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The wage effects of subsidized career breaks

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  • Oskar Skans
  • Linus Liljeberg

Abstract

This article studies how subsidized career breaks affect future labor market performance. The analysis uses a Swedish career break program where applications were accepted until local funds were exhausted. The rejected applicants serve as counterfactuals to derive estimates that are unaffected by selection or omitted variables. The estimated wage effect of a 10-month-long break is negative and in the order of 3 % 1–2 years after the interruption. The average applicant is estimated to have substantially lower returns to experience than the average worker. The results thus show that career breaks are costly, even for groups with low expected returns to experience, and in an environment with very compressed wages. The career breaks also induced an increase in job and task mobility whereas post-leave labor supply remained unaffected except for workers close to retirement. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Oskar Skans & Linus Liljeberg, 2014. "The wage effects of subsidized career breaks," Empirical Economics, Springer, vol. 47(2), pages 593-617, September.
    • Handle: RePEc:spr:empeco:v:47:y:2014:i:2:p:593-617
    DOI: 10.1007/s00181-013-0757-7
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    Cited by:

    1. Braga, Breno, 2018. "Earnings dynamics: The role of education throughout a worker’s career," Labour Economics, Elsevier, vol. 52(C), pages 83-97.

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    More about this item

    Keywords

    Career interruptions; Wages; Experience; Job mobility; J31; J22; J24; J26;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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