Assessing the Impact of Education and Marriage on Labor Market Exit Decisions of Women

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Working Paper 2010-2 February 2010 Abstract: During the late 1990s, the convergence of women's labor force participation rates to men's rates came to a halt. This paper explores the degree to which the role of education and marriage in women's labor supply decisions also changed over this time period. Specifically, this paper investigates women's decisions to exit the labor market upon the birth of a child. The results indicate that changing exit behavior among married, educated women at this period in their lives was not likely the driving force behind the aggregate changes seen in labor force participation. Rather, changes in exit rates among single women, particularly those less educated, are much more consistent with the changing pattern of aggregate female labor force participation. JEL classification: J22, J11 Key words: labor force participation, labor supply, labor market exit, opt administrative data I. Introduction and Background In the late 1990s, the steady march of women's labor force participation rates towards convergence with those of men came to a halt. There is no consensus in the literature as to the source of this change in labor force patterns, although much of the attention has focused on the behavior of married and highly educated women, especially those with children (e.g., Cohany and Sok 2007). The analysis in this paper will focus on the role marriage and education play in women's decisions to exit the labor market at a time of major transition--the birth of a child--and how the importance of those factors changed during the 1990s. The relevance of investigating exit decisions arises from the attention some literature has given to the notion that women, particularly married and educated women, are opting out, meaning they were previously attached to the labor market and are increasingly choosing to exit (Boushey 2005 and Goldin 2006). Many have identified that the recent decline in labor force participation rates of women has been concentrated among highly educated women with young children (Goldin 2006, Bradbury and Katz 2005). Others have identified both characteristics and behavior (e.g., Reimers and Stone 2007 and Hotchkiss 2006), as well as strength of the labor market (Boushey 2005), as contributors to the observed decline in labor force participation. If the declining labor force participation rates among women can be tied to changes in behavior among married and educated women, one would expect to see those behavioral changes reflected in decisions made during a particularly transitional period in women's lives. The birth of a child has been found to have a profound impact on the decision of women to exit the labor market, even among very highly educated women (Herr and Wolfram 2009). Figure 1 shows the incidence of women exiting the workforce after giving birth, based on the data used in this analysis. The exit rate flattened in the late 1990s and then began increasing in 2000 (with a slight down tick in 2002, which is the last year of available birth data). This exit pattern is consistent with the flattening out and subsequent decline of the national labor force participation rates of women which began in the late 1990s, also shown in the figure. [Figure 1 here] The analysis in this paper covers the period 1994-2002, and combines vital statistics birth information with employment data in order to capture information on the immediate factors that affect decisions to exit the workforce at time of birth, including information on the mother and child's health, the characteristics of the mother's industry and firm, and the mother's employment history. We find that the impact of marriage and education on exit decisions did change through the 1990s, but not in a way that would be expected, given the focus on the behavior of married, educated women. As it turns the exit pattern depicted in Figure 1 was driven by changing behavior of single women, both high school and college educated. …