The change of employment status and wage before and after parental leave in Germany: Economic theory and empirical evidence using the GSOEP from 1984-2004 Berlin, 30 th June 2014 Alexander Labeit, MD, PhD Center for Outcomes Research (COR) University of Illinois College of Medicine at Peoria Email: labeit@uicomp.uic.edu Phone: 001-309-671-8424
Overview Part 1: Family policy and institutional regulations during the period of maternity leave and parental leave Part 2: Economic theories Part 3: Labour force participation after protected periods of childbirth (maternity leave and parental leave Part 4: Re-entry into employment after childbirth Part 5: Change of income after interruption of the employment by childbirth Part 6: Conclusions and future research 2
Packages of measures for better compatibility between family and work I Group 1: Incentives for employment interruption and exit from employment German Federal Act on the Payment of Child Raising Benefit and Child Raising (BErzGG) (1986): Payment of child raising benefit and parental leave State specific child raising benefit laws Cicil service law: long-term leave of absence Company specific possibilities of advanced parental leave Parental leave law (1985) in the statutory pension insurance Employee promotion law (Beschäftigtenförderungsgesetz ) (1985): temporary replacement subsitution 3
Packages of measures for better compatibility between family and work II Group 2: Promoting the reintegration after employment exit AFG regulations (training, retraining, among others) Qualification Offensive" BMJFFG model program (1989-1993) Offers from municipal and community service associations Group 3: Reconciliation of work and family life Promotion of part-time work by law, labour collective agreements and in the public service Promotion of part-time work without paying social security taxes Infrastructure development: kindergartens, nurseries, full-day schools 4
Regulation of the Maternity Protection Law (MuSchG) in the FRG Paragraph Content Restriction 1 MuSchG Conditions of entitlement All dependent employed pregnant women in Cchildbed 2 MuSchG Organization of the work place Listing of forbidden and constricted activities for becoming mothers 3, 4 MuSchG Leave of absence right and work restrictions for pregnant women 6 weeks before childbirth delivery Listing of all forbidden and restricted activities 6 MuSchG Work restriction after childbirth 8 or 12 weeks after childbirth 8 MuSchG Restriction of activities Listing of all restricted activities, work conditions and work times 9 MuSchG Ban of layoff During pregnancy and until 4 months after child labour 11-14 MuSchG Salary replacement Service provision through health insurance and employer 5
German Federal Act on the Payment of Child Raising Benefit and Child Raising (BErzGG) Paragraph Content Provison 15 BErzGG Conditions of entitlement and entitled persons All dependent employed women and men with a living child in the household and own child care of this child 15 BErzGG Duration Until to the third living year of the child 15, 16 BErzGG Possibilities of arrangement 18 BErzGG Right of return and professional protection of workplace Determining the configuration of the parental leave prior to the start Possible change only with the consent of the employer Possibility of three-time exchange between parents Work part-time employment up to 19 hours Protection from the termination of employment 6
Changes of the German Federal Act on the Payment of Child Raising Benefit and Child Raising Leave (BErzGG) Date of the BErzGG Date of validity of law Duration of parental leave Child-raising allowance 06.12.1985 01.01.1986 10 10 06.12.1985 01.01.1988 12 12 30.06.1989 01.07.1989 15 15 30.06.1989 01.07.1990 18 18 12.12.1991 01.01.1992 36 24 05.12.2006 01.01.2007 36 24 7
Changes of the German Federal Act on the Payment of Child Raising Benefit (BErzGG) Paragraph Content Regulations 1, 3, 4 BErzGG Eligibility requirements and legitimate All children under 2 years of age in the household Own care of the child no, or no full-time employment Use only by a parent Income below certain thresholds 4 BErzGG Duration Until the second year of the child life 5 BErzGG Level Maximal 300 per month and child 8
Separation of the time in 3 different periods 9
Economic theories relevant for work interruption after a childbirth Human capital theory Signal theory Microeconomic household theory Gender discrimination in the labour market Theory of internal and external labour markets 10
Dependency of wage rate from age and employment interruption 11
ecision for return-to-work from reservation, market and net wage Condition for return-to-work decision: w k t R(t) 12
Dividing time between leisure, household and work time Condition for return-to-work decision: w k t R(t) 13
