Family Friendly Workplace Policies

The paper presented in this ZEW Research Seminar introduces a monopsony model where firms choose wage-childcare bundles. The authors argue that, by speeding up the return to work after childbirth, childcare acts as a productive amenity. This creates a strong incentive for high productive firms, which face large productivity opportunity costs from parental non-employment, to introduce childcare. Drawing on unique German employer-employee data supplemented with detailed firm survey data, they first show that childcare providing establishments are more productive. In line with our model, establishments that introduce childcare indeed experience subsequent employment growth, both through attracting new hires and increasing retention. The retention channel is especially prominent for mothers with young children. The increased retention of mothers is long-lasting, particularly for high-wage mothers for whom the authors find sizeable positive effects on returning to the firm of around 20 per cent. Childcare provision also prevents occupational downgrading after childbirth, further supporting the notion of firm provided childcare being a productive amenity.