certainly illegal. But it's potentially a thing employers do. My Masters student Hayden Skilling is currently investigating whether this can explain any substantial part of the unexplained gender wage gap; I'll report on results later this year.

MAIN RESULTS AND THE ROLE OF CHANCE The likelihood of childbirth by around age 35 was reduced for every year spent in casual employment, irrespective of socioeconomic status, partner's education and parents' birthplace. The likelihood was reduced by 8, 23 and 35% for 1, 3 and 5 years spent in casual employment, respectively.
Now run the thing in reverse and assume rational expectations. You're an employer. Two equally capable potential employees are up for a job. One comes with a non-trivial risk of taking maternity leave. The other is male. In case of maternity leave, you need to sort out cover and you can't guarantee that the employee returns. So you're taking on risk and you need to be compensated for taking on that risk.

There exists no real way for young women credibly to signal that they have no plans on having children, or that they promise to work for n years prior to any childbearing. It's generally illegal for the employer to ask, and both the candidate and the employer knows that any promise made is unenforceable - in fact, the employer would likely get in trouble for trying to enforce it.

Again, I'm not saying any of the resulting equilibrium is in any way good or desirable. If you wish to promote gender equity, though, you have to set incentives such that good results obtain. Maternity leave mandates that are costly to employers will likely result in fewer women being given positions that draw maternity coverage. Employment subsidies proportionate to the cost of the risk imposed might socialise the costs more efficiently.

Previously: Parental Leave and Benefits.


  1. This seems like a reasonable place to ask: What are the effects of mandating employers to offer both maternity and paternity leave? Does it solve the gender inequality problem? Does it have other (presumable negative) effects?

  2. Women are more likely to take up offered leave than are men, so it only helps a bit. Some places have mandatory leave periods for both genders. And while that can help for some professions where you can't really work while you're not at the office, for others, you can't really force people not to be working when they're officially on mandatory leave.

  3. In addition to the "immediate" absence due to pregnancy and maternity leave, having a child also seems to have a long term effect on hours worked by women (and their labor market earnings) - at least according to a working paper by my "office-neighbour" that finds each child reducing female earnings by 16% on average (main effects due to reduced labor supply of women with average earnings):

  4. What do you think of the Swedish solution to this problem?

    Specifically, the part where each member in a couple are given a non-transferable portion of baby-leave that will expire if not used.

    The idea is to encourage men to take baby-leave, because if men are as likely to take baby-leave as often and for similar durations to women, then this would lead to greater equality in risk assessment and therefore greater equality in the workplace.

    This seems plausible to me, and from what small amount I've read on this it seems to be working.

  5. Another recent working paper that might be worth checking out:

  6. That's ridiculously helpful, Tobias. Many thanks. Totally in line with what Hayden's finding in his masters thesis.