Glass Ceilings and 100-Hour Couples: What the Opt-Out Phenomenon Can Teach Us about Work and Family

TEN. Financial Costs

127 chapter ten  Financial Costs I’m an excellent housekeeper. Every time I get a divorce, I keep the house. zsa zsa gabor  This chapter analyzes the economic implications of a woman’s decision to take time out of the labor force. In addition to the obvious loss of income while out of work, women who drop out temporarily suffer a wage penalty upon return. For some couples, the husband earns more than enough to support the family comfortably, and the woman’s income loss is easily offset by the gains in the family’s wellbeing generated by mom being at home. This kind of calculation relies on her husband’s continuing income stream. By leaving the workforce , these women take economic risks that at some point, whether because of divorce, disability, or death, their husbands will no longer support them and their children. Until now we have focused on the benefits accorded to families with a mom at home. Here we delve into the economic costs of that decision to leave work for home, and give some strategies for how families can manage these risks. Take Time Off, Pay the Penalty Leaving the workforce, even if only for a brief period, can have substantial negative impacts on a woman’s earning capacity. Women who have interrupted their careers for whatever reason return to work at salaries that lag behind those of their female counterparts who remained in the workforce continuously. A Center for WorkLife Policy study found that, overall, employed women who took 128 Chapter Ten time off suffered an 18 percent wage penalty. Women in business did better, with only a 9 percent loss, but women lawyers suffered a whopping 41 percent wage penalty for taking time out of the labor force. The wage penalties are severe, and the longer that women are away from their jobs, the more draconian the penalty. Across sectors , women who take a year or less off from work suffer only an 11 percent penalty, but if their break lasts for three or more years that number rises to 37 percent.1 These penalties would be even more dramatic if they included lost retirement contributions. Women who have taken time out of the labor force clearly take signi ficant hits to their salaries upon returning to work. Unfortunately, these wage penalties seem to trail them through their working lives, albeit at a diminishing rate. To a certain extent, we would expect that holding all else equal, a woman who has worked continuously throughout her lifetime would earn more than a woman who had taken significant time out of the labor force.2 What is problematic is that the penalties associated with time out of work are not commensurate with the length of the gap. One study found that even women who had returned to work twenty years ago still suffered a 5 to 7 percent wage penalty, as compared to women who had worked continuously, but with comparable levels of experience. This same study estimated that a seven-year gap costs women about ten years’ worth of earnings.3 Despite the negative impact on their wages, many women we interviewed indicated that the decline in their earning capacity was easily offset by the gains from having more time with their families. Indeed, given that their husbands may earn enough to support them comfortably into retirement, the costs in terms of forgone income may be easily counterbalanced by the benefits they gain in terms of a less-stressful life. But what if for some reason, their husband’s income disappears? Does a College Degree Protect You from Divorce? While many believe that divorce is a post-1960s phenomenon, the American divorce rate actually trended upward starting from the Financial Costs 129 Colonial period, only leveling off for the two decades following World War II. Beginning in the mid-1960s and continuing through the 1970s, though, divorce rates skyrocketed, more than doubling in fifteen years. After hitting a high point in the early 1980s, the divorce rate has roughly stabilized and even declined a bit.4 While there is some debate among social scientists over whether the current divorce rate is closer to 40 or 50 percent, there is still a general consensus that roughly half of all American marriages will end in divorce. Yet when you break the rates out by education and income levels, the statistics tell a...