Mothers lose £50,000 in lifetime earnings raising two children, claimed Research Fellow Heather Joshi in a lunchtime talk on 18 January. These foregone earnings are far larger than is realized. Joshi argued that in some cases it may even pay fathers to earn less and assume more responsibility for child raising, so that their wives do not suffer this loss of earning power!
Joshi argued that her results have important implications for women's pension arrangements, for the structure of child benefit, for compensation to mothers after the break-up of marriages, and for the implementation of Equality of Opportunity. Policies to promote job sharing for both sexes are also involved. She called for measures to reduce the after-tax cost of child care and to make it easier for fathers to share more fully in child rearing. In her opinion, conventional arrangements are not only unfair to women, but wasteful of human resources.
There are many costs and benefits of parenthood. Joshi's research concentrated on the cash consequences of motherhood, measured in terms of foregone lifetime earnings. The loss of earnings arises in three ways: through absence from the labour force; through shorter hours worked on return to the labour force, because of part-time working; and through lower rates of pay in the jobs to which mothers do return.
The most obvious effect of motherhood is on labour force participation. It usually causes women to leave paid work. Joshi argued, however, that this is not the whole story. Differences in the numbers of hours worked and in rates of pay when mothers returned to the labour force were also very important.
Mothers seldom leave the labour market permanently. Do they return to the same type of job they would have had if they had remained childless? Joshi contrasted the work patterns of mothers and of childless women. She noted that childless women seldom work part-time while employed mothers often do; this loss of hours worked represents another cost of motherhood. In addition to the effects on hours worked, Joshi drew attention to the impact of motherhood on rates of pay. She noted that workers who follow an uninterrupted career often achieve higher levels of pay through promotion, seniority or experience; these opportunities are foregone by women who interrupt their employment to raise children. In effect, mothers are unable to accumulate as much human capital because of interrupted employment. Joshi also noted the "crummy jobs' effect: mothers who do return to paid work often accept poorly paid part-time jobs, which do not utilize fully their skills or training, in order to fit employment into their family roles. Motherhood may therefore oblige women to accept lower-paying jobs than they might otherwise have obtained.
Joshi used the 1980 "Women and Employment' Survey to examine these questions. She applied regression analysis to the survey data to assess the factors which affected whether or not women were in the labour force. The analysis, which is detailed in CEPR Discussion Paper No. 40, "Participation in Paid Work: Multiple Regression Analysis of the Women and Employment Survey' also dealt with variations in hours of work and rates of pay. Joshi used the results to construct a summary measure of the cost of parenthood based on the effect of child bearing on the mother's lifetime earnings.
Joshi described the career of a hypothetical "Illustrative Woman' on the assumption that she has zero, one, two or three children. Joshi traced the woman's pattern of work and earnings over her adult lifetime, allowing for interruptions in her employment and part-time work. The analysis of the survey data suggested that an illustrative mother of two spends six fewer years at work than her childless counterpart. This results from a loss of nine years of full-time employment, offset by a gain of three years of part-time work. Two children reduce her lifetime earnings by approximately #50,000 , if she has average earnings potential. With only one child the time lost to paid employment would not be halved, and neither does absence from the labour force rise proportionately for a third child. The lifetime earnings foregone are #35,000 with one child or #62,000 with a three-child family according to Joshi's estimates.
Interruptions to employment also affect chances of promotion and hence the wages women command on their return to the labour market. Women who have been employed continuously are better paid than those who have interrupted their previous employment. Joshi found that average hourly pay after age 25 was reduced by six, eight and eleven per cent for the mothers of one, two and three children respectively . Joshi noted that the combined hours and rate-of-pay effects of child-bearing on women's earnings may be as important as the more familiar effect operating through labour force participation.
Joshi argued that current conventions oblige women to pay a price for the pleasures and responsibilities of parenthood. This price is a loss of financial independence. This would not be a cause for concern if marriages successfully guaranteed compensation to mothers, but it is when they end in divorce.
Equitable compensation to home-makers on divorce would ideally require ex-husbands to provide some alimony. Joshi's research suggests that the sums required to compensate mothers for their loss of earning power would often be impractical, especially if the husband supported a second wife. A better solution, she suggests, lies in promoting women's financial independence during marriage . This could be done by reducing the barriers to combining employment and domestic responsibilities. Measures which reduced the cash consequences of parenthood for mothers would also reduce the compensation required if the marriage should end.
Joshi maintained that the pattern of specialization between spouses not only puts women at a financial disadvantage, but is also inefficient for society. It may lead to under-utilization of female human resources by the labour market. If fathers shared responsibility for child rearing, the gain from better utilization of women's skills might exceed the loss of production from male members of the labour force. Joshi suggested a series of measures which could make this role-sharing by both parents a more realistic option and increase the availability of child care outside the family. These included more opportunities for part- time employment and job-sharing in the better-paid sectors of the labour market, flexible hours for employed parents and parental leave for workers of both sexes, as well as better provision of neighbourhood and work-place nurseries. She also called for the tax deductibility of child care expenses instead of the present taxation of child care provided by employers.
Joshi noted that commercially provided child care is not commonly available in Britain. Such care is more popular in France or the United States; the tax system is an important reason. Discussion also touched on the "price elasticity' of children. Even if Joshi's estimates of the cost of parenthood were accepted, would variations in this "price' affect the number of children? Joshi replied there would certainly be a timing effect on birth rates, an effect which would be discussed in a lunchtime talk by John Ermisch.
Joshi concluded by raising a spectre. She argued that if society does not reduce the cash consequences of motherhood, it may yet find a generation of women who avoid these consequences by avoiding motherhood. These women would then earn a "man- sized' pension entitlement, drawn from the earnings of a succeeding generation which is too small to sustain such pensions.