The Short- and Long-Term Effects of Family-Friendly Policies on Women's Employment

Countries often encourage part-time work among new parents as part of their family policies, aiming to foster mothers' attachment to the labor force. However, this well-intentioned approach may inadvertently impede women's long-term prospects in the labor market. We examine the impact of a 1999 Spanish reform allowing new parents to reduce working hours by up to a half while their youngest child is under age 6, along with job protection measures. Leveraging eligibility rules, we employ a regression kink design, comparing ineligible women to mothers with varying eligibility durations, and track women's subsequent work trajectories. We find that longer eligibility resulted in a modest increase in maternal part-time work during her child's early years. Mothers worked part time, on average, about one additional day for each extra month of eligibility. This rise in part-time work came at the expense of fewer days of unemployment, rather than fewer days of full-time work, and thus correlated with higher earnings. In the long term, we document slightly higher employment and earnings for those with extended eligibility after aging out of the program. The long-term effects remain modest. In conclusion, we find that the policy had minimal impact on the labor supply and earnings of women with children, both in the short and longer term.