Maternity penalties: average is over edition

By Eric Crampton 13/01/2014

Matt Yglesias makes the case that, in a world in which workers are not interchangeable widgets, compulsory jury duty places an unreasonable burden on firms.

The implicit model of jury duty is one in which workers are basically interchangeable widgets. John is going to be missing for a while, so Jane will pull some extra shifts to cover for him. Since different people have different tastes and circumstances, the odds are pretty good that at any given time there’s someone on staff who actually prefers to work longer hours in exchange for higher pay. Consequently, John is put out a bit but basically the company trundles on.
There obviously are some work roles that function this way. But there are a lot of work roles that don’t. Even when we have people doing similar jobs, that doesn’t mean anyone can actually double-up. If I’m on a jury, Weigel can’t write my blog while also writing his blog. He could try to write his blog during regular business hours and then write my blog at night, but all the news will have already happened. By the same token, even if other editors step up to fill in for a missing editor and work longer hours the reduction in parallel processing still means articles will be published more slowly. The impact of the slowdown then trickles through the entire enterprise and lowers everyone’s productivity. And I think we’re hardly unique in this regard. People are collaborating in complicated ways in workplaces all across America, and while nobody is irreplaceable, it’s also fairly unusual to just be able to swap a given person in and out without consequence.

Jury duty is random-draw. At least here in New Zealand, you’ll have a few weeks’ notice and trials might last a fortnight. If your employer can make a case that you’re irreplaceable during that period, then you can get an exemption or deferment.

Imagine that jury duty were longer: three months to a year if called. Imagine further that one identifiable group of employees – half of all potential employees – would never ever be called for jury duty. And imagine further that, among those in remaining group, there were a pretty high chance of being called for jury duty a couple of times while in their 20s and 30s. And there’s no opportunity for employers to get deferment for critical staff. Would you, as an employer, lean towards hiring the first group for task-critical roles, even though you think jury duty is really valuable and important?

Maternity leave isn’t jury duty: it’s chosen by the employee. We then have two effects going on. Women who wish to have children disproportionately select into jobs allowing flexible time arrangements and less overtime. And, employers fearing incipient maternity leave may be reluctant (all else equal) to assign women of higher childbearing likelihood into mission-critical and higher paying tasks.

Claudia Goldin’s superb Presidential Address at the AEAs makes the case that the structure of mission-critical jobs in some industries is what’s driving the gender wage gap. Women disproportionately prefer workplace flexibility over pecuniary benefits. And some high-paying jobs require massive time investment.

Residual differences by occupation in earnings by gender, I will demonstrate, are largely due to the value placed on the hours and job continuity of workers, including the self-employed.23 Individuals in some occupations work 70 hours a week and receive far more than twice the earnings of those who work 35 hours a week. But in other occupations they do not. Some occupations exhibit linearity with respect to time worked whereas others exhibit nonlinearity.24 When earnings are linear with respect to time worked the gender gap is low; when there is nonlinearity the gender gap is higher. 

… In many workplaces employees meet with clients and accumulate knowledge about them. If an employee is unavailable and communicating the information to another employee is costly, the value of the individual to the firm will decline. Equivalently, employees often gain from interacting with each other in meetings or through random exchanges. If an employee is not around that individual will be excluded from the information conveyed during these interactions and has lower value unless the information can be fully transferred in a low cost manner.

The point is quite simple. Whenever an employee does not have a perfect substitute nonlinearities can arise.25 When there are perfect substitutes for particular workers and zero transactions costs, there is never a premium in earnings with respect to the number or the timing of hours. If there were perfect substitutes earnings would be linear with respect to hours. But if there are transactions costs that render workers imperfect substitutes for each other, there will be penalties from low hours depending on the value to the firm.

I’ve not seen a better single compilation of the existing evidence on the gender wage gap.

0 Responses to “Maternity penalties: average is over edition”

  • This is fascinating. Why not start with the premise we are all going to die and work back from there. These arguments get up my craw. “Work Centres”, ie people, are actually living breathing dying human beings.

    Yes, mothers “choose” to have children. Shock horror. News of the World flash! They will grow up to be consumers. Whoa…..what? We are only interested in the profit tomorrow or next week aren’t we? Why on EARTH would be invest in a consumer who wont pay back for another 20 years???

    Jury service. What is the difference if somebody in the business has a car accident – through no fault of their own other than being on the same road – and is off work for 2 weeks, 1 month or ever? Or

    Earthquake. And (a) business closes for a while. Some don’t survive. Most do. Why? Because people understand that these things happen and not surprisingly people will go out of their way to help out. Jury service is no different.

    Give us a break. Society has deemed that we shall try our fellow citizens in a court of law. Apparently it is better scheme than lynch mobs.

    So. We all pay. Employer and employee. it makes our society a better place. We decided that.

    • Ross:
      1) There are reasonable arguments in favour of random-draw jury service having social benefits. But if those social benefits really exceed the costs imposed on firms and workers affected, then we should be able to compensate them for their loss.
      2) All of my argument would apply equally well to car accidents, were there some clearly identifiable group that was at very high risk of car accidents and some other clearly identifiable group that was not. Employers would tend to avoid the group statistically more likely to be out on disability leave, or to take them only at lower wages.
      3) Even if it’s the case that a couple’s having children has benefits for society 20-years off, those benefits would be dispersed broadly; it would be silly to expect that a firm would invest in something that has trivial benefit to the firm 20-years from now and perhaps some social benefit. Like, it might happen, but we can’t bank on it. And so we shouldn’t be surprised if firms try to avoid bearing those costs. And if we think it useful that such things be accommodated, then we need to find better ways of spreading the burden equitably.
      4) You sound very angry. Have a beer.

  • I don’t think any of your arguments are necessarily wrong Ross, but they neglect the realities – both economic and social.

    Much and though I don’t think the situation that Eric outlines is fair and in fact that it has iniquitous outcomes, it DOES reflect reality.

    Fertility IS now an individual choice. As is the career one chooses. Its a business’s (or any organisation’s) right and responsibility to select and retain staff that offer the best long-term value to the business. They should all be allowed to make these choices freely.

    If society as a whole sees value in childbearing (and you point out just one good reason to do so) then society should arrange for a practical way to incentivise this choice, should it be necessary.