Why Do Married Mothers Make Differing Employment Decisions In Different Countries?
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Computer animationMeeting/Interview
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Meeting/Interview
Transcript: English(auto-generated)
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The goal of this project is trying to understand why married women with kids make such different employment decisions across countries. When women have kids they usually have to decide how much time they want to spend on
00:20
their career and how much time they want to spend with their children. In the data we actually see that the earnings of women plummet and their career trajectories slow down once they have children. The earnings of women without children on the other hand grow at a similar rate as those of men. A similar story is true for employment rates. The employment rates of women
00:45
decline once they have children but this decline varies tremendously across countries. Take for example two Scandinavian countries like Denmark and Sweden. Here we see that the employment rates of women with children is pretty
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much the same as those of women without without children. When we look at countries like the United States or Germany on the other hand we actually see that employment rates drop once women have children and it takes these women a long time to return to the labor market. So my broad research question is how can we understand such different employment decisions by
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married mothers across countries. While this is a very complex problem and there are many factors that influence the decision a mother has to make I want to focus on two specific institutional factors in this project and that is number one the transfer programs that families received by the government
01:43
and number two the price of childcare. So the question for this project is can the variation and the price of childcare and the variation in government transfer programs explain why we see such different employment decisions of mothers across countries. To understand how much
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childcare prices and transfer programs matter what I would ideally like to do is to vary those prices and programs freely across countries and then collect data and observe how choices of families change. As you can imagine that is not really possible in real life and so what I do to
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overcome this problem is that I develop and simulate a quantitative economic model. Such a model is like a virtual laboratory in which I can conduct experiments like changing the price of childcare or changing transfer programs and I can observe how choices of mothers with children change.
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This then gives me a sense of how important both childcare prices and transfer programs are for the employment decisions of mothers and with how much do childcare prices and transfer programs actually matter for
03:03
the employment decisions of mothers. Let me start by explaining the series of experiments that I conduct in my virtual laboratory and what I observe. Then I can interpret these observations in the next section. My first experiment is that I remove the price of
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childcare and transfer programs for families with children from the model economy. What I see now when I simulate the model is that the employment rates of married mothers increases. The reason is that childcare is now free of charge in this world. Now you might say that this is a quite unrealistic world and I agree.
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However, this experiment serves as a benchmark and is therefore useful for us. As a second step or a second experiment, I now reintroduce childcare prices into the model economy. Now what happens is that the employment rates of married mothers declines
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and this decline is uniform across countries. The reason is that there is a fraction of mothers who now cannot no longer afford to pay for childcare, so they drop out of the labor market and take care of their children at home. As a final step, I reintroduce transfer programs for families with children.
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And here is where it gets interesting because the effects of these transfer programs on maternal employment are different across countries. Take Denmark as an example. Once we add transfer programs in Denmark, we actually see that the employment rates of married women with children are increasing. This means that these programs are
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successful in compensating mothers for the price of childcare. When I do the same experiment in the United States, I add back transfer programs. What we see now is that the employment rates of mothers actually decline. And this is a very surprising finding. So how can we
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understand this puzzling fact? Now how can it be that family transfers increase maternal employment in Denmark while reducing maternal employment in the United States? What this finding really tells us is that it matters how we design
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and distribute these family transfers. For example, in Denmark, the government subsidizes daycare centers directly, which means that these daycare centers can offer childcare at lower prices to families with children. In the United States, family transfers work quite differently. We actually see that childcare prices are
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high, but families can deduct these expenses from their taxable income at the end of the year. However, there's a certain income threshold and if the family earns income above this threshold, all these benefits are cut. That implies that for some families in the United States,
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it's optimal to stay below the income threshold to receive family transfers. And this is often done by one parent working full time and the other parent not working at all, which is usually the mother who then takes care of children at home. These findings imply that in times
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when we are concerned with how much money governments have to spend on social programs, we really need to think carefully about how we distribute this money. And my research suggests that there are better ways of doing so, at least when it comes to family transfers. In the mid
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2000s, the European Commission released a policy directive and asked all member countries to increase the availability of subsidized childcare across countries. And the goal was to increase maternal employment. Now many member states have implemented costly policy reforms in order to achieve
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this goal. However, the success was limited. The goal in the future is to use my method to study these policy reforms and to see whether there are smarter ways of designing family transfer programs in order to increase maternal employment. Now you might wonder why we care about
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maternal employment rates in the first place. Economic studies have shown that the gender wage gap is mainly driven by the fact that mothers reduce their hours worked or even drop out of the labor force completely once they have children. So designing smart family policies is really a way for us to level the playing
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field between mothers and fathers and to increase gender equality.