mployment status 9 month before childbirth Emplyoment status Employment status after maternity leave 9 months after birth No employment PT employment FT employment PT employment 246 67 3 FT employment 518 33 70 Emplyoment status Employment status after parental leave 9 months after birth No employment PT employment FT employment PT employment 139 117 10 FT employment 518 143 76 14
Logistic regression for return after maternity leave 15
Considered variables for the re-entry into the labour market Including as independent variables: Age, marital status, number of births School education (years), labour market experience, job tenure, change of employer (after parental leave), size of enterprise, public sector, employment status (full- or part time employment Absolute level of net income of the woman and the man, relative proportion of the women to the household net income, difference in education between man and woman Level of child raising benefit, potential maximal duration of parental leave in the birth year, birth year Survival regression: end of parental leave period 16
Model of re-entry after extending parental leave Including as independent variables: Age, marital status, number of births School education (years), labour market experience, job tenure, change of employer (after parental leave), size of enterprise, public sector, employment status (full- or part time employment Absolute level of net income of the woman and the man, relative proportion of the women to the household net income, difference in education between man and woman Level of child raising benefit, potential maximal duration of parental leave in the birth year, birth year Survival regression additional: end of parental leave period 17
KM survival estimate for return to work within parental leave 18
Discrete Cox regression for return-to-work during maternity/parental leave 19
Discrete Cox regression for return-to-work during maternity/parental leave 20
KM survival estimate for return to work after parental leave 21
Discrete Cox regression for return-to-work after maternity/parental leave 22
Discrete Cox regression for return-to-work after maternity/parental leave 23
Estimation of Mincer like wage rate equation Modified Mincer equation: lny t = α + ( r Including as independent variables: Marital status, number of births School education (years), labour market experience, job tenure, change of employer (after parental leave), size of enterprise, employment status, Full- or part time employment, industrial sector, working hours, hours of household time Total employment interruptions in years differentiated into: unemployment spells, household time, parental leave spells Estimation of wage equation with taking a selection correction term into consideration (Select-term) Specific year s s δ ) + s ( r * * * 1 k1 δ 1) e1 + ( r2 k 2 δ 2 ) e2 + ( r3 k3 δ 3 ) 24 e 3
Estimation of employment participation of women in the 2-equation model (wage equation and labour force participation) 25
FE panel regression for gross wage rate with Heckman select term 26
FE panel regression for gross wage rate with Heckman select term I 27
Relationship of gross wage rate and gross income after return to work and before birth 28
Conclusions I In the multivariate logistic regression analysis after the end of the maternal leave period there are only few significant variables. For 2 analyses - analysis period within parental leave analysis period after parental leave) using discrete survival analysis techniques there are only few significant variables explaining the return-to-work decision. Some of the hypotheses derived from microeconomic household theory and human capital theory for the return-to-work decision in the logistic and discrete survival time regression could be confirmed and others must be denied. Different interruptions in the working career influence the gross wage and gross income of women. A differentiation is made between 3 types of interruptions: spells of household work, spells of unemployment and spells of parental leave and spells of the same type are summed up. 29
Conclusions II A fixed effects model with an unbalanced panel and with a Heckman selection correction and gross wage as dependent variable shows that different types of interruption have different effects on the wage. Some of the hypotheses derived from microeconomic household theory and human capital theory could be confirmed and others must be denied. Spells of unemployment have the biggest income reduction (5,1% wage reduction for one year unemployment), followed by parental leave interruptions (2,3% wage reduction for one year parental leave). Household work interruptions have no significant effect. Further hypotheses derived from human capital theory and theory of internal and external labour markets are confirmed and also the work effort hypothesis. 30
Thank you for your attention! Any questions, comments and further ideas 31