Overview:
One century ago, in 1907, there would have been little evidence of the economic
cost of motherhood. Women got married and had kids. "Employment"
for women was raising the children on a daily basis. At least in the United
States, that is what the majority of the population was doing, with little
variance. But as our society has evolved, and equality prevailed, men and
women of every different race compete in the same market for the same jobs
(…however, as our society has changed, our biology has not, and women
are still the ones having kids). In this paper I will explore how maternity
affects women in the labor market. I will be observing and comparing the
economic cost of motherhood in the United States and in Brittan. Specifically,
I will look at the differences in labor market conditions for men versus
women and mothers versus non-mothers.
Women and the U.S. Labor Market
For the United States labor market, I will discuss the effects of motherhood
has when comparing women against men (the "gender" gap) and mothers
against non-mothers (the "family" gap). Historically, women's
actions in the labor market have reflected the tradeoff between fertility
decisions and employment decisions. Logically, the fertility/employment
tradeoff women face is a decision that does not drive male's behavior in
the labor market. In general terms, the chance of a male moving into non-employment
during their first year in the labor market is 38%, as compared to 42% for
females. In terms of the long run, 80% of female interruptions are related
to family as compared to 1% of male interruptions being related to family.
Furthermore, females with young children have lower employment rates than
females without children, 45% and 66% respectively (Erosa et. al., 2002).
When individuals enter the labor market, employment rates are pretty universal
regardless of family status or gender. However, the female employment rate
increases with age at a much slower pace than the male employment rate due
to the women leaving the labor market for fertility decisions. At thirty
years old, the female employment rate is approximately 14 percent lower
than males. A large gender employment rate gap exists until around 45 years
of age.
An individual in the labor market can be seen as accumulating two forms
of capital: general (on-the-job experience) and specific (tenure). When
an individual leaves the labor market for an extended period of time, they
lose their tenure capital but retain their general capital. If you were
to imagine a corporation, the high level managers have accumulated human
capital as knowing the general operations of business but also in a specific
form, as establishing relationships with co-workers and business partners.
If a manager leaves the corporation for a few years and then returns, he/she
will still know the general operations of the business, but it is likely
that the personal relationships and credibility will no longer be valid,
as personnel changes within the firm and for clients. This becomes significant
in terms of this discussion when considering how a woman is affected by
leaving the labor market to become a mother. Statistically, non-mothers
have higher wages in the labor market then mothers. One explanation of the
family wage gap is that when a mother interrupts her career, she loses her
established tenure capital, which in turn creates the wage gap between mothers
and non-mothers. However, more recent studies have shown that females that
are willing to accept the opportunity cost of motherhood are most often
from the class of individuals with low tenure capital. In one model, tenure
capital explains only 2.8% of the gender gap and 7.3% of the family gap
(Erosa et. al., 2002). Most of the differences in the gender and family
wage gap were explained by exogenous factors. In this case, the effect associated
with fertility is not nearly as significant as originally believed and tenure
capital plays a much smaller role in explaining the wage gap.
What is the role of education in the wage gap? And is there a "marginal
cost" associated with having more children versus fewer children? Level
of education is a general indicator for job quality and subsequent wage
level. As a whole, mothers with one child have wages 16% lower than non-mothers
and mothers of two or more kids have wages 29% lower. Studies show that
there is no family wage gap between white mothers and non-mothers without
a high school diploma. However, as education levels increase, so does the
opportunity cost of motherhood. White mothers with high school diplomas
earn, on average, 10% less per child than non-mothers with high school diplomas.
Mothers of more than one child with a college education suffer a 15% lower
wage than non-mothers with a college diploma. Interestingly, mothers of
one child with a college education only suffer a 4% penalty as compared
to non-mothers (Anderson et. al. 2002). This suggests that as each additional
child requires more attention and energy, productivity decreases with each
additional child (in the eyes of the labor market). Overall, we can see
that the opportunity cost of motherhood isn't even a factor at low skill
labor (reflecting no high-school education). The opportunity cost of motherhood
is increasingly real as job skill increases, as reflected by the level of
education.
In conclusion, with respect to the U.S. labor market, motherhood is a real
factor that has a significant effect on wages and overall level of employment.
Though it is plausible that tenure capital is a factor in the wage and employment
gap between sexes and mothers/non-mothers, it does not play a very significant
role. There seems to be a marginal cost for having one child versus more
than one child that affects wages. And lastly, the opportunity cost of motherhood
is positively correlated with the skill level of labor, as measured by education.
