Career and Family Decisions: Cohorts Born 1935-1975

Abstract

Comparing the 1935 and 1975 U.S. birth cohorts, wages of married women grew twice as fast as for married men, and the wage gap between married and single women turned from negative to positive. The employment rate of married women also increased sharply, while that of other groups remained quite stable. To better understand these diverse patterns, we develop a life-cycle model incorporating individual and household decisions about education, employment, marriage/divorce, and fertility. The model provides an excellent fit to wage and employment patterns, along with changes in education, marriage/divorce rates, and fertility. We assume fixed preferences, but allow for four exogenously changing factors: (i) mother's education, health, and taxes/transfers; (ii) marriage market opportunities and divorce costs; (iii) the wage structure and job offers; (iv) contraception technology. We quantify how each factor contributed to changes across cohorts. We find that factor (iii) was the most important force driving the increase in relative wages of married women, but that all four factors are important for explaining the many socio-economic changes that occurred in the past 50 years. Finally, we use the model to simulate a shift from joint to individual taxation. In a revenue-neutral simulation, we predict this would increase employment of married women by 9% and the marriage rate by 8.1%.Broadly speaking, employment rates of single men and women, as well as married men, were all fairly stable over the whole 1962 to 2015 period. 2 In contrast, the employment rate of married women doubled from 30% in 1962 to about 60% in 1995, almost approaching that of single men/women. Since 1995, the employment rate of married women has stabilized.The increase in relative wages and employment of married women coincided with an increase in their education relative to singles. But we find education alone cannot explain the increase in married women's relative wages. Selection of women into marriage based on unobserved labor market skills has also gone from strongly negative to positive.The focus of this paper is to unravel the causes of these puzzling differences in trends of wages and employment of married women relative to other demographic groups over the 1962-2015 period by analyzing behavior of cohorts born from the 1930s to the 1970s. Potential explanations include: changing selection into marriage, changing incentives to invest in human capital, increased demand for female labor, changing divorce laws, changes in availability of oral contraception, and home production technology. Thus, to understand the changes in wages and employment that occurred over this period, one needs a model that includes marriage market sorting along with individual and household decisions about education, marriage/divorce, employment, and fertility.Of course, prior literature contains many papers that address some aspects of these phenomena. For example, explanations of why wages/employment of married women have increased include: reduced gender wage discri...

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Marriage Market Dynamics, Gender, and the Age Gap

“…An alternative approach would be to model fertility as a choice variable. Recent papers that estimate non-equilibrium life-cycle models with endogenous fertility decisions include Adda, Dustmann and Stevens (2017) and Eckstein, Keane and Lifshitz (2019). Both approaches allow younger women to have greater fertility capital.…”

“…47 See Eckstein, Keane and Lifshitz (2019) for evidence on how the marriage wage premium has changed over time and the factors responsible for this. model does generate too high employment for single individuals over the life-cycle.…”

“…While the importance of extending household model to equilibrium environments is well recognised (e.g.,Chiappori and Mazzocco, 2017), in the context of life-cycle models this has previously been considered extremely difficult or "infeasible"(Eckstein, Keane and Lifshitz, 2019). An alternative framework which also incorporates a life-cycle in a dynamic marriage market model is presented in Ciscato (2019).3 To the best of our knowledge, all existing applications of limited commitment household models studies restrict marriages to be within cohort (or equivalently at a fixed age difference).4 Exceptions includeBergstrom and Bagnoli (1993),Siow (1998),Choo and Siow (2006),Coles and Francesconi (2011), Díaz-Giménez and Giolito (2013), Choo (2015), Ríos-Rull,Seitz and Tanaka (2016),Low (2017), andGershoni and Low (2018).…”