Cluster-Seminar Public Finances and Living Conditions

Long periods of part-time work lead to a stagnation of wage growth. In this paper, I study how the wage stagnation decomposes in lack of career development and the lack of wage growth conditional on the career level. I develop a dynamic choice model of labor supply which distinctly incorporates vertical career moves to jobs paying higher wages as a function of the choice of hours of work. I use a new classification of occupations available in the German Socio Economic Panel to estimate the decomposition of the long run-part time penalty for females in Germany. Bringing the model to the data, I find that accounting for levels on the career ladder diminishes previously estimated part-time penalty coefficients substantially. I further estimate that the higher share of the long-run part-time penalty accrues to foregone opportunities to be promoted. Delaying the birth of the first child by two years leads to significant increase in labor market earnings and an improvement in career outcomes. A similar improvement is as good as impossible to achieve by a reasonable decrease in child care costs. These findings highlight that distinguishing between a career prospects penalty and a within level experience accumulation penalty is key for optimal policy design.