IFAU's research in 2013

Getting a family has an effect on women – wage differences, sickness absence, parental leave, care of sick child and parental insurance

Having one’s first child means a change in life for those who have just become parents. For mothers, it also has labour market consequences for many years to come. Fifteen years after the arrival of the first child, there has been an average increase in the income difference of 35 percentage points between the father and the mother. Among couples in their forties, it is estimated that about three thirds of the income differences can be explained by getting a family. Women’s wages do not seem to be affected in the short run, but after 15 years, there has been an increase in the wage differences of an average of 10 per cent. One reason is that mothers work less; this decrease in labour supply together with a less strong connection to the labour market leads to a decrease in income and wages.

The first child does also have consequences for mothers’ sickness absence. There is an increase in the mothers’ sickness absence after the birth of the first child and mothers have twice as many days of sickness absence as fathers (measured after 14 days). Are mothers also more ill? The conclusion of the authors of the report is no; mothers do not suffer from worse health, it is the women’s larger responsibility for the family and their weaker connection to working life that might be a reason for the increased sickness absence. Women do also, on average, seem to have a more preventive and risk averse behaviour; they do, for example, have more sickness absence than men after a stay in hospital. Women with children have the largest increase in their sickness absence. There also seems to be a relationship between the parents having had sickness absence in their childhood and own sickness absence as an adult. The relationship is particularly strong if the parents had a large sickness absence.

On the subject of family and absence, IFAU has also found that employees in small firms decreased their use of parental benefits and temporary parental benefits (care of sick child) when employment protection was reduced in small firms in 2001. The corresponding decrease did not occur in somewhat larger (11–50 employees) firms. The authors of the report are cautious about calling this an effect, but mean that the results are in line with earlier research on how a decreased employment protection affects the sickness absence of employees.

Recently arrived families get full parental insurance for accompanying children up until the age of eight years. This means that women’s labour force participation and employment are lower than what would otherwise have been the case. Seven percentage points more of the mothers with small children (aged 2–6 years) remained outside the labour force two years after the family had received a permanent residence permit as compared to those who arrived in Sweden with older children (aged 7–10 years). Fathers were not affected at all.

Work practice, the job and development programme and “Jobbtorg” in Stockholm

The objectives of the labour market policy programmes are to provide applicants with new skills and contacts in order to more quickly be able to meet the employers’ demand. Forslund and Vikström (2000) draw the conclusion that the closer a programme is to regular employment, the better is the outcome. In line with this conclusion, we found that work practice helps participants return more quickly to work than in the case of labour market programmes or open unemployment. But the outcome depends on the follow-up horizon – the programmes seem to be somewhat better in the long run. On average, the effect was larger for women than for men and for younger relative to older people.

The job and development programme is the largest programme of the Public Employment Service with more than 100 000 long-term unemployed participants. Coaching and surveys are common activities, but the participants get less help in the important contacts with employers according to both survey and register data. Three out of ten who have reached phase 3 (the employment phase) have, for example, not participated in activities at a work place or in labour market programmes at an earlier stage of the programme. 75 per cent were satisfied in phase 3 and thought that the tasks were meaningful.

However, the foreign-born long-term unemployed that are on social security in the municipal programme Jobbtorg in Stockholm City were not satisfied (“jobbtorg” is a kind of work centre). A majority considered the activities to be bad or very bad (more than 60 %) and the participants would rather look for a job through the Public Employment Service or on their own. 

Education – longer vocational training did not contribute to lower unemployment, perceptions about what is male and female and the effects of free choice on student results

Education is central in the lives of children, young people and many adults. A completed secondary school education is an important factor for one’s success on the labour market. When the vocational programmes were extended from two to three years, the number of general subjects became larger. An argument for this was that by getting broader knowledge, students would avoid future unemployment. It would then be easier to adapt to a changing working life. But those who had completed a three-year vocational secondary-school programme did not seem to do any better than those who completed a two-year programme. In the 2008–2010 crisis, those who had completed a three-year programme at secondary school and had low grades from comprehensive school did instead run a larger risk of being unemployed. The pattern is most obvious for boys and is probably due to an increased number of drop outs from the longer vocational programmes.

