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The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Scandinavian Model

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  • C. Katharina Spieß
  • Katharina Wrohlich

Abstract

Germany is known to have one of the lowest fertility rates among Western European countries and also relatively low employment rates of mothers with young children. Although these trends have been observed during the last decades, the German public has only recently begun discussing these issues. In order to reverse these trends, the German government recently passed a reform of the parental leave benefit system in line with the Scandinavian model. The core piece of the reform is the replacement of the existing means-tested parental leave benefit by a wage-dependent benefit for the period of one year. In this paper we simulate fiscal costs and expected labour market outcomes of this reform. Based on a micro-simulation model for Germany we calculate first-round effects, which assume no behavioural changes and second-round effects, where we take labour supply changes into account. Our results show that on average all income groups, couples and single households, benefit from the reform. The calculation of overall costs of the reform shows that the additional costs are moderate. As far as the labour market behaviour of parents is concerned, we find no significant changes of labour market outcomes in the first year after birth. However, in the second year, mothers increase their working hours and labour market participation significantly. Our results suggest that the reform will achieve one of its aims, namely the increase in the labour market participation of mothers with young children.

Suggested Citation

  • C. Katharina Spieß & Katharina Wrohlich, 2006. "The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Scandinavian Model," Discussion Papers of DIW Berlin 630, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp630
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    Cited by:

    1. Pettersson-Lidbom, Per & Skogman Thoursie, Peter, 2009. "Does child spacing affect children’s outcomes? Evidence from a Swedish reform," Working Paper Series 2009:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Beatrice Scheubel, 2014. "Does It Pay to Be a Woman?: Labour Demand Effects of Maternity-Related Job Protection and Replacement Incomes," SOEPpapers on Multidisciplinary Panel Data Research 685, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Caliendo, Marco, 2009. "Income Support Systems, Labor Market Policies and Labor Supply: The German Experience," IZA Discussion Papers 4665, Institute of Labor Economics (IZA).
    4. Jerome De Henau & Daniele Meulders & Sile O'Dorchai, 2010. "Maybe Baby: Comparing Partnered Women's Employment and Child Policies in the EU-15," Feminist Economics, Taylor & Francis Journals, vol. 16(1), pages 43-77.
    5. Buligescu, B. & de Crombrugghe, D.P.I. & Mentesoglu, G. & Montizaan, R.M., 2008. "Estimating the wage penalty for maternal leave," ROA Research Memorandum 005, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    6. Drasch, Katrin, 2011. "Do changing institutional settings matter? : educational attainment and family related employment interruptions in Germany," IAB-Discussion Paper 201113, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Filgueira, Fernando & Rossel, Cecilia, 2017. "Confronting inequality: Social protection for families and early childhood through monetary transfers and care worldwide," Políticas Sociales 226, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Joseph, Olivier & Pailhé, Ariane & Recotillet, Isabelle & Solaz, Anne, 2013. "The economic impact of taking short parental leave: Evaluation of a French reform," Labour Economics, Elsevier, vol. 25(C), pages 63-75.
    9. Irene Lapuerta & Pau Baizán & María González, 2011. "Individual and Institutional Constraints: An Analysis of Parental Leave Use and Duration in Spain," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 30(2), pages 185-210, April.

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    More about this item

    Keywords

    female labour supply; parental leave; micro simulation study;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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