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HR Policies and Maternal Labor Supply

The Example of Employer-Supported Childcare


Susanne Schneider

The author asks how far the extension of employer-supported childcare serves as a driver for higher maternal labor supply. She addresses this question by categorizing employer-supported childcare as an efficiency wage introduced by the employer to increase the working volume of mothers. Applying various impact evaluation techniques in an econometric analysis, the author concludes that the availability of employer-supported childcare has a positive impact on the length and working volume of mothers who return back to work after giving birth. Furthermore, the usage of employer-supported childcare by mothers with pre-school age children influences the amount of agreed and actual working hours positively.


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8. Conclusion

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8.  Conclusion

This thesis explored ESCC. Throughout the last century, ESCC has been provided by companies to their employees as an amenity. However, it was merely a benefit of minor impact. In recent years, still a rather minor issue in the field of childcare studies, it acquired substantial attention mainly due to the growing importance of the reconciliation of family and work. This thesis investigated the role of ESCC for maternal labor supply employing gift-exchange theory, a theory rooted in the fact that an employer is able to raise work norms by paying workers a gift in excess of the required minimum in return for an effort above the minimum required. Previously, gift-exchange theory has rarely been used in the context of maternal labor supply, which required that the theoretical framework be extended systematically by adding several factors that may be influencing maternal labor supply.

The main results of the thesis can be summarized as follows. Mothers re-enter work faster when the employer is providing ESCC before giving birth. For instance, around 24 months after childbirth, above 75 percent of mothers employed in companies with ESCC and 47 percent of the mothers employed in companies without ESCC are entering employment again. Furthermore, there is a substantial shift of mothers working part-time instead of having a minijob after childbirth. The working volume of mothers is positively influenced by ESCC when the mothers are actually using it. The effect is higher for the actual than the agreed working time. The mere availability of, or use by a partner of ESCC do not influence the working hours positively. Concerning the hypothesis, the main implications are as follows: Firstly, the section on company policy and administration showed that the usage of HR policies rather than the availability of HR policies makes a great difference. The usage of further HR policies in combination with ESCC influences maternal labor supply positively. Furthermore, the effect of an efficiency wage for the maternal working volume seems to depend on the economic sector. While the mothers working in the knowledge-based sector do not react to ESCC at all, mothers employed in the manufacturing sector and service sector increased their working volume due to ESCC. Concerning the factors in personal life, the irregular working time as well as flexible working arrangements show distinct results for each dimension. Furthermore, it has been confirmed across all specifications that mothers who are satisfied with their salary are more likely to increase their labor supply due to ESCC.

This thesis contributes to ongoing conversation in extending previous research and scholarship literature on ESCC. Focusing on Germany, this is the first study exploring the causal relationship between ESCC and maternal labor supply. Previous studies focusing on the German market used personnel data of companies exclusively, to present the situation at hand with descriptive statistics. The work at hand had questioned the classification of ESCC as an institutionalized childcare alternative to public childcare and added an extensive set of factors to investigate discursively the ESCC in relationship to various components. This analysis marks ← 177 | 178 → the first attempt to apply gift-exchange theory to a subject in family economics. The gift-exchange approach provided significant insights and new angles to this topic, which is especially remarkable since gift-exchange theory was developed to explain unemployment as a macro-level challenge.

Two-third of the working mothers with young children would prefer to increase their working volume (Lauber et al., 2014). The analysis has revealed that improper childcare arrangements are not the main reason for the choosing ESCC and increasing their working hours afterwards. It seems that the working environment is shaped in a way that the usage of ESCC provides additional incentives to work more. In case of re-entering employment, the working environment can be predominantly perceived as the direct surroundings and personal working conditions (BMFSFJ, 2008). In case of the working volume, the working environment may refer to the general working attitude, formed by standards in the economic sector. ESCC per se, thus, does not lead to a closure of the gap between actual and agreed working time, but its perception as a concessive policy for the reconciliation of family and work has the potential to do so.

An increased working volume of mothers has positive effects on the current and future financial situation of the employee. It should be noted that the impact on actual working hours is higher than the effect on the agreed working hours. Whether possible overtime is paid or unpaid thus becomes an important factor. While it is outside the scope of the thesis to evaluate this, unpaid overtime might be especially undermining for mothers since they cannot spend time with their children and they do not earn additional money to ensure their well-being. As a consequence, it can be questioned whether the overtime is voluntary, due to a great intrinsic motivation, or due to an informal enforcement by superiors. Even if overtime is voluntary but unpaid, it would be advantageous for the mother to adjust the actual working time to the agreed working time (Müller, Neumann, & Wrohlich, 2015). In the light of gift-exchange theory, it could be augmented that the reciprocate behavior of the mothers due to ESCC cannot be exclusively regarded as good will, but also as a response to informal expectations. In this case, future research is required to assess whether the increase in the actual working time can be interpreted as a gift-exchange.

Before addressing the concrete implications for the employer and the state, one can surmise that the usage of ESCC has a positive effect on the maternal labor supply. However, albeit offered, it often remains unused. It is one task of further research to investigate whether the employees cannot use it (time restriction, available spots, etc.) or choose not to use it. Certain implications can be drawn independent of this concern.