Women and the British Labor Market
It is interesting to compare the differences in the role of motherhood in
the American economy versus the British economy, as it is essentially the
same entity (I mean, I assume everything works the same over there as it
does over here) in a different framework. In the following section I will
discuss how motherhood plays a role in the labor market of Britain. Specifically,
factors such as: the role of education in the wage gap, the timing of fertility
decisions in the labor market, the "quality" of children of a
working mother.
There is a 39% gap between the wages of 33-year old mothers and non-mothers
in Britain, which can be sufficiently explained by three factors: lower
specific human capital, part-time versus full-time, lower education levels
(Joshi, 2002). As mentioned in the section on the United States, specific
human capital does play a role in determining the wages of an individual,
and it seems to be more significant in terms of determining the wages of
British women. There is also the fact that women trying to balance work
and motherhood often opt for part-time work, which plays into them having
lower wages as compared to non-mothers. And again, as we saw with the United
States, education plays a role in the wages of working mothers. However,
the role of education is reversed in Britain. In the U.S., higher education
meant higher opportunity cost for motherhood as reflected in forgone wages.
In contrast, British mothers with higher levels of education actually earned
wages significantly closer to the wages of non-mothers as compared with
lower levels of education. At no education, British mothers experience huge
losses compared to non-mothers. This occurs mostly because with no education,
implying a low-skill job, there is no maternity leave and mothers tend to
take longer periods to return to work than those at higher levels. Therefore,
mothers are out of the labor market for a given period of time and lose
all their accumulated specific human capital. When they return, their wages
are significantly lower than the non-mothers who have stayed in the labor
force all the while. It is important to note that in the British data there
is a marginal cost for each additional child, as we saw in the U.S. data.
However, for Britain, that cost is more significant for low education levels
as compared to high education levels. When mothers have college degrees,
the disparity between the wages of a mother versus a non-mother are minimal.
The initial year after a birth, during a period of paid leave or part-time
employment generally result in a lower wage, however, when mothers return
to full time employment, their wages are essentially the same as non-mothers.
Other important factors are that women with higher education wait longer
until they have children (generally around 30 as compared to 23) and the
time out of the workforce is shorter, as they can afford reliable childcare.
Though it has yet to be proven, this illustrates the idea that higher earning
power enables the purchase of childcare and may have a positive effect on
family size; refuting the hypothesis that women's employment will have a
negative effect on fertility.
Given the relationship that in Britian, education facilitates employment
and possibly fertility, the next step is to see if there is any relationship
between working mothers and the quality of their children. One may assume
that a working mother spends less time with her child, which in turn has
a negative effect on her child's welfare. This suggests that mothers with
higher education would have lower quality children. However, another hypothesis
argues that, on average, education improves the productivity of a person
in both their paid and unpaid activates; suggesting a positive relationship
between mother education and child quality. One study (Joshi, 2002) looked
at the relationship between a mother's level of education and their child's
level of education. For British families, an increase in the mother's level
of education resulted in a smarter child (measured in terms of basic reading
and math) and less aggressive behavior (regarded as a positive personality
trait; i.e. less prone to violence). There is probably some significant
level of this being related to genetics and the inherent ability of the
mother being passed to her children. They also observed the effects of working
mother's on the educational and social development of their children. On
average, the math scores and level of non-anxious behavior increased for
the children of working mothers, from the ages of 1 to 5. Ultimately, there
is no conclusive evidence that an employed mother has negative effects on
the child.
In conclusion, British women with high levels of education have the smallest
loss of earnings at motherhood. However, higher levels of education often
mean that a woman is more likely to postpone or even avoid motherhood. This
is the opposite of the observed relationship between motherhood and wages
in the United States. In addition, there are no conclusive adverse effects
on the children of working mothers as opposed to unemployed mothers. It
is important to consider, however, that increased household wages by a mother
allows for fathers to spend more time with children. Also, just because
mothers are working, does not mean they are spending any less time with
their children, as the kids may be involved with activities (i.e. day care
or preschool). Both of these factors further our understanding that there
is no one-to-one tradeoff between motherhood and child quality.
Anderson, Deborah J.; Binder, Melissa; Krause, Kate (2002), "The Motherhood
Wage Penalty: Which Mothers Pay It and Why?", American Economic Review
v92, n2 (May 2002): 354-358.
Erosa, Andres; Fuster, Luisa; Restuccia, Diego (2002), "Fertility Decisions
and Gender Differences in Labor Turnover, Employment, and Wages", Review
of Economic Dynamics v5, n4 (October 2002): 856-91.
Gupta, Datta Nabanita; Smith, Nina (2002), "Children and Career Interruptions:
The Family Gap in Denmark", Economica v69, n276 (November 2002):
609-629.
Joshi, Heather (2002), "Production, Reproduction, and Education: Women,
Children, and Work in a British Perspective", Population and Development
Review v28, n3 (September 2002): 445-74