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Feb 9, 2018

The Best Work/Family Arrangements Come from Families, Not Governments

Parental leave policies, like many government mandates, often fail to produce the good outcomes hoped for or even have negative unintended consequences.

In his look at the negative effects on women’s careers of the generous parental leave policies in Denmark and other Scandinavian countries, Jordan Weismann at Slate discovers two truths that economists have been noting forever in discussions of these issues. He also overlooks two libertarian insights about the relevance of contextual and inarticulate knowledge, and the importance of processes rather than end-states, for understanding why one-size-fits-all public policies so often produce unintended and undesirable consequences.

Weismann summarizes some new research on the effects of the 52 weeks of paid parental leave and the heavily subsidized day care available to Danish parents:

After kids, their career paths split. Fathers mostly continued on as if nothing had changed. Mothers, however, saw their earnings quickly collapse by 30 percent on average, compared to what they would have hypothetically earned without children. They became less likely to work at all, but earned lower wages and clocked fewer hours if they did. Worse, their careers never fully recovered. After 10 years, women’s pay was still one-fifth lower than before they had kids.

So even with a set of policies that American progressives have long called for in the US, the gender wage gap persists in Denmark, and women’s labor force participation rates actually decline after becoming mothers. Those are very much the opposite of what proponents of such policies believe they will accomplish.

In his analysis, Weismann notes two important reasons for these results, both of which deserve a little more attention.

First, although he doesn’t quite use this language, his description of what happens to women with children is their human capital depreciates from lack of use. If you exit the labor force for some period of time, your skills can atrophy and your knowledge of your industry is not as current. You can also lose social capital by not keeping up with the personal connections that are often key to professional success.

This effect is more powerful the more the more rapidly changing the conditions are in the industry. For example, even well-paid high-tech workers can see their wages fall dramatically if they are away from work for just a period of months as rapid changes in the industry render their combination of skills, knowledge, and connections increasingly out of date and less valuable.

The result is that when you subsidize long parental leaves, the parent who takes it is going to take a wage hit. There’s no avoiding this reality and it’s consistent with economists’ insistence that most of the difference between the average salaries of men and women can be explained by just these sorts of differences in their human capital, and not by employer discrimination. Note that were it the case that men were more likely to take advantage of parental leave time than women are, it would be the men taking the wage hit. This economic effect isn’t intrinsically gendered, but if there is a gendered pattern to who chooses to step away from the labor force, that gendered pattern will show up in wage differentials.

And that leads to Weismann’s other important re-discovered truth. “In the end, many women may be happy to trade some of their career for a family life, especially when government policies make it into less of an all-or-nothing deal.” We cannot say for sure what combination of biology and socialization is responsible, but it remains an empirical social fact that women are more likely than men to take primary responsibility for household production, particularly childcare.

From the perspective of progressives, the ways in which generous leave policy subsidizes women who wish to trade off wages for more time with their kids might well be seen as problematic as they contribute to the wage gap. Of course, the expansion of part-time work in the private sector since the 1940s has always offered women (or men who wished to be primary providers of child care) the option of more finely grained trade-offs than either totally “in” or “out” of the labor force. But part-time work pays less, and women’s higher likelihood of working part-time is one of the labor force characteristics that explains the difference in average wages between men and women. Adopting a parental leave policy that makes it even more likely that women will work part-time seems to undermine the attempt by those supporting the policy to narrow that gap.

From a libertarian perspective, these policies seem like a needlessly expensive way to distort the costs and benefits facing parents as they attempt to sort out these complex questions of work and family and the trade-offs they necessitate. The question is how to navigate those trade-offs in ways that work best for the couples involved. Economics and libertarian political thought suggest two important points to consider, both of which are missed by Weismann when he, despite all of his discussion of the problems in Denmark, still thinks the US should have more generous paid leave and subsidized childcare.

First, one-size-fits-all policies are bound to backfire in these ways because they cannot take account of the contextual and often inarticulate knowledge that goes into how parents might best solve these problems. The lived reality for couples is that they sort out their work/family arrangements and trade-offs in all kinds of idiosyncratic ways that are dependent on knowledge that cannot be transformed into public policy. Knowledge about their children’s needs, the availability of childcare options (including family members), and the particular preferences and work-driven schedules of parents all matter, and will vary widely from family to family.

This is a long-standing Hayekian point about the way in which the price system enables us to make such knowledge usable by others even though we cannot express it in words or data. Faced with the actual trade-offs in terms of wages, daycare prices, and other costs that market prices provide, couples can determine how to allocate their time between the market and the household based on the knowledge communicated by others doing the same. What one-size-fits-all public policy does is undermine this process by distorting the costs and benefits of the choices they would otherwise make, which is precisely why we get the problematic unintended consequences we see in the Slate piece.

Second, libertarian theory redirects our attention away from the question of equality of outcomes (such as eliminating the gender wage gap or equalizing labor force participation rates) to the processes by which social outcomes are produced. Specifically, we can appraise the legitimacy of a particular outcome by looking at whether it was reached by a process of consent by equals. This is as true for families as it is for polities.

As Sarah Skwire and I wrote awhile back:

What a libertarian feminism tells us, in a way consistent with political theorists such as Nozick or Hayek, is that if we wish to appraise the legitimacy of a particular outcome, we should look at the process–not just the end-state. That some women are at home full-time does not mean feminism has failed (or that these women have failed feminism). It does not mean that those women are doing work that is less important than other women’s work. If that particular arrangement is recognized as the best way to solve that particular household’s need for market and household production, and has emerged out of a negotiation that is reasonably equal and absent of powerful cultural expectations, then it is no less feminist than any other arrangement so negotiated. Feminism should be about choice, not about the “one true way.” Choices such as these that are negotiated by intimates, however, are truly legitimate when they are the result of process that involves meaningful consent. We should applaud that consent and the agency to make the choice. We are under no compulsion to love the choices any particular household makes.

Public policy that pushes men and women toward a pre-determined good outcome (e.g., that women should be working full-time after they have kids) undermines the ability of couples to reach arrangements that are both truly negotiated and efficient. The alternative to using public policy is to work for cultural change that better ensures that the negotiations among heads of households are characterized by meaningful consent and the ability to recognize and possibly resist cultural expectations of what they “should” do.

In addition, working through the culture puts the burden on men to ensure that their marriages are spaces of consent and equality, and to be willing to take on more of the responsibility for household production, especially childcare, if that is the solution that makes sense in their particular context.

Bottom-up solutions are almost always superior to those imposed from the top down because they can take advantage of meaningful consent and local knowledge. If you want better work/family arrangements, don’t impose them. Instead create the conditions that allow families to work best at providing them for themselves.