Sorting of Working Parents into Family-Friendly Firms

TL;DR

This paper investigates how parents, especially mothers, tend to stay in or leave the workforce based on the availability of family-friendly benefits, revealing that labor force exit rather than job switching explains their sorting into such firms.

Contribution

It provides empirical evidence that labor force exit, rather than job transitions, primarily explains parental sorting into family-friendly firms post-childbirth, supported by quasi-experimental case studies.

Findings

Parents with young children stay in firms with family-friendly benefits.

Most mothers exit the labor force rather than switch jobs after childbirth.

Family-friendly benefits influence labor force participation more than job transitions.

Abstract

Using detailed data on workplace benefits linked with administrative registers in Korea, we analyze patterns of separations and job transitions to study how parents sort into family-friendly firms after childbirth. We examine two quasi-experimental case studies: 1) staggered compliance with providing onsite childcare, and 2) mandated enrollment into paternity leave at a large conglomerate. In both cases, introducing family-friendly changes attracted more entry by parents who would gain from these benefits, and parents with young children stayed despite slower salary growth. We use richer data on a wider range of benefits to show that sorting on family-friendliness mainly occurs through labor force survival rather than job transitions. Most mothers do not actively switch into new jobs after childbirth, and they are more likely to withdraw from the labor force when their employers lack family-friendly benefits. We explain these findings with a simple model of sorting that features heterogeneity in outside options and opportunity costs for staying employed, which change after childbirth and vary by gender and family-friendliness at current jobs. Taken together, our findings indicate that mothers are concentrated at family-friendly firms not because they switch into new jobs after childbirth, but because they exit the labor force when their employers lack such benefits.