The sudden onset of problems with a child’s health substantially increases the probability of the mother working from home. Women who are induced to work at home because of such a problem earn on average 73% less than they would have otherwise.
These are among the findings of new research by Amairisa Kouki and Robert Sauer, to be presented at the Royal Economic Society's annual conference at the University of Warwick in April 2019. Their study, which analyses US data on mothers, their children and their work location to explore the relationship between working at home and women’s earnings, shows how flexible working arrangements can be costly.
It has been well established that caring for children and other family responsibilities can have a large impact on women’s careers. Family responsibilities often lead to career interruptions and earnings disadvantages for women, in part driving the gender earnings gap.
Recently, flexible working arrangements, such as working from home, have been promoted as a way to ease the economically harmful effects of investing in family. While the deleterious economic impact of family responsibilities has been well studied, there is much less evidence on the beneficial or harmful aspects of working from home.
In theory, working from home could do more harm than good. If a person takes a job with lower wages because it offers an opportunity to work at home, or working from home directly reduces productivity, then flexible work location arrangements will not lead to an increase in earnings. A desire to work at home might also signal to employers a limited commitment to the job, preventing or delaying a move up the career ladder.
The new study analyses US data on mothers, their children and their work location to explore the relationship between women’s earnings and working at home. The data are drawn from the National Longitudinal Survey of Youth (NLSY79) and the NLSY79 Child and Young Adult Survey (CYA). These two datasets combined contain detailed information on women’s earnings, location of work and family responsibilities.
One of the main relationships that the research examines is between the health status of a child and the likelihood that the mother works from home. According to the data, the sudden onset of a child health problem substantially increases the probability of the mother working from home.
The probability that a woman works at home increases by 4.7 percentage points when a child health problem occurs. This is a large increase considering that the overall proportion of women that work at home is 17.3%.
The data also reveal the magnitude of the wage penalty among women who are induced to work at home as a result of a child developing a health problem. The wage penalty associated with working at home can reach 73%. That is, women who are induced to work at home because of a child health problem earn on average 73% less than they would have otherwise. This constitutes the main evidence that working at home can be economically very costly.
In the United States, access to work-family benefits is relatively limited, compared with other OECD countries. In addition, fewer employees have access to quality of life benefits, such as paid childcare and subsidised commuting. The federal Family and Medical Leave Act (FMLA) provides employees with job-protected, unpaid leave, but part-time workers and those at the lower end of the wage distribution are generally among the most deprived of such benefits.
While there are many economic benefits to having a flexible labour market in the United States, the study concludes that more attention should be paid to designing policies that specifically address the wage penalty associated with working at home.
Tax credits for individuals who choose to work at home is one potential public policy avenue. In terms of private initiatives, employers could consider sharing more of the cost savings when employees work at home. This might have the benefits of higher retention rates and an expanded pool of labour.
Working at Home and the Female Wage Penalty: Flexible Working Arrangements Can Be Costly by Amairisa Kouki and Robert M. Sauer
