Can Financial Incentives Reduce the Baby Gap? Evidence from a Reform in Maternity Leave Benefits with Anna Raute

As women’s educational attainment and labor market participation have increased, so too have concerns about decreasing birth rates and below-replacement fertility levels. All OECD countries other than the US provide paid parental leave in order to reduce the cost of childbearing. However, the structure of parental benefits may affect different groups in different ways. This week’s WAPPP seminar featured Anna Raute, WAPPP Fellow and Assistant Professor in Economics at the University of Mannheim, as she presented her research on the effects of the 2007 German parental leave reform.

Highly educated and high-earning women tend to have fewer children than lower-educated and lower-earning women, leading to what researchers have called a “baby gap” between these two groups. For highly-paid women, having children is associated with a greater opportunity cost than for women who are less well paid. In Germany, this manifests in a stark difference in number of children born to highly-educated versus lesser-educated women, as well as a large gap in the percentage of childless women. Close to one-third of highly educated women in Germany never have a child, compared to 18% of lower-educated women (here meaning women who have completed a high school degree but no vocational training or tertiary education). However, in other countries with family policies, such as Sweden, this gap in childlessness or number of children is not quite so stark. The structure of family policies may affect these figures.

Prior to the 2007 reform, parents received a fixed sum of 7,200 euros per child. However, after the reform, parental benefits were linked to the mother’s pre-birth earnings. Rather than the flat payment, mothers could receive between 67-100% of their pre-birth earnings, up to 21,000 euros per child. Prior to the reform, lower-earning mothers were getting a much greater relative benefit from parental benefits than their higher-earning peers. By contrast, with the new reform, higher-earning women stood to benefit much more from wage replacement than from the flat payment, which may have decreased their perceived opportunity cost of having a child.

The key question, Professor Raute asks, is whether fertility post-reform exhibited differential changes across the income and education distribution. Much of the prior literature on parental benefits focuses on cash transfers and welfare programs that provide greater incentives for lower-income mothers than higher-income mothers. This study provides a critical window to examine whether high-earning and highly-educated women are less elastic, or whether they too react to financial incentives in terms of their fertility.

Nine months after the implementation of the law, there was a statistically significant increase in the average monthly birth rate per thousand mothers, as well as a small drop in the number of abortions. In addition, the rate of IVF between 2006 and 2011 increased by 33%. The increase in fertility nine months after the law’s implementation translates to an additional 2,300 children born per year.

Using German pension data, Professor Raute examined this increase in terms of income and education level. This birth data reveals that medium- and high-earners benefitted substantially from the new reform. While benefits for lower-earning mothers did not change substantially pre- and post-reform, medium-earning mothers received an additional 4,000 euros, on average, and high-earning mothers received an additional 8,000 euros. If the difference in these benefits affects fertility, we should expect to see a relative increase in fertility for women who are benefitting greatly from the reform versus those who are not benefitting as much.

For women who are below the median income, there is not a statistically significant change in the probability of having a child. By contrast, for women who earn above the median income, fertility increases for each income bracket. Overall, each additional 5,000 euros in expected benefits raises the probability of having a child in a given year by 6%.

Professor Raute observes the same effect when examining education. Post-reform, the average probability of having a child increases by 6% for medium-educated women and by 13% for highly-educated women.

Given the recency of the reform and the lag in available data, these are only short-term effects. Professor Raute examined women at the end of their fertility cycle in an effort to understand whether we might see a permanent effect on fertility and for which groups. Indeed, for women at the end of their fertility cycle, each additional thousand euros in benefits increases mean fertility level from pre-reform levels by 5.1%. This strong effect indicates that we might expect to see a permanent effect of the reform on completed fertility.

In addition, there is a significant increase in fertility for women ages 40-45. This effect seems to be driven by women who already have one child and decide that – now that it’s cheaper – they will have a second, as opposed to childless women deciding to have their first child due to the effects of the reform. Highly-educated women are also having their first children 4.8 months earlier, on average, which is correlated with a greater number of children overall.

Overall, these findings provide strong support for a discontinuous increase in overall fertility as a result of the reform, resulting in strong effects on fertility for women with higher earnings and educational attainment. The observed baby gap between highly-educated and lesser-educated women therefore seems to be narrowing.

Interestingly, the 2007 reform also increased paternity acknowledgement, in which unmarried fathers can opt to legally register as the child’s father, with all of the attached rights and obligations. In Germany, paternity acknowledgement is strongly associated with better outcomes for children.

Professor Raute hypothesizes two possible explanations for why the 2007 reform increased parental acknowledgement. It could be that as benefits to mothers increase, fathers have to contribute less to support the household, and therefore paternal acknowledgement is cheaper (the “cost channel”). Alternatively, the reform reserved two months of paid leave for fathers, which may have encouraged paternity acknowledgement (the “paternity leave channel”).