Since the mere provision of ESCC does not directly influence maternal labor supply, employers aware of the potential of working volume by employed mothers need to pursue a comprehensive approach of promoting the reconciliation of family and work. Based on the here presented results, the perceived support expressed through direct supervision or beneficial HR policies are one way of doing so. However, it seems that there are also factors shaping the working environment outside the actual influence of the employer. Since it has been demonstrated that ← 178 | 179 → the effect of efficiency wages depends also on the economic sector in general, employers need to be aware of underlying working attitudes. For instance, awards are especially effective in increasing work motivation in the public sector (Frey et al., 2013). Focusing on on-site childcare, the organization of a company-owned facility requires a substantial amount of long-term planning. Smaller companies rather cooperate with other companies than providing their own. Even for large companies, full capacity might not always be reached (BMFSFJ, 2013a). This analysis shows no proof that all mothers offered ESCC would choose to use it. Hence, it is advisable for a company to rent public childcare spots, since renting rather than providing childcare includes far less responsibility. While this analysis has aggregated the effects of on-site childcare and renting childcare spots, it would be interesting to evaluate whether the importance of the perceived working environment has the same meaning for both kinds of childcare.

Finally, the implications for the state as the predominant provider of childcare (Thater, 2015) need assessment. Arguing whether ESCC and public childcare can be regarded as complementary or substitutional requires the consideration of the following aspects: the quantitative distribution of less than four percent of the children visiting ESCC compared to public childcare facilities with over 90 percent reveals the numeric inferiority of ESCC (BMFSFJ, 2014; Seils & Kaschowitz, 2015); public childcare has been institutionalized within the society independent of other providers such as churches, or non-profit organizations (Thater, 2015). The expansion of ESCC is frequently discussed in the media, highlighting the difference between public childcare and company childcare, addressing the mixing of private and working lives, which is rather uncommon in German society (Brewster et al., 2010). The improvement options in public childcare are limited, and equally, there is no legal mandate for the expansion of ESCC as it is offered voluntarily. Considering both public childcare and ESCC, this thesis does not see them as acting complementary. Including family-related care in the equation, however, alters the analysis. Chapter 2, for example, has shown that several mothers combine institutionalized and family-based care, whereby it probably does not matter whether the institutionalized care includes ESCC and/or public childcare. In this case, ESCC and public childcare can be regarded as substitutes. Independent of the distinct classification of ESCC, the subsidies by the national government for on-site childcare might be a positive way to support maternal labor supply (BMFSFJ, 2013a). It cannot be stated whether the subsidies by the state are the (one) reason for employers to offer on-site childcare. Nonetheless, the program shows employers the importance of offering policies encouraging mothers with young children to take time off during employment. The program is in line with the paradigm shift introduced alongside the parents’ money reform in 2007.

It can be concluded that there is a substantial positive influence of ESCC on the work behavior of mothers. The results should nevertheless be seen in the light of limitations. The results do not include data about why mothers choose ESCC over public childcare alternatives. While the hypotheses and control variables provide several hints, a qualitative approach could deliver additional important insights ← 179 | 180 → (Babbie, 2015). Focus groups of mothers could be asked why they do not use ESCC when it is available, responses providing clarity and incentives to deepen research in this field. A qualitative approach could also refer to the conclusions derived from the analysis on the re-entry to work. Do mothers agree that employer concession in general are more important when re-entering employment than the distinct individual HR policy? It may also be asked whether the working conditions are too strict to provide the freedom to react above average on external incentives (for instance when working on an assembly line).

The discussion has revealed that the gift-exchange theory seems to be applicable in this context. This allows this research with its focus on labor supply to provide an important addition to scholarship on the effects of family-friendly HR policies on the working attitude. Whether the operationalization of extra effort or productivity according to the gift-exchange approach is suitable in terms of questions regarding the re-entry to work or working volume could be assessed as a result. In this context, it should be highlighted that Herzberg et al.’s hygiene factors could be extended by further determinants. For instance, the attitude of a mother towards the role of women in society in general could be included. Data available do not allow the inclusion of this variable in this kind of analysis. The focus of this thesis was the analysis of the effects of efficiency wages of maternal labor supply, not the question whether mothers should work at all, but rather if they want to increase their labor supply due to a supportive environment.

One limitation of the prevailing analysis lies in the fact that mothers might be restricted in choosing their preferred working time by the employer. For instance, the economic or personnel situation of the company does not allow to expand the working hours.

Furthermore, there are some data limitations, which should be mentioned. Firstly, the literature review has highlighted that a differentiated analysis of childcare aspects would be useful. Quality aspects in terms of the teacher/children ratio or opening hours could deliver important insights for the analysis at hand. While several questions are included on these aspects, a large quantity of missing values gave reason to include the aggregated variable on general childcare satisfaction in the empirical analysis. The dimension of job security of Herzberg et al. could not be included since it refers to the external economic situation, which is not covered in the dataset. The discussion of the results has shown that the working schedules of the father can inhabit substantial importance. For instance, it matters whether he has regular working times or not. Furthermore, some variables, which would preferably be included in the analysis, could not be utilized as the data provision is sporadic (for instance perception of stress at home vs perception of stress at work).