Self-Employment, Workplace Flexibility and Maternal Labor Supply: A Life-Cycle Model (Job Market Paper)
This paper quantifies the value of self-employment as a flexible work alternative for mothers with young children. On average, self-employed women have more control over their work schedule, hours and location than wage and salary employed women. I incorporate self-employment into a life-cycle model of married women’s fertility and employment decisions and use data from the NLSY79 to estimate the value of self-employment flexibility for mothers. I find that mothers with preschool-aged children value the package of flexible amenities in self-employment at $7,400 annually, which represents around 20% of their average wage and salary earnings. A partial equilibrium counterfactual exercise suggests that self-employment flexibility encourages married women to continue working when they have young children, raising women’s median lifetime earnings by 2.4%. Overall, my findings offer evidence that inflexible work causes mothers to leave the labor force in response to the high costs of managing work and family.
Mothers of young children often reduce their labor supply to manage household responsibilities. Workplace flexibility is an important determinant of these labor supply decisions that have lasting implications for future labor force participation and earnings. This paper provides new evidence that self-employment is a work option that mothers use to gain flexibility along multiple dimensions while maintaining labor force participation. First, I demonstrate that young children have a positive effect on self-employment propensity that is both statistically and economically significant using data from the Survey of Income and Program Participation. The results imply that the self-employment rate among women with a two year old child is 11-16 percent higher due to the birth of that child. Second, I show that self-employed women appear to have more flexibility in their work location, hours, and schedule than wage and salary women using data from the American Time Use Survey. My findings suggest that self-employment itself allows women to spend more time with their children even while working the same number of hours. These results contribute to a deeper understanding of the varied work decisions women with young children make, which will inform policies related to child care, workplace flexibility, and programs to promote self-employment.
The EITC and Self-Employment Among Married Mothers (with Katherine Michelmore)
While the EITC provides a disincentive to work for most married women, previous research suggests that it offers an overall incentive to report self-employment earnings to the IRS when filing taxes (LaLumia 2009). Using the Survey of Income and Program Participation, we use variation in EITC generosity across and within states between 1996 and 2013 to estimate the impact of the credit on married mothers’ self-employment behavior. We find the average increase in EITC generosity over this time period led to a 2 percentage point increase in the proportion of married mothers reporting positive self-employment hours in the SIPP. The same increase in EITC results in a 4.3 percentage point decline in the proportion of married mothers reporting positive wage and salary hours. Our results are consistent with previous evidence suggesting that increases in the EITC lead to lower employment among married mothers, but we provide new evidence that the EITC induces married mothers to change their employment type. Building on prior work indicating that the EITC encourages the reporting of self-employment earnings to the IRS, the response in monthly self-employment hours suggests that the EITC induces a real increase in self-employment behavior rather than only a reporting response. This observed shift towards self-employment could arise from an alleviation of credit constraints, a desire for flexible work, or an attempt to maximize the size of the credit through targeted changes in reporting and labor supply.
Non-Peer Reviewed Publications:
“Distributional Effects of Tax Expenditures.” Tax Expenditures: State of the Art, Ed. Lisa Philipps, Neil Brooks, and Jinyan Li. Canadian Tax Foundation. 2011. (With Eric Toder and Benjamin H. Harris.) PDF
“Desperately Seeking Revenue.” National Tax Journal. Vol 63. 2010. pp. 331-51 (With Rosanne Altshuler and Roberton Williams.) PDF
“Catastrophic Budget Failure.” National Tax Journal. Vol 63. 2010. pp. 561-83. (With Leonard E. Burman, Jeffrey Rohaly, and Joseph Rosenberg.) PDF
“Responsibility to Punish: Discouraging Free-Riders in Public Goods Games” Atlantic Economic Journal. Vol 36(4). 2008. (With Zachary Devlin-Foltz.) PDF