The Economic Consequences of Family Policies: Lessons from a Century of Legislation in High-Income Countries

an article by Claudia Olivetti (Boston College, Massachusetts and National Bureau of Economic Research, Cambridge, Massachusetts) and Barbara Petrongolo (Queen Mary University London; Centre for Economic Policy Research (CEPR); and London School of Economics, all in London, UK) published in Journal of Economic Perspectives Volume 31 Number 1 (Winter 2017)

Opening paragraph

Among the most remarkable changes in the labor markets of high-income nations during the past century have been the rise in the female workforce and the narrowing of gender gaps in schooling and earnings. At the same time, government mandates and firm policies regarding families expanded. In some instances, legislation was preceded by great economic change, as when the spread of industrialization in the 19th century led to calls for restrictions on female work. Other legislation resulted from social and political change, as occurred during the women’s movement of the 1960s and 1970s. Demographic change also played a role as nations have sought to address declining fertility or when dictatorships desired to increase population. By the early 21st century, most high-income countries have put into effect a host of generous and virtually gender-neutral parental leave policies and family benefits, with the multiple goals of gender equity, higher fertility, and child development.

Conclusions

What can we learn from the evolution of family policies across high-income economies? It is a complex tale in which changing economic, cultural, and political economy considerations appear to shape (and be shaped by) these policies. No obvious consensus on the labor market impact of parental leave rights and benefits emerges from the empirical literature. Although there are some exceptions, it seems a fair summary that cross-country studies tend to find more positive effects on female employment than micro-level studies for relatively short leave durations, and more negative effects for longer entitlements. Employment and earnings impacts tend to be more beneficial for the less skilled, possibly with a detrimental impact on the earnings of high-skill women. In a nutshell, there is little compelling evidence that extended parental leave rights have an overall positive effect on female outcomes.

The policies with the strongest evidence for reducing gender disparities seem to be early childhood spending (in both cross-country and microdata) and in-work benefits (in the microdata). A potential common theme here is that making it easier to be a working mother may matter more than the length of leave or the payments that new parents receive while out of the labor force.

The United States has been an outlier in the adoption of family policies across high-income countries since the turn of the twentieth century. As Goldin and Mitchell argue in this symposium, the female labor force participation in the US has evolved into a pattern with very high rates of employment early in the life cycle, which then sharply decline with motherhood, which is being progressively delayed. The cross-country and micro-level evidence has not found an overall strong connection between maternity leave and female labor force participation. But the relatively short leave entitlements available to mothers in the United States may possibly contribute to this life-cycle pattern of delaying motherhood, with persistently low rates of labor force participation for women in their 30s and 40s.

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