Conference Paper European Meeting of the Econometric Society
Women's Economic Gains from Employment, Marriage and Cohabitation
28 Aug 2007
U.S. public policy promotes both marriage and labor market participation as strategies for improving the economic welfare of low-income women and their children. In this essay, I ask which of these mechanisms (marriage or employment) leads to greater economic gains— especially for those women who are predisposed towards poverty. In light of the dramatic rise in cohabitation rates in recent years, I also include cohabitation as a third mechanism for improving well-being. Using data from the 1979 National Longitudinal Survey of Youth, I estimate a fixed-effects model of household income (adjusted for household composition) to assess the within-person gains associated with changes in employment and marital status; I allow the effects of employment on household income to differ for single, cohabiting, and married women. Focusing first on “poor” women (those who ever received welfare), I predict that the log household income of single, nonemployed women increases by 0.80 if they enter a cohabiting union, 1.04 if they marry, 0.76 if they work part-time (1000 hours/year), and 1.16 if they work full-time (2000 hours/year). The finding that the biggest predicted gain is from entering full-time employment (while remaining single) reflects the fact that the expected earnings of these low-wage women exceeds the share of adjusted earnings that they can be expected to gain by marrying a (typically low-wage) man. When I consider transitions of women who are already employed part-time, I find that their expected gains from cohabitation and marriage are virtually identical (0.48 and 0.47, respectively) and that union formation now has a greater expected benefit than moving to full-time employment, which I predict raises log income by 0.40. When I focus on nonpoor women, I find that single, part-time employed women are expected to gain 0.64, 0.56 and 0.54, respectively, when they enter a cohabiting union, marry and move to full-time employment; each of these gains is greater than what I predict for their poor counterparts. This is not surprising given the higher earnings potential of these women as well as that of their spouses and partners.