Looking at children born in the first few months of the reform, whose parents couldn’t have known about the new reform when they were conceived, paternity acknowledgement increased by 1.5 percentage points. However, this effect was driven primarily by women who were working prior to giving birth, who were entitled to a larger share of benefits under the reform. This effect implies that the cost channel, rather than the paternity leave channel, is responsible for the increase in paternity acknowledgement post-reform.

Did the plough doom us to millennia of gender inequality?

'Women are supposed to stay at home and raise children.' 'Men are supposed to work and bring home money to provide for the family.'

Throughout the world, we have many ideas of which gender should be responsible for what---perhaps the most fundamental and universal has been employment roles. Why is that?

One theory has to do with the nature of work: the economic structures of "traditional" society were largely manual labor based, almost necessarily ensuring the centrality and dominance of the physically more muscular male in economic production. People have argued that this started with the plough thousands of years go: before the plough, men and women were equal economically in that both could till soil and gather food by hand with equal skill. Accordingly, they were largely equal socially, intellectually, and in terms of power.

But when the plough was invented, it required a great deal of upper body strength to produce more agricultural output. So the gathering work that women did became less economically relevant, and the remaining work was left to the physically stronger sex---by nature's course, this was usually the male. Most consequential economic activity became dependent on the successful physical performance of the male. This was furthered by the thought that women’s interaction with domesticated farm animals would reduce fertility levels.



In his seminar last week on “The Origins of Gender Roles: Women and The Plough,” Alberto Alesina of Harvard University explored the effects of this ancient technological innovation on today’s perception of gender roles. The fact that work was bifurcated along gender lines so long ago, he argues, has meant that these norms and expectations persist even centuries after humans moved beyond agriculture as the primary economic activity.

Controlling for things like ethnicity, politics, and geographic features, Professor Alesina and his colleagues matched up traditional and ancient plough usage with today’s women’s labor market participation and perceptions of gender equality and norms. They found that there is, in fact, a strong correlation between ancient plough usage and gender inequality today. That technology affected not just the realities of work, but also the norms, markets, institutions, and policies that were shaped around them.

Since then, however, we’ve seen some profound changes in economics. Urbanization and industrialization, for example, brought women back into the workforce in a large way and galvanized the women’s and labor rights movements---to say nothing of the service sector. And though today’s inequality may have its roots in ancient technologies, it is still propagated by harmful norms and narratives that we certainly can control.



Photo Source

Can Chinese Women Have it All?

Last year, Anne Marie Slaughter famously told the world “Why Women Can’t Have it All”: that women could not be both good mothers and professionally successful, to simplify it a little. Thursday’s WAPPP Seminar asked that question to one out of every five women on the planet.

From http://www.theatlantic.com/magazine/archive/2012/07/why-women-still-cant-have-it-all/309020/

Well, not literally. But Karen Eggleston, director of the Asia Health Policy program at Stanford University, and HKS’s Richard Zeckhauser, did present their excellent research on “Jobs and Kids: Female Employment and Fertility in China.” They ask if female employment in China affects, or is affected by, the number of children women bear. The question is particularly important for China, the world’s biggest population (1.4 billion) with a “one-child policy” in a booming, urbanizing market economy.

They conclude that there is a negative correlation: employment often reduces the number of children that women want and have. So if the Chinese government’s goal is to reduce the population, they’d be better off increasing women’s employment and education (which also improves job prospects), rather than something as draconian---and with as many consequences---as forced sterilization or regulatory restrictions.

Eggleston and her coauthors then looked at some ways to improve employment: increase access tochildcare services, so women could “have it all” more efficiently, and as a transit nut, I was pleased when they explore how access to bus service improves women’s employment outcomes.

Of course, these lessons from China speak volumes about what's needed elsewhere: for women anywhere to truly try and "have it all", they at least need to have the same access as all. That includes fixing society’s failure to value the monetary and social contribution of work undertaken in the home, an argument made by both feminist activist Betty Friedan and many social conservatives.

It also includes improving the nature of work: too many people sacrifice too much (including family) to work too hard, for too little payback. This is particularly true in China, where underpaid factory work often disrupts families with little promise of improvement, but also in the US, where economic mobility has stagnated.

Lastly, it should include increasing social interdependence: As Barnard President Debra Spar writes, "if women are ever to solve the ‘women’s problem,’ they…cannot do it alone…This isn’t because women aren’t smart enough, or unable to garner sufficient power. It’s just the basic math. Men must help.”

From https://www.facebook.com/photo.php?fbid=10151008457769771&set=a.105009819770.89070.76386069770&type=1&ref=nf

The Politics of Work - Family Policies in France, Germany, and Japan

The issue of women, mothers, and work has received a lot of attention in recent headlines: which women have the choice to "lean in," try to "have it all," or find some balance that best fits their lives? Just how far can a mother (or father!) lean in when holding a small child without toppling over, and what kind of work policies permit more choice in these matters?

