Spain: Labor Market Institutions and Fertility
Spain: Labor Market Institutions and Fertility
A 2021 study (Labor Market Institutions and Fertility by Nezih Guner, Ezgi Kaya, and Virginia Sánchez Marcos) investigates how labor market institutions affect fertility decisions, focusing on the role of dual labor markets and inflexible work schedules. Using rich administrative data from Spain and a structural model, the authors quantify the impact of temporary contracts and split-shift schedules on women's childbearing choices.
Background and Motivation
Spain presents an ideal case for studying the interaction of labor market features and fertility. It has one of the lowest total fertility rates in the world at around 1.3 children per woman, well below the replacement level of 2.1. It also has a highly segmented labor market with a large share of workers, particularly the young, on temporary contracts. These contracts have much lower firing costs than permanent ones and can last 2-4 years, although they are often much shorter in practice.
Moreover, many jobs in Spain feature split-shift schedules with long lunch breaks that extend the workday into the evening. This non-standard organization of working time, illustrated by over 50% of employees still being at work at 6 p.m., makes it difficult to combine work and childcare.
The paper focuses on college-educated women, as labor market uncertainty and flexibility are considered particularly important for the highly educated. The goal is to understand how temporary contracts and split-shift schedules influence skilled women's fertility and labor supply.
Facts from Spanish Data
Using Social Security records and the Labor Force Survey, the authors document two key facts:
Women on temporary contracts are 28% less likely to have a first child than those on permanent contracts. This gap accumulates over the lifecycle, with women who spent over half their working years on temporary contracts having 1.27 children by age 44 compared to 1.53 for those with more permanent employment.
Mothers are about 57% less likely to work split-shift schedules than men or women without children, suggesting the difficulty of combining such schedules with childcare.
Model and Quantitative Analysis
The authors develop a structural life-cycle model to quantify the impact of these labor market features on fertility. Women decide each period whether to work, how much to consume, how much to save, and whether to have a child. The model incorporates several key elements:
All jobs start as temporary with high separation rates and transition stochastically to permanent status with lower separation rates.
Jobs can have regular or split-shift schedules, with the latter having a time cost for mothers.
Children are involved in monetary and time costs, with women facing a tradeoff between career-building (more experience and promotion to permanent) and the biological clock.
The calibrated model matches the Spanish data's labor market and fertility patterns well. Counterfactual simulations deliver the following insights:
Eliminating temporary contracts or split-shift schedules increases completed fertility from 1.54 to around 1.7. The rise comes from both lower childlessness and more women having 2+ children.
These reforms also boost mothers' employment to nearly equal that of non-mothers, eliminating the motherhood employment gap.
Providing childcare subsidies raises fertility to 1.75 but less impacts mothers' employment, given the other labor market frictions.
Combining the three reforms—a single contract, regular schedules, and subsidized childcare—increases the total fertility rate to 1.86 children, the level of France, Europe's highest. Mothers' employment also rises substantially to 94%.
Contributions and Implications
This paper makes several notable contributions to the literature on fertility and labor markets:
It is one of the first to quantify the sizable impact of dual labor markets and inflexible schedules on women's fertility choices. Prior work has focused more on the role of overall economic uncertainty or specific policies like parental leave.
The focus on college-educated women highlights how labor market institutions constrain even highly skilled women's ability to combine career and family.
The rich administrative data provides compelling evidence on the career-family tradeoff, while the structural model enables counterfactual analysis of how institutional reforms could improve fertility and mothers' employment.
The results suggest that reducing the pervasiveness of temporary contracts and split-shift schedules could go a long way in addressing Spain's very low fertility rate. More broadly, they underscore how the structure of jobs and careers, not just aggregate economic conditions, critically shape women's childbearing decisions in advanced economies. Policies that improve job stability and flexibility may enable women to reach their desired fertility without sacrificing their labor market aspirations. Further work should examine how men's career incentives interact with women's and explore the macroeconomic implications of fertility changes.