Motherhood Wage Penalty During the Times of Transition:

A Test for Labor Market’s FlexibilityOlena Nizalova, PSSRU/CHSS-University of Kent

Tamara Sliusarenko, TDC GroupSolomiya Shpak, George Mason University

JCE Symposium, Kyiv, UkraineApril 26, 2015

MWP pathways

• Decrease in hours devoted to work

• Loss of human capital

• Compromised mobility

• Lower productivity

• Changes in preferences

Previous Findings

• ~0% (Finland, Sweden, Belgium, Israel)

• 5-10% (France, Canada, UK, Poland, Slovakia,

Czech R.)

• 10-15% (Russia, Hungary)

• 33% (Germany)

Selected studiesStudy Data Methods Estimated MWP

Harkness and Waldfogel (2003)

1991 Swedish Level of Living Survey (LNU)

OLS, FE No significant penalty for Swedish mothers

Waldfogel, J. (1997)

1968-88 NLSYW OLS, FD, FE 4% for one child 12% for two or more

Gupta and Smith (2002)

Danish Longitudinal Data, 1980-1995

RE, FE, Heckman

Temporary 6-7%. Disappear by age of 40.

Livermore et al. (2010)

HILDA OLS, FE-FD, Heckman

5% for one child9% for two or more

Viitanen, T (2004) NCDS of UK OLS, double selection

19-22% 10-13% in selection model

Budig et al. (2012)

LIS Waves 4 and 5 (1995-2001)

OLS, FE, Heckman

33% - West Germany, 16% - USA7.5% - France

Variations in MWP

Family Labor Market Policies:

• Maternity leave mandates

• Publicly provided childcare

Cultural norms (Budig et al. 2012)

• Attitudes towards maternal employment

• Male breadwinner/ female caregiver model

Ukraine: academic perspective

• Generous maternity leave policies

• Extensive network of public childcare

• Negative attitudes towards maternal employment

But:

• De facto liberal labor market environment

• Positive attitude towards grand-parenting combined with early retirement age.

Ukraine: policy perspective• Dramatic population decline of late 90s-2000s,

partially due to lowest low fertility

• Attempts to boost fertility through expensive policies (Baby Bonus: ~42% of total Social assistance budget per year)

• Inevitable reforms which will have an impact on MWP:– Legal reform

– Pension reform (increase in retirement age)

• Need to prepare for upward pressure on MWP

Overview of results

• Overall motherhood wage penalty of 19%

• 17% for one child, and 29% for two or more children

• Insurance role of education: wage penalty –lowest for highly educated women

• No support for the hypothesis of the beneficial effect of postponing the first birth till 30

Model

log(hourly wage)it=α0+β1*Cit+β2*Xit+(vi+uit)

C: Number of children, number of children in specific age category (0-6, 7-18), dummies for children in specific age category, ever mother

X:• Personal characteristics: age, education,

work experience, marital status, etc.• Job-related characteristics: large, small firm,

state/public firm, part-time employment

Empirical approach

Individual unobserved heterogeneity => fixed effects

Selection into labor force => Heckman model

OLS, OLS with selection, FE, FE with selection

Data

• Ukrainian Longitudinal Monitoring Survey (2003, 2004, 2007) + retrospective part

• Female respondents aged between 15 and 65 in 2003

• 53 111 person-year observations, 44 565 –working age, and only for 17 221 person-years we have the wage reported

• Final pooled data set: 15 656 observations, 1423 obs per year

Main variables

• Hourly wages– nominal monthly contractual wage in December for

every year except for interview year (interview month)

– CPI

– Hours worked

– Monthly wage divided by 40 if person works not less than 25 hours and by 20 if she works less than 25 hours (Kimmel and Kniesner 1998)

• Children variables– Constructed from roster

– Restrict children to 0-18 years old

Average monthly earnings

0

200

400

600

800

1000

1996 1998 2000 2002 2004 2006 2008

average monthly wages for females with high school or lower education

average monthly wages for females with professional/vocational education

average montly wages for females with high education

average female monthly wages

Descriptive statistics (1)

Variable (%)1997 2007

all employed all employed

# observations 3833 1352 3118 1533Children

none 47.51 33.14 47.24 40.25one 32.69 42.23 33.93 38.29two 17.4 21.97 16.45 19.5more than two 2.4 2.66 2.37 1.96

Descriptive statistics (2)

Variable (%)1997 2007

all employed all employed

Education

high school 44.51 28.25 33.03 19.83vocational 41.85 51.48 49.78 55.71university 13.64 20.27 17.19 24.46

Married 57.5 69.01 63.34 65.82Employed 56.74 100 55.23 100

Wage(monthly) 383.1 800.27

Descriptive statistics (3)Variables mothers not mothers

all employed all employed

Current mother (%) 100 100

Number of kids (0-18) 1.45 1.44

Number of kids (0-6) 0.25 0.17

Number of kids (7-18) 1.19 1.26

No children (%) 1.00 1.00

One child (%) 61.61 60.87

Two or more children (%) 38.39 39.13

Age 44.49 44.25 38.99 41.22

Descriptive statistics (4)Variables mothers not mothers

all employed all employed

High school (%) 30.2 23.55 52.2 26.67

Professional/Vocational (%) 52.36 54.04 36.28 51.05

University (%) 17.43 22.42 11.52 22.27

Married (%) 74.92 74.86 37.94 49.18

Employed (%) 65.97 100 39.12 100

Monthly wage 412.04 460.47

Experience (years) 18.44 20.06 14.4 18.37

Hours worked per week 38.63 39.07

# Observations 21142 10430 18421 5226

Non-parametric wage-number of children profile

Results (1)