There is a strong gender division in the Swedish vocational programmes as well as on the labour market. By observing participation and through interviews, two researchers have studied how young people are socialized into the professions of medical care and construction. The researchers find that traditional gender norms are being observed and put into practice. It might be difficult for the underrepresented sex to become ”part of the group”. The individuals run the risk of becoming representatives of their sex, rather than an individual who is an assistant nurse, painter or carpenter.

The possibility of choosing schools has increased the possibilities for choice, but does normally have very small effects on students’ school results. The small positive effects that exist are fairly uncertain and are almost only limited to cities. 

Youth unemployment, psychological health and the importance of patience

Youth unemployment has been subject to much debate in 2013. How large it is, how big the problem is and whether it will have any lasting effects. IFAU has held a web-seminar on this subject where, among other things, its extent and the lower payroll taxes for young people have been discussed. Reducing the tax on labour by a general decrease in the pay roll taxes for young people does not seem to have had any considerable effects on employment. The first decrease served to increase the employment of young people by two per cent in the short run. The second decrease does not seem to have had any further effect. The income reduction per job created is large.

Many young people are unemployed for short periods of time, but for young people who do not have a secondary-school education or, for example, have psychological problems, the period of unemployment might be long and particularly difficult. The psychological health, personality, patience, ability to adapt in school of young people and their level of intelligence do, in fact, affect their entire working life. These factors do also partly explain the relationship among youth unemployment, future unemployment and early retirement pension, and being on social security.

Many young people are on social security due to unemployment. German data shows that both strong and weak sanctions seem to affect the transition of young people from social security to work. Strong sanctions have a larger effect, but since they largely remove all economic support to the young person, one of the authors’ conclusions is that more research is needed about what a well-adjusted sanction looks like.

Wage and income for foreign-born and newly employed, the importance of networks

Wage formation is of great importance for the amount of labour that employers demand. There are several kinds of wage differences in Sweden. Women do, for example, have lower wages than men (which we discussed above) and those who were born outside Europe have a lower wage than those who were born in Sweden. There does not seem to be any decrease in the wage gap between foreign-born and native Swedes when individuals born outside Europe change workplaces or professions, but there is when individuals remain in one work place. However, the results should not be interpreted as foreign-born being ”favoured by remaining” in one place since the report does not determine why an individual changes work places or remains in one work place. Moreover, those who came to Sweden before the age of 16 and have their highest education in Sweden have a lower wage than native Swedes.

The employer sets the wage according to several criteria – formal qualifications such as education and experience are weighted in here. But more hidden abilities are more difficult to evaluate for an employer when employing a new person. One solution might be to employ former colleagues of current employees. Through these references, the possibility of evaluating more hidden abilities increases already at the beginning. Those who have been employed through contacts have a shorter formal education than other employees, but better abilities in other dimensions. Employing individuals about whom one has information through summer jobs or through other employees seems to be an important way for young people of entering the labour market. Students in vocational programmes at secondary school have a 35 percentage point larger probability of getting their first more long-term job after completing secondary school at those work places where they worked during their studies, as compared to other students from the same vocational programme and school. It is, however, not always certain that a “created” summer job in the municipality will lead to more work for those who have had such a job.

The wage increase rate has been held back

Before the extension of the EU and the opening of the borders to the new EU-countries in May 2004, there were discussions about how this would affect wages in Sweden. One of our reports shows that wages have been held back somewhat. Incomes from gainful employment fell by about 1 per cent for individuals who lived at and around a ferry birth in southern Götaland, relative to those who lived further away. The effects were the largest for the manufacturing industry and staffing companies. There were no certain effects on employment and monthly wages.

Something which is also assumed to have held back the wage increase rate is the earned income tax credit and the lower level of compensation from the unemployment insurance. This has led to its becoming more profitable to work as compared to having an income from, for example, the unemployment insurance. There was a decrease in the so-called net compensation rate. This, in turn, has led to the estimate that Swedish wage increases have been held back: A 1 percentage point lower net replacement rate is estimated to give a 0.2–0.4 per cent lower wage. A restrictive wage formation is, in turn, expected to be beneficial for employment.