Gender and Mandated Benefits: The Impact of Israeli Reserve Duty on Wages

Neoclassical theory suggests that mandated benefits drive a wedge between the wages of those that receive benefits and those who do not. Much of the empirical literature focuses on family leave programs that primarily benefit women. In Israel, two major mandated benefits are family leave and military reserve leave. This study exploits differences in the pattern of benefits/leave probabilities for men and women, Jews and non-Jews, as well as changes to the structure of reserve duty in the mid 1990s to see if employers respond to anticipated leave changes by adjusting wages. It finds that younger Jewish men made small gains relative to older Jewish men, but that young Jewish women made even greater gains during this period, suggesting little evidence that employers adjusted wages in response to the change in reserve duty requirements in Israel. This finding contributes to evidence suggesting gendered political and cultural factors shape wages.HIGHLIGHTS In Israel, mandated maternity leave and reserve duty leave are similar in terms of cost to employers.This provides a unique opportunity for analyzing how employers respond to costs associated with such leaves by gender.Israeli reserve soldiers, comprised almost exclusively of Jewish men, do not experience a wage penalty.Findings challenge standard neoclassical labor theory, which argues that higher cost workers earn lower wages.Wage determination is driven not just by economic factors, but also cultural and political ones.