Wednesday, May 27, 2015

Unintended Consequences

The New York Times reports on the unintended (and unwanted) consequences of family-friendly policies. The basic story is in the first three paragraphs:
In Chile, a law requires employers to provide working mothers with child care. One result? Women are paid less.

In Spain, a policy to give parents of young children the right to work part-time has led to a decline in full-time, stable jobs available to all women — even those who are not mothers.

Elsewhere in Europe, generous maternity leaves have meant that women are much less likely than men to become managers or achieve other high-powered positions at work.
So much for overseas, what about in the U.S.?
Unlike many countries, the United States has few federal policies for working parents. One is the Family and Medical Leave Act of 1993, which provides workers at companies of a certain size with 12 weeks of unpaid leave.

Women are 5 percent more likely to remain employed but 8 percent less likely to get promotions than they were before it became law.
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There is a lesson here for those agitating for a higher minimum wage or family leave. Fewer individuals will have jobs when the cost of employment is raised.

Employers neither are, nor should they be, social justice warriors. Employers are economic entities; this I assert as a lifelong Management professor.

A firm's decision to hire a non-family member is the result of a cost-benefit analysis which found the output of the person hired would add more to the firm's bottom line than he or she would cost in wages, benefits, and taxes. When employment costs rise, the decision will more often be negative, a decision not to hire.

If firms anticipate higher employment costs and more scheduling inconvenience associated with hiring women, they will be likely to hire fewer women, assuming equal productivity.  Women more often become executives in the U.S. because we have fewer laws requiring their special treatment, another unintended consequence.