Perinatal Family Labour Supply: Historical Trends and the Modern Experience

The predominant perspective on perinatal family labour supply in the theoretical and empirical economics literature is that careers and children are simultaneous choices, so conditioning on the prenatal career ambitions of individuals, and particularly women, the event of a birth has little or no effect on labour market behaviour. There are, of course, many reasons to believe that this “allor- nothing” view, rooted in assumptions of perfect foresight, overlooks significant labour market effects of children and that due to various trends, including rising correlation in husband-wife earnings, these effects may becoming increasingly important. Using historical Canadian Census data and rich longitudinal microdata, I use nonparametric techniques to identify discontinuities in employment probabilities, hours of work and wage outcomes of parents, and particularly dualcareer couples, in the months just before and after a first birth. The evidence indicates that although the vast majority of new mothers and fathers who were employed prior to birth, maintain that employment, a non-trivial percentage of women (roughly 20%) appear to give up employment entirely after a birth and roughly half of them will not have returned to work 5 years later. More importantly, the percentage that drop out of the labour force is increasing and has been for at least the past two decades. This decrease is particularly evident among more educated and older women. Further, among new mothers and fathers who maintain their employment through the perinatal period, there is evidence of other types of labour supply adjustments including significant decreases (mothers) and increases (fathers) in both usual monthly hours of work and hourly wages. There is also evidence of increased probabilities of job changing in the year just before and after the birth for fathers, but not for mothers. Together these findings provide a much richer perspective on how today’s dual-career families balance work and child rearing. In terms of its policy relevance, the findings emphasize the importance of measures that support parents in balancing work and family time, as opposed to measures that are focused on enabling parents, and particularly women, to maintain uninterrupted careers while raising children.