Log of

hourly wage

Pooled

OLS

OLS

selectionFE FE selection FE selection

(1) (2) (3) (4) (5)

1 child-0.078**

(0.024)

-0.078**(0.026)

-0.165**(0.026)

-0.169**(0.026)

-0.165**(0.027)

2 or more

children-0.117**

(0.026)

-0.117**(0.027)

-0.274**(0.038)

-0.291**(0.039)

-0.276**(0.039)

IndividualYES YES YES YES YES

FirmNO NO NO NO YES

State/publi

c/collective

-0.119**(0.039)

N 15 656 14 849

Results (2)(1) (2) (3) (4)

Ever mother-0.185**

(0.026)

Number of

children-0.151**

(0.019)

1 child-0.169**

(0.026)

2 or more

children-0.291**

(0.040)

Number of

children (0-6)-0.089**

(0.026)

Number of

children (7-18)-0.168**

(0.020)

Individual controls

YES YES YES YES

Results (3)

-0.45

-0.4

-0.35

-0.3

-0.25

-0.2

-0.15

-0.1

-0.05

0

1 child 2 or more children

Results (4): Timing of First Birth

All High school

or Lower

Vocational/

Professional

Bachelor

Degree or

Higher

(1) (2) (3) (4)

(Number of kids)

*(a1b<20)

-0.145** (0.035)

-0.196**(0.059)

-0.149**(0.046)

-0.202(0.133)

(Number of kids)

*(20≤a1b<25)

-0.156**(0.027)

-0.159**(0.061)

-0.189**(0.036)

-0.086(0.060)

(Number of kids)

*(25≤a1b<30)

-0.137**(0.034)

-0.139(0.075)

-0.126*(0.049)

-0.119*(0.057)

(Number of kids)

*(a1b≥30)

-0.253**(0.073)

-0.179*(0.090)

-0.332*(0.141)

-0.145*(0.069)

Observations 15,656 3,850 8,304 3,502

Conclusions

• Overall motherhood wage penalty of 19%; 17% for one child, and 29% for two or more children

• Wage penalty is different for females with different level of education

– Highest for low skilled workers

–Marginal increase in wage penalty of giving birth to the second child is smallest for women with higher education

Conclusions

• No support for the hypothesis of the beneficial effect of postponing the first birth: wage penalty is highest for those giving birth after age 30.

MWP vs Baby Bonus• 20% motherhood wage penalty * average

monthly wage of 3 035 (Dec 2014) = app. 607 UAH/month

• Current baby bonus: UAH 41,280 (lump sum UAH 10,320 and 860 per month for 3 years)

• Baby bonus in current prices UAH 32 240 per child (2% monthly inflation)

• MWP over the course of 18 years >UAH 130K (18*12*607)– This does not include wage decrease due to loss of

human capital through education and experience– Pay raises are assumed to compensate for inflation

Discussion (1)19% MWP:

– Too high as for a country with generous maternity leave policies, existing publicly subsidized childcare (Scandinavian countries ~0%)

– Too low as for a country which combines these generous policies with the cultural norms of being critical of maternal employment (Germany ~33%)

Discussion (2)Possible explanations:

– Employers do not bear the full cost of maternity leave provision

– Publicly provided childcare is not as effective as in Scandinavian countries: families spend no more than 1.2% of hh budget on it, it has lower quality (student to teacher ratio, actual number of children exceeds the facilities’ capacity)

– Cultural norms supporting grand-parenting combine with early retirement age

Policy implications (1)Reforms after the Revolution of Dignity => upward pressure on MWP

– Legal system reform: increase of cost of maternity leave for employers

– Pension reform: increase in statutory retirement age and therefore decrease in availability of alternative childcare options from grandparents

Policy implications (2)Possible counter measures:

– Improve quality and availability of public childcare facilities

– Create attractive business environment for private initiatives in childcare sector

– Promote cultural norms supporting maternal employment

30

Thank you

Birth rates dynamics

0

20

40

60

80

100

120

140

160

180

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

15-19 20-24 25-29 30-34 35-39 40-44 45-49

Maternity Leave Legislation

Year

Length of paid leave

Length of

voluntary

leave

Conditions1 child

2 children

or

complicati

ons

1983 112 126 <1 year>1 year of

experience

1991 126 140 <2 years Insured

1998 126 140 <3 years Insured

2001 126 140 <3 years Insured

2013 126 140 <3 years Insured

Note: Paid leave is compensated by 100% of average wage

Baby Bonus Dynamics (USD)1st Child 2nd Child 3rd Child

2001 32 32 32

2002 38 38 38

2003 60 60 60

2004 127 127 127

2005 287 287 287

2006 1574 1574 1574

Full

amount 1st pmnt

Full

amount 1st pmnt

Full

amount 1st pmnt

2008 2423 950 4950 958 9901 990

2011 2469 1010 5049 1010 10098 1010

2012 3829 1276 7659 1276 15317 1276

2013 4172 1391 8344 1391 16688 1391

2014 1720 430 1720 430 1720 430

Treatment of Mothers in Labor Markets• Hiring practices. Content analysis of most popular hiring websites

shows that employers violate this law. For example, one financial company is looking for “HR-director, men under 35” while another company is looking for “women of age 40 onwards for the administrative work”.

• Contracts. Some employers prescribe in the labor contract a section that obligates women not to get married or/and pregnant during first two or three years on the job. Otherwise, she will face monetary penalties, which anyway are often high for mothers.

• Poor enforcement of the labor law. Although the Labor Code prohibits layoffs of pregnant women and women with small children, human rights activists claim that the lack of effective sanctions for the violations of these rules "unleashes" employers.