Child-rearing, Social Security and Married Women’s Labor Supply over the Life Cycle

TitleChild-rearing, Social Security and Married Women’s Labor Supply over the Life Cycle
Publication TypeReport
Year of Publication2021
AuthorsDas, D
InstitutionPurdue University
KeywordsCaregiver Credit, female labor supply, life-cycle model, Social Security

This paper studies how career interruptions during child-rearing years affect the labor market
trajectory, lifetime earnings, and Social Security benefits of married women in the United
States. To this end, I develop a dynamic structural life-cycle model of female labor supply,
savings, and Social Security benefit claiming and estimate the model using the Method of
Simulated Moments for the 1943-1954 cohort. I use the estimated model to quantify the
effect of three revenue-neutral counterfactual policy reforms: (i) introducing a Social Security caregiver credit that covers the lost earnings during the first 5 child-rearing years
through changes in retirement benefits, (ii) combining the introduction of caregiver credit
with the elimination of spousal and survivors benefits, and (iii) removing spousal and survivors benefits. I find that the gender gap in average career earnings at the Social Security
Early Retirement Age reduces significantly under all three counterfactual scenarios, with the
largest effect of 12.77% decline under the second reform. The findings suggest that instituting caregiver credit for child-rearing in the absence of the marriage-based Social Security
benefits would offset a substantial portion of the motherhood penalty in lifetime labor earnings of married women and increase their retirement benefit adequacy.

Citation Key11974