Economic model explains why Dutch mothers often work restricted hours and earn less than men

Why do Dutch women who have a family often work restricted hours and earn less than their male colleagues? Surprisingly, in economics little is known about how couples value togetherness, what benefits and costs it accrues, or how it interacts with other uses of time.

Family Time Model

The model of family time the economists developed features both the benefits and costs of togetherness. The model reflects that joint leisure is desirable on the grounds of companionship and that joint childcare is beneficial for children’s development. It also reflects that both joint leisure and joint childcare imply significant costs.

First, togetherness requires spouses to synchronise their schedules to be physically together at the same time. This implies that those who prefer joint time may have to renounce a job that requires flexibility. Yet, being flexible at work is often associated with a wage premium. Second, while joint childcare may improve the quality and impact of care, it hampers division of childcare duties in time which increases the need for another, perhaps costly caregiver or daycare.

The model includes these factors and allows us to understand how time use (including joint and seperate uses) is affected by economic circumstances, such as wages in the labor market, the timing of work, or the costs of day nurseries. It also allows for monetizing the additional value (if any) that joint time has over separate time, and estimate the amount of joint childcare in the household – a component not typically observed in survey data.

The value of family time

On the basis of survey data from the Dutch LISS panel, Theloudis and his colleagues find that partnered individuals spend substantial amounts of time together. In the vast majority of households, both mothers and fathers do childcare. The more time the mother devotes to childcare, the more time the father also devotes. Only 2% of fathers do not do any childcare at all.

Households are willing to pay on average €1.2 per hour (10% of the hourly wage or about €200 per month) for an hour of joint leisure over private leisure. Households are willing to pay €2.1 (17% of the hourly wage or about 350 euro per month) for an hour of joint childcare over separate childcare.

Working fewer hours

The family time model suggests that the spouse who works fewer hours in the labor market will potentially also restrict the timing of their job (or renounce jobs that require flexibility) in order to increase togetherness in the household. If women work fewer hours than men due to lower pay or other reasons, they will then restrict the timing of their work to synchronize their work schedule with that of their husband’s and increase togetherness between them. If being flexible on the job pays a premium, women forgo such premium and earn lower overall wages that further feed the gender wage gap.

Demand for togetherness may thus help explain both the gender wage gap and the high rates of female part-time work. Given women’s lower historical hours of work, gender differences in the timing of work arise endogenously in the model, i.e. as a choice due to demand for togetherness. These differences then feed into a pay gap between men and women.

Recommendation

One may argue that policy should do nothing to eliminate a timing-of-work related pay gap that is the outcome of people’s choices. This line of argument is, however, incomplete, says Theloudis. Togetherness improves marital stability and child development with welfare-improving consequences for individuals and the economy. If women disproportionately pay the cost of this welfare, then there is scope for policy to compensate them for this.

Read more

• See also this blog by Theloudis;
• The scientific paper Togetherness in the Household by Sam Cosaert, Alexandros Theloudis, and Bertrand Verheyden will be published in the American Economic Journal: Microeconomics.