Patricia Boling, Associate Professor of Political Science at Purdue University, dove into these questions as she researched fertility rates, parental leave policies, and child-care options in three different countries. Fertility rates - more easily understood as the average number of children a woman has in her lifetime - are an important driver in adjustments to national work-family policies.  France, Germany, and Japan have all faced low fertility rates. This is not necessarily a state concern about women choosing fewer children; rather, the concern here is usually about the economics of supporting an aging population with a decreasing working-age population.

France tackled the issue of declining fertility rates at the turn of the last century, and its pronatalist policies and outcomes may offer some guidance to nations looking to impact their declining populations. The long-standing French policies that support child rearing include a 3-year long gender neutral paid leave, free public school for toddlers, and tax incentives for additional children. Germany followed suit in 2007 by offering a year of paid leave and an increase in state child-care spaces for 1-year-olds. Japan has been adjusting family policies, known as "Angel Plans," since the 1990s, increasing dual-partner leave time, compensation, and supporting child-care programs.

These all sound great, but just how successful have they been? As Professor Boling points out, national work-family policies matter, but no country is a blank slate. Many factors influence a woman's choice to have children: their culture, the political economy of the labor force, gender wage gaps, and the practical impact parental leave has on career choices. The success of work-family policies is often constrained by these factors as well. Institutional capacities, the tradition of administrative political action, the relationship between national policies and local implementation, and the traditions of businesses as political actors and their relationship with training and expectations from employees also impact how these policies play out.

France has experienced some successes with its policies, though challenges remain with the gender balance of parental leave. The long parental leave offers low pay for the parent who chooses to take it, and there are only 11 days of specified paid paternity leave. As a result, women often take repeated leaves and stay in low-skilled jobs with little chance for advancement. While fathers could conceivably take the longer leave, the incentive structure and labor force economy are such that the "gender neutral" leave is in-name-only.  Germany's adoption of child-care policies has a strong correlation with geography and history: the former East Germany has high rates of toddlers attending child-care, while the West and South have lower rates and a cultural aversion to mothers who do not stay home with their young children. Japan is more challenged by a number of institutional factors. It has the largest "mommy penalty" in the world: the gendered wage gap between women, men, and mothers. Businesses expect loyalty from employees and are hesitant to invest training in women of childbearing age. These same businesses play a major role in political processes, and may limit the success of attempts to adjust practices.

The lessons to be learned about work-family policies are still developing, as nations around the world continue to shape their responses to declining fertility rates. Professor Boling's discussion was a brief insight into a book currently underway. As our own national conversation continues about leaning in, stepping out, having what we can or want, it is worthwhile to keep our eyes open to other nations and their approaches to women, work, and family.


Valerie Kane is an MPP Candidate at the Harvard Kennedy School.

What's Culture Got to Do with Fertility?

I had no idea what to expect from a talk titled “Lowest-Low Fertility: A theory of normative rigidity and economic context” but judging by the packed room, a number of people were interested in hearing Mary C. Brinton, the chair of Harvard’s sociology department, discuss this topic. 

   

What is “lowest-low” fertility? A country’s total fertility rate of 1.3 or fewer births per woman is considered lowest-low. Of course, low fertility is not a problem for the planet overall, but for individual countries fertility far below replacement rate has serious implications – a rapidly aging population and a shrinking labor force among them. 

 

So why are some developed, post-industrial countries experiencing lowest-low fertility and others are not? For instance, the United States does not have “lowest-low” fertility, but Japan does, even though Japan has better child care options and ostensibly more family-friendly policies. Low fertility doesn’t even correlate with female labor force participation. In fact, it appears that countries with high percentage of women working actually have normal fertility rates.

If it’s not working women and it’s not government policies, what is driving down fertility in some well-to-do nations? Perhaps it is culture. 

Professor Brinton and her team set out to test this hypothesis. Utilizing data from the global attitudes survey, they isolated the gender-role perceptions through answers to questions like “A woman needs children to be fulfilled” and “Men have more rights to jobs when jobs are scarce.” They discerned three broad clusters among 24 post-industrial countries – those with predominantly “conservative” attitudes, reflecting the male breadwinner-female caregiver model, and then “egalitarian” or “caregiver egalitarian” countries.  

Professor Brinton’s analysis demonstrates that predominance of male breadwinner-female caregiver attitudes correlates significantly with low fertility rates. The quantitative model controls for the economic well-being of the countries and includes other potential factors that affect fertility, such as unemployment among young males. 

This means changing a culture of gender inequality and breaking down attitudes that perpetuate rigid gender norms is in the best interest of any post-industrial country concerned about its rapidly shrinking and aging population. If only changing culture were easy...