Leaving the Shadows Behind? Effects of Domestic Workers Reform on Mothers’ Formal Employment

What happens when new labor regulations are implemented and enforced while a welfare cash transfer program is already in place? Argentinean National Law 26.844 of 2013 aimed to increase formalization rates in the domestic work sector by increasing access to benefits for workers and enforcement mechanisms for household employers. Compared to those with older children, a 5 percentage-point lower increase in formalization among domestic workers with children under 18 years of age (a key eligibility criterion for welfare) is found after the introduction of the regulation. Moreover, there is suggestive evidence that this may stem from domestic workers’ concerns about losing welfare payments, although it is unclear whether this fear arises from misunderstanding, lack of information, or distrust in the reform. These findings underscore the importance of policy designs that mitigate potential disincentives and ensure that they do not undermine efforts to increase formal sector participation.