DP208 The Cash Opportunity of Childbearing: An Approach Using British Data

Author(s): Heather Joshi
Publication Date: December 1987
Keyword(s): Child Care, Earnings Function, Fertility, Human Capital, Labour Supply, Lifetime Income
JEL(s): 813, 821, 824, 841, 851
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=208

The opportunity costs of rearing British children, in terms of cash earnings forgone by their mother, are estimated for a typical family. Data from the 1980 Women and Employment Survey provide estimates for hourly pay as a function of work experience and current hours of work. In addition, these data are used to generate participation and hours profiles for representative women with different numbers of children. These are then combined with the earnings function to simulate lifetime income. The simulations indicate that the earnings forgone as a result of bearing and rearing two children can be decomposed into three effects, of approximately equal magnitude: on participation, hours and pay. These effects exceed the direct costs of children and do not rise proportionally with family size. In addition, forgone earnings are sensitive to the spacing of births but not (undiscounted) to the timing of the first birth. The methodology and results of these simulations contrast markedly with those of a similar study of United States women. We argue that the non-linearity of the earnings function in our study and state dependence in British labour force transitions violate the assumptions of the multi-state labour force life-table on which the United States study was based.