Professor Nina Smith, Department of Economics December 3-4, 2004 A model to aspire to? Experiences from the Nordic countries on Parental Leave schemes

Professor Nina Smith, Department of Economics Major reforms in the Nordic countries Sweden 1974: Maternal leave of 3 months is introduced, later on in Denmark and Norway large expansion publicly provided (and highly subsidized) childcare – especially Denmark is in front 1 month father quota is introduced in Sweden in 1995, in 1993 in Norway, in 1998 in Denmark (but dropped again in DK in 2002) More flexible schemes are introduced in Sweden and Norway – later on in Denmark and Iceland 2001: Iceland: 9 months leave ·3 months for the mother ·3 months of parental leave ·3 months (only) for the father

Professor Nina Smith, Department of Economics Leave schemes in the Nordic countries 2004

Professor Nina Smith, Department of Economics Experiences from the Nordic countries on Parental Leave schemes On the positive side: Welfare of families and children Ageing population: High female participation rate is needed without too negative effects on fertility OECD (Employment Outlook, 2001, Ch. 4) Praised the Scandinavian welfare states for their family friendly policies: Scandinavian countries have been in front with respect to family friendly policies High female participation rate even for mothers with young children and fertility has not decreased far as much as in other OECD countries

Professor Nina Smith, Department of Economics Maternal leave (weeks), source OECD (2001)

Professor Nina Smith, Department of Economics Child care coverage (%) for children 0-2, source OECD (2001)

Professor Nina Smith, Department of Economics Employment Rates for Women in Families with a Child less than 6, OECD 2001

Professor Nina Smith, Department of Economics On the negative side: Womens labour market career – gender equality. The nordic countries have been in front with respect to womens labour force participation - but not with respect to gender equality in a number of other dimension

Professor Nina Smith, Department of Economics On the negative side: Gender wage gap is low, but has not decreased the latest 25 years Low gender wage gap is mainly the result of a compressed wage distribution Gender wage gap has increased among highly educated groups – Scandinavian women have not got much out of an increased educational level and much more labour market experience Women tend not to get top positions - very few female CEOs or professors in the Nordic countries But women at the bottom of the qualification distribution have improved their position The Nordic labour markets are highly segmented – more than half of women employed in public sector, while only about 20% of men are publicly employed

Professor Nina Smith, Department of Economics The effects of the leave schemes – recent re- sults from Denmark and other Nordic countries I: Lost human capital and statistical discrimination effects – all women are punished when leave schemes are general with 100% coverage and mainly women take up these schemes (Source: Datta Gupta and Smith, 2002) II. Segmentation effects : The public sector offers more family friendly work environment (varies between countries). Collective agreements: More generous leave schemes etc. At the expense of wage increases. Example Denmark: 100% compensation in public sector, on average 60% in private sector wages are about 14% lower in public sector compared to private sector for comparable jobs Women who intend to get children select into the public sector where they are not penalized as mothers, Source: Nielsen, Simonsen and Verner (2004)

Professor Nina Smith, Department of Economics Wage profiles, Public sector (15-16 years of education), source: Nielsen et al. (2004)

Professor Nina Smith, Department of Economics Wage profiles, private sector (15-16 years of education), source Nielsen et al. (2004)

Professor Nina Smith, Department of Economics The effects of the leave schemes – recent re- sults from Denmark and other Nordic countries I. Lost human capital and statistical discrimination effects II. Segmentation effects III. Fathers do not use parental leave! – until father quotas are introduced: Economic incentives for mothers, not fathers, to take up leave when compensations are not 100% Fathers are less punished in regimes with father quotas compared to taking up parental leave: Less signalling of being a soft man

Professor Nina Smith, Department of Economics Fathers do not use parental leave - until father quotas are introduced: Example from DK DENMARK Number of weeks of paternal and maternal leave divided by number of children born in the year, , Source Smith (2000) and Statistics Denmark

Professor Nina Smith, Department of Economics In Sweden father quotas have changed the behaviour of fathers Distribution of leave (weeks) Source: SOU 2003:36

Professor Nina Smith, Department of Economics A Model to Aspire to? Yes – but still many things to do: Maternal/parental leave: The cost of extending leave schemes in terms of lost labour supply and financial costs Higher compensation rates will induce more fathers to take up leave More/longer father quotas? Forcing the family? Or parallel to discussions when split taxation instead of joint taxation was introduced (in many countries incl. UK) Empirical evidence: The only way to get fathers to take up parental leave without being punished in the labour market More flexible schemes: May be much more attractive for fathers... and career oriented mothers May not be attractive for the employers – at least from a short run perspective Alternative to extended leave schemes: Publicly provided childcare (of good standard) during childs first year (the welfare of the child, costs for the public and womens labour market attachment)

Professor Nina Smith, Department of Economics Main References OECD, Employment Outlook, 2001 (Chapter 4) Datta Gupta, N. and N. Smith (2002), Children and Career Interruptions: The Family Gap in Denmark. IZA discussion paper #263. Economica, 69 (276), ), downloadable from ftp://ftp.iza.org/dps/dp263.pdf Datta Gupta, N., R. Oaxaca and N. Smith (2003), Swimming Upstream, Floating Downstream: Trends in the US and Danish Gender Wage Gap, IZA DP #756, IZA Bonn, downloadable from ftp://ftp.iza.org/dps/dp756.pdf Rosholm M. and N. Smith (1996), The Danish Gender Wage Gap in the 1980s: A Panel Data Study, Oxford Economic Papers, 48, pp Nielsen, H. S., M. Simonsen and M. Verner (2004), Does the Gap in Family-friendly Policies Drive the Family Gap?, Working Paper 02-19, Department of Economics, Aarhus School of Business, forthcoming in Scandinavian Journal of Economicshttp:// Bonke, J., N. Datta Gupta and N. Smith (2003), Timing and Flexibility of Housework and Men and Women's Wages, IZA Discuassion paper #860, IZA Bonn, downloadable from ftp://ftp.iza.org/dps/dp860.pdf Pylikova, E. And N. Smith (2004), The Impact of Family-Friendly Policies in Denmark and Sweden on Mothers' Career Interruptions Due to Childbirth, IZA Discussion Paper no. 1050, IZA Bonn. Blau, F. and L. Kahn (1997), Swimming Upstream: Trends in the Gender Wage Differential in the 1980s, Journal of Labor Economics 15, 1-42 Albrecht, J., Bjorklund, A. and Vroman, S. (2003), Is There a Glass-Ceiling in Sweden?, Journal of Labor Economics, 21 (1),