Fertile employment

By Eric Crampton 24/11/2013

One potential explanation for lower female wages: employers fear that female employees will take maternity leave and condition wage and employment offers on that risk. I’m not saying it’s a good thing. It’s almost certainly illegal. But it’s potentially a thing employers do. My Masters student Hayden Skilling is currently investigating whether this can explain any substantial part of the unexplained gender wage gap; I’ll report on results later this year.

MAIN RESULTS AND THE ROLE OF CHANCE The likelihood of childbirth by around age 35 was reduced for every year spent in casual employment, irrespective of socioeconomic status, partner’s education and parents’ birthplace. The likelihood was reduced by 8, 23 and 35% for 1, 3 and 5 years spent in casual employment, respectively.

Now run the thing in reverse and assume rational expectations. You’re an employer. Two equally capable potential employees are up for a job. One comes with a non-trivial risk of taking maternity leave. The other is male. In case of maternity leave, you need to sort out cover and you can’t guarantee that the employee returns. So you’re taking on risk and you need to be compensated for taking on that risk.

There exists no real way for young women credibly to signal that they have no plans on having children, or that they promise to work for n years prior to any childbearing. It’s generally illegal for the employer to ask, and both the candidate and the employer knows that any promise made is unenforceable – in fact, the employer would likely get in trouble for trying to enforce it.

Again, I’m not saying any of the resulting equilibrium is in any way good or desirable. If you wish to promote gender equity, though, you have to set incentives such that good results obtain. Maternity leave mandates that are costly to employers will likely result in fewer women being given positions that draw maternity coverage. Employment subsidies proportionate to the cost of the risk imposed might socialise the costs more efficiently.

Previously: Parental Leave and Benefits.

0 Responses to “Fertile employment”

  • It could be argued that although maternity leave is a known risk, there are any number of unknown risks associated with employing anyone, whether male or female, so why give this particular risk any special status?

  • True, but the risk of sexual harrassment could equally systematically bias employers against hiring men. So there maybe is an arbitrary element of historical discrimination here? At any rate, paternity leave is becoming increasingly common.

  • Lets assume maternity leave is a good idea. It must be because sufficient pollies voted it in right? :-). It doesn’t matter which govt. Its here. They did it why?? Because it was disadvantaging women if they didn’t.

    So here we have someone suggesting it might (now) be “uneconomic” to hire a “young woman”. Hmmm….

    I think the country was telling employers something. All that is missing is the will to accept that women should – nay must – be paid the same. After all, they are doing the same job from day one as would be expected of a man capable in the same position. Surely, if risk of leaving was a reason for the discrepancy, why aren’t men paid the same lower rate when they begin employment in practically ANY job?

    Frankly, women are being treated just like Indonesian fishermen mentioned in the Star Time today. Disgracefully.

    • I think you discount too quickly the possibility that policies are enacted because they look and feel good, regardless of any necessary connection to the real world.

  • Simple solution – equal, paid PATERNITY leave for men. Most fathers I know (I’m not a father) would have loved extended paternity leave to better bond with their child in the early months.

    • Problem with those schemes is that women are still more likely to take advantage. Yes, agree, better that both parents are eligible. But unless you wind up making it mandatory, employers are still more worried that women are more costly than men.

  • I wonder if public access to marriage registration information, now that same sex marriage is legal, will result in less employer bias towards lesbians? This would be a good test of your theory (given that surrogate paternity is still probably rather unlikely).

    • Hayden’s masters is using fertility differences between lesbian and heterosexual women to work out what part of the lesbian wage gap is due to lower likelihood of bearing kids…

  • “…regardless of any necessary connection to the real world.”

    Real world Eric: Apparently women are the only ones at the moment who can divide sufficient stem cells to create the offspring who will pay for your superannuation.


    “Problem with those schemes is that women are still more likely to take advantage.”

    Pardon? I have probably missed something but that is a staggering suggestion. The mere fact that it is available and you say they take advantage ???

    The one big advantage of a woman to a newborn is they have an inbuilt milk supply. Beat those two mere male.

  • Ross, I was worried when I saw your name but I should have known I’d agree with your comments – you are a damned good feminist. I completely agree with ShadowMind on the paternity leave thing – there should be no discrimination or assumptions made about who the parents choose to ‘stay home’ with the new addition.

    Yes, I see it from the employer’s point of view – women um… might get pregnant. But they equally might not. They might not want to (heaven forbid). They might have predetermined that the other partner will ‘stay home’. They might not be able to.

    From the ‘young woman’s’ point of view… this means we get to endure our work colleagues thinking (and sometimes discussing) the potential population of our uteri in the forseeable future. Is it not enough some people almost bet on when said ‘young woman’ will get pregnant and then go “I knew it!” (triumphantly) when you tell them (yes thanks guys, now I know you were talking about my uterus and my plans of what to put in it)? Is it not enough that we are well-skilled, good employees?

    Or have random people asking you if you are planning on having children. That’s fun too. Such a personal question and yet almost everyone thinks nothing of asking it. I’ve often felt like replying “actually no my uterus is free right now and planning to stay that way” or “no I’m actually infertile” or “I don’t appreciate you asking about what my husband does with his penis”. I have not had the facetiousness to do this yet but I would sure love to see the look on their faces.

    Rant complete.

  • Well, Shflbm, we can either overturn all of society and make everybody be all enlightened and have employers do things that are inconsistent with profit maximisation, or we can try to structure the rules so that we aren’t actually making women worse off when we’re trying to make them better off.

    I agree entirely that it is entirely undesirable that young women face exactly the situation you describe. I’m near certain that employer worries of this sort made it much harder for my wife to break into the Christchurch employment market when we moved here. Employers expected that a woman married to a guy who’d just taken up a permanent slot at the University would shift very quickly to the mommy track. We would have been more than happy to sign contracts guaranteeing no childbearing within the first four years of employment (moved here 2003, first child 2008), but such contracts are basically illegal and unenforceable.

    It is BECAUSE of the situation you’re describing that I am very nervous about legislation that imposes costs on employers who hire women who, on a statistical risk basis, are more likely soon to have kids.

    “Oh it isn’t fair and they shouldn’t behave that way” is all true and all well and good, but it’s entirely unenforceable. You can’t prove an employer has discriminated on the basis of pregnancy risk. “Oh, she wasn’t the right fit” is pretty much impossible to disprove. If you want to change outcomes, you have to change incentives and payoffs.

    A few potential options:
    – Men and women not wishing to have any children (ever, or for n years) should be able to enter into employment contracts specifying as much.
    – Compensate firms for costs involved in facilitating maternity (or paternity) leave.
    – Allow employees to enter into binding contracts around returning to the workplace after childbearing. Employers can reasonably be worried that a great employee might decide he or she wants to be a full-time caregiver or might only want to return on a part-time basis. If they’re worried about that, they’ll underinvest in that employee’s training and development because of that risk.

    I sympathise with your frustration despite my lack of uterus; we felt that frustration as a couple when we first moved here. I’m looking for solutions that make it in the employer’s interest to behave reasonably. If we think that it is an important social goal that maternity be facilitated by employers, the burden of achieving that goal is best placed on the overall tax system rather than on employers if we do not want to make things worse.

  • One can do the “right thing” and pay equally, or, one can cut a deal that maximises profits. Guess which controls. Now. Is this gender biased?

    It might be an interesting dismal science research topic. Find businesses created and still controlled by “a woman”. Match them to a similar set created by “a man”. Discover the pay rates for employees. I suspect neither will match the “average”.