I show that highly educated millennial Americans search for employers that provide parental leave, and that women’s stronger willingness to pay for this benefit contributes to the early-career growth in the gender wage gap. Using an hedonic job search model, I estimate that workers are offered higher wages when hired by employers providing paid and unpaid parental leave, but women are willing to pay, respectively, 40% more and 56% more than men for these benefits. While all workers search for jobs and experience wage growth by entering firms offering both high pay and valuable benefits, the gender wage gap increases as young women accept lower wages, compared to men, upon receiving job offers from employers who provide parental leave. While the early-career growth in the gender wage gap would decline by 75% if willingness to pay for parental leave did not differ across genders, a policy mandating and subsidizing parental leave provision could itself halve the early-career wage-gap growth. The widespread availability of parental leave would lessen workers’ need to accept lower wages in exchange for its provision, reducing the gap in accepted wages between men and women entering leave-providing firms.
“The Underworked American? Explaining the Rise and Fall in Long Workweeks” (new draft available soon)
I document that work-hours have been increasing in the United States between the 1980s and the mid-1990s, before steadily declining until the end of the 2010s. These trends were predominantly driven by secular changes in the share of young, salaried employees working long hours (more than 40 hours per week) in high-pay jobs. Using a Gicheva (2013)-type model where long work-hours increase young workers’ promotion probabilities in career-oriented jobs, I show that the inverted U-shaped trend in overtime work can be explained by changes in labor demand that increased (in the 1980s-1990s) and decreased (in the 2000s- 2010s) the life-cycle wage premia that young employees expect to obtain when supplying overtime work hours. In the model, changes to the life-cycle wage premia from working long hours also result into changes in the spread of permanent income across employees supplying different amounts of work-hours. I then estimate long-run trends in persistent and transitory wage dispersion and show that persistent wage dispersion grew in the 1980s and 1990s and declined thereafter. Thus, the increase and decline of life-cycle wage premia for working long hours reconcile the inverted U-shaped trends both in overtime work and in persistent wage dispersion. These results are suggestive that, after surging in the 1980s and 1990s, the “fortunes of the youth” (Beaudry, Green & Sand 2014) may have been declining later on, due to shifts in labor demand that flattened the life-cycle wage profiles that young, salaried employees can obtain when supplying long work-hours.