Economics of Gender Chapter 11 Assist.Prof.Dr.Meltem INCE YENILMEZ

Family Policy – The participation rate of women in the labor force has risen – More women with infants currently work in the labor market than do not – The rise in labor force participation rates has been greatest for those women with the youngest children

Explaining the Family Gap in Earnings Family Gap in Earnings: Women with children earn less than women without children; all other women’s earnings are equal Why is there a family gap in earnings? – Other factors that could play a part: Mothers select family-oriented jobs Mothers face discrimination in the labor market

– Unobserved Heterogeneity: The idea that mothers are different from non-mothers in ways that are unobservable to the researcher in studies of the earnings gap Women are heterogeneous in some unobserved characteristic that is positively correlated with their wages and negatively correlated with their desire for children Or, selection may occur because women with lower wages are more likely to have children, when all other factors are equal— The opportunity cost of having children is lower for these women

The Sources of the Gender Wage Gap There is also mixed support for Becker’s Effort Hypothesis: Mothers earn less because they exert less effort on the job either because they have less energy left over after working at home or because they are conserving energy for household production

Family Leave Policies Family and Medical Leave Act (FMLA): This Act, passed in 1993, provides up to 14 weeks of unpaid job- guaranteed leave to qualified employees for family reasons or medical emergencies Prior to the FMLA, some states had mandated leave provided for, but the only federal law was the Pregnancy Disability Act of 1978

– Costs are actually low since leave is unpaid and administrative compliance costs are low – Could reduce turnover costs – May bolster employee moral, loyalty and productivity – It will help women retain costly human capital investments – Time off is important for parental/child bonding

As long as markets are perfectly competitive, firms will provide the amount of leave employees want and no government intervention is needed Even if markets are perfectly competitive, government mandated leave may be desirable if such leave creates a positive externality – Positive externality may be created by leave, if for example, mothers on leave have healthier children and use fewer of society’s medical resources

The Effects of Dual-Earner Married-Couple Families on Child Well-Being In recent years, the proportion of dual-earner families has increased dramatically – Implies very different experiences for children What effect does having a working mother have on child well- being? – Children are in child care—Three possible negative effects have been identified with this situation: Separation of mother and child may be harmful for attachment Stress of balancing work and family may lead to lower quality interactions between mother and child Quality of non-maternal child care may affect child well- being

Household Bargaining Models Bargaining occurs over how to allocate income within the family Cooperative bargaining models: Family members bargain until an equilibrium is reached Pareto optimal equilibrium: It would not be possible to make one party better off without making the other party worse off

Each person wants to allocate resources toward what they care the most about Relative bargaining power is determined by the threat point – The level of well-being that each person would achieve if they could not agree on an outcome within the marriage Depends on the income each would control if the marriage ends

Economists are interested in testing the common preference assumption The problem with this endeavor is that labor market earnings are endogenous; i.e. they are a major determinant of how resources are spent in the household Researchers have looked for exogenous variation in household resources