The effect of job displacement on women’s fertility decisions

Emilia del Bono, Rudolf Winter-Ebmer, Mon, 02/25/2008



Over the last century women’s role in the labour market has gradually changed from secondary workers with limited planning horizon to equivalent partners or independent decision makers with a life-time planning perspective. This means careers or jobs that provide opportunities for promotion and advancement have become more desirable for females and labour market conditions that impede the establishment of stable careers early in their lives like unemployment, temporary jobs or involuntary turnover, may be reasons for a delay or even a permanent reduction in fertility. The authors of CEPR DP6719 explore how women’s fertility decisions are affected by these considerations and find that certain stages of their careers might be particularly sensitive to labour supply interruptions.

The paper investigates the effect of job displacement on the probability of having a child in the following period. A career interruption not only forces the individual to start anew with a different employer, but also causes significant reductions in future wages and earnings, so that its effects are felt in the long-term. The authors identify four key effects of job loss on fertility outcomes. The first two are the income effect, which result from the inability to smooth consumption over time and the opportunity cost effect, stemming from the lower value of time during a period of unemployment. A third one arises from the loss of future income that is incurred if a woman is unable to invest in human capital at crucial stages of her career, for example a female with a young child is not able to keep up with the intensive training that occurs in the first few years on a new job. The final effect operates through the job finding rate, as pregnant women or those with small children might be less attractive to potential employers.

The authors use data on firm closures identified in the Austrian Social Security Database, which covers all women in the labour market. The results reveal that job displacement reduces the number of children born by 5 to 10% in the short and medium term (after 3 and 6 years respectively). Furthermore, the reduction in fertility is largely due to the behaviour of women in white-collar occupations and higher earnings group. There is evidence provided that this reduction is not due to the income loss generated by unemployment but arises because displaced workers undergo a career interruption. All these results imply that measures aimed at protecting young mothers’ careers prospects and labour market attachment must be implemented such as provision of child care facilities, full-time schools and more flexible working-time arrangements.

DP6719 Clash of Career and Family: Fertility Decisions after Job Displacement

Summarised by CEPR staff

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Topics:  Labour markets

Tags:  unemployment, human capital, fertility, plant closing


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