Work from Home, Work for Less? How Workplace Flexibility Affects Mothers’ Careers

The rise of work-from-home (WfH) has become a durable feature of 21st-century labor markets, raising a key question for gender equality: Is WfH a stepping stone or a stumbling block for women’s careers? While WfH could help women reconcile professional and family responsibilities, it may also slow career advancement through productivity losses and lead to stronger specialization in domestic work. To study the short- and long-run macroeconomic implications of an expansion in WfH opportunities, I develop a quantitative general-equilibrium, overlapping-generations model calibrated to pre-COVID U.S. data. Couples jointly choose their time allocation between market and domestic work, WfH adoption, and occupation. The model predicts that expanding WfH opportunities strengthens mothers’ careers in the long-run: women’s earnings growth between ages 25 and 40 increases by 7.2 percentage points, and the gender earnings gap narrows by 7.4 percent. Women benefit both from their own and their spouses’ WfH adoption as well as through re-sorting into higher-paying occupations. However, some women experience career losses when working in occupations where WfH entails high productivity penalties. At the aggregate level, welfare rises by 11.1 percent and output by 0.5 percent. Important for the current policy debate, I find short-run losses in women’s earnings from WfH adoption, as occupational choices are fixed and the expansion of WfH is large and unexpected.