Précis
Power couples and location choice
Child care costs and employment
Unionization and productivity
Power couples and location choice
For dual career households, decisions about where to live can be especially complicated because two careers need to be taken into account when the household is facing relocation. In a recent working paper from the National Bureau of Economic Research, Dora L. Costa and Matthew E. Kahn study household location choice and "power couples" (in which both husband and wife have a college education).
The data for this study come from integrated public use micro samples from the 1940 and 1970–90 censuses of population. It was not possible to use census data for 1950 or 1960, because for 1950, the education of both spouses in couples was not available, and for 1960, the metro-politan area was not identified. The study analyzed data on marital status, age, sex, race, education, labor force status, occupation, and metropolitan area. The researchers restricted the sample to pairs in which the husband was between ages 25 and 45, to ex-clude couples who are towards the end of their careers.
Costa and Kahn find that as of 1990, power couples were more highly concentrated in large metropolitan areas than they were earlier in the century. They estimated that at least half of the rise was due to the increasing severity of the location-choice problem for college-educated couples. In addition, Costa and Kahn find that the relative returns for power couples of living in a large city compared to a small city have grown over time. Large metropolitan areas may be attractive to many couples, because they tend to offer a greater variety of job opportunities than other areas.
Child care costs and employment
Along with the trend in recent decades of growing numbers of two-career couples, there has been a trend of increasing labor force participation of mothers of young children. As Patricia M. Anderson and Phillip B. Levine describe in an NBER working paper, only 12 percent of women with children under age 6 were in the labor force in 1947, but by 1996 that figure was 62 percent. This increase has made child care a more prominent concern. In "Child Care and Mother’s Employment Decisions," Anderson and Levine review evidence on the responsiveness of the labor supply of mothers to child care costs. They also derive their own estimates of this response and how this varies with women’s skill levels.
For their study, Anderson and Levine utilized data from the early 1990s from four panels of the Census Bureau’s Survey of Income and Program Participation. The sample in the study was restricted to women with children under the age of 13. Education was used as a proxy for skill level, with the sample divided into three groups: less than high school education, high school graduate, and more than high school.
About 38 percent of families in the sample paid for child care. The least skilled mothers were least likely to pay for care, while the most skilled were most likely: About 30 percent of the lowest skilled paid for care, compared with 43 percent of the highest skilled.
Anderson and Levine measured the elasticity of the labor force participation of mothers with respect to the cost of child care. Their results suggest that the range of elasticities for all women with children under age 13 is between –0.055 and –0.358. The results also indicate that the elasticity is larger for less skilled workers and declines as skill level rises.
Pay and productivity are concepts that are closely linked in economic theory. And, as a matter of historical fact, Madeline Zavodny of the Federal Reserve Bank of Atlanta writes in the Bank’s Economic Review that rising real compensation tracked fairly well with improvement in labor productivity until relatively recently. Starting in the mid-1970s and continuing through the mid-1990s, she observes productivity growth was "anemic" and wage growth was even more sluggish.
Because unions are in the business of raising wages for their members and union membership rate declined over this same period, Zavodny examines the relationship between the unionization rate and any gap between wages and productivity. She hypothesizes, "If the decline in unions partially underlies the wage productivity gap in manufacturing, then the difference between productivity growth and compensation or wage growth should be smaller in industries with higher initial unionization rates; industries with smaller declines in unionization rates should also have a smaller wage-productivity gap than industries with larger declines in unionization."
Zavodny’s regression analysis of this relationship controlled for employment growth, capital investment at the industry level, international trade, and fixed-year effects suggests that industries that were more unionized at the start of the period indeed experienced smaller increases in the wage-productivity gap. However, the gap does not rise significantly faster in industries with declining unionization rates. Factors with strong associations with a smaller wage-productivity gap were rising employment and, perhaps, an increasing share of exports in an industry’s total shipments.
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