The impact of family-friendly policies on the labor market: Evidence from Spain and Austria

The policies under analysis are set out in Spanish Law 39/99 and Austrian Law Nr. 38/2004. In essence both policies were directed at allowing parents to work part-time if they had children under 7 years old, with an equivalent wage reduction. Furthermore, those workers who decided to use the law were protected against being laid off. Our results indicate that the law helped mothers to combine childcare and work because there was an increase in the probability of working PT for targeted mothers (direct effect). Furthermore, there is clear evidence that the law increased the probability of dismissal of non-eligible mothers – i.e. mothers with children over 10 years old. Finally, the law also increased the probability of potential mothers being hired under fixed-term contracts, presumably to avoid the possibility of their availing themselves of the reduced working hours and the protection against dismissal. Therefore, the law had some positive effects but also some negative ones which were largely unexpected.