August 12, 2020

This week in Class Notes:

• Parenthood penalizes the wages of women and raises them for men, but the impact is bigger for white parents. 
• More children are being dislocated by their parents’ drug abuse – half a million grandparents are stepping up.
• The introduction of the Earned Income Tax Credit (EITC) in 1975 brought an extra million moms into the workforce – and may have modernized attitudes about working mothers.
• This week’s top chart highlights another COVID-19 race disparity: unemployment.
• Erica Komisar champions the benefits of the “work-at-home revolution” for parents in this week’s choice opinion.
• Check out our team's new piece “Taxing wealth transfers through an expanded estate tax.”
• Finally, register to receive a free book written by Isabel Sawhill and I. 

Parenthood wage gaps by gender and race

Are wages affected by parenthood? Yes, according to Van Winkle et al., but the size of your penalty or reward depends on your race, gender, and the age at which you become a parent. The authors find a wage penalty for mothers and a premium for fathers, echoing previous research. The gender split can be seen for all races, but the size of the impact varies. White moms with several children face the steepest and most persistent wage penalty, while white dads with several children reap the steepest and most persistent reward. Compared to white parents, Black and Hispanic parents experience smaller wage effects, probably because they are more likely to work lower-wage jobs with little room for growth. Parenthood hits white women harder because they are more likely to work jobs with opportunity for growth than Black and Hispanic women. The fatherhood bonus, on the other hand, concentrates earlier in life and dwindles faster for Hispanic and Black men. 

How the drug abuse crisis affects children’s living arrangements

When parents become drug addicts, their children’s lives are often dislocated. In 2015 alone, substance abuse problems meant that one and a half million children were living apart from at least one of their parents, and 300,000 apart from both. Buckles et al. also find that exposure to the drug crisis increases the likelihood that children live in impoverished households using SNAP benefits, and struggle with family instability. But grandparents are picking up the slack. According to the authors, more than half a million children displaced by drug abuse lived with their grandparents in 2015, and parental drug use explains almost all (83%) of the rise in the number of children living with their grandparents from 1996 to 2015.

The rise of the working mom

A million moms entered the workforce in 1975 as result of the introduction of the Earned Income Tax Credit (EITC), which benefits lower-income working parents. Jacob Bastian finds that the gap between the employment rates of women with and without kids shrunk by 20% in the five years post-EITC implementation and that the policy increased moms’ employment rate by 6%. Mothers eligible for the tax benefit were more likely to start working than non-eligible women right after implementation, suggesting that the tax incentivized lower-income parents to work, regardless of already-changing social attitudes. Using employment rates and General Social Survey data, the author also argues that the influx of working moms may have improved social attitudes towards women in the workplace.

Top chart: Race and coronavirus job losses

This week’s top chart from ProPublica shows how different groups have experienced unemployment throughout the COVID-19 crisis. Black and Hispanic workers face particularly sharp declines.

Choice opinion: WFH benefits parents

“It has taken a pandemic to prove that it’s possible to integrate work into our personal lives. The justifications for requiring employees to be on site have melted away in favor of a more relaxed and trusting environment in which employers care less whether employees clock in than whether they complete their tasks. Everyone wins—maternity-leave advocates who have been fighting for this arrangement for years, employers, mothers and children most of all,” writes Erica Komisar in the Wall Street Journal.

Self-promotion

Inheritance is compounding inequality; over half of intergenerational transfers go to the wealthiest 10% while less than 10% of transfers go to the bottom half. Meanwhile, the federal debt continues to swell. In a new piece, “Taxing wealth transfers through an expanded estate tax,” our team argues that we may be able to kill two birds with one stone by expanding the estate tax: reducing wealth inequality while cutting federal debt levels.

Request your free book!

Isabel Sawhill and I have authored a new book entitled “A New Contract with the Middle Class.” It covers five areas where the quality of life for the middle class could be improved: their relationships, their material resources, the allocation of their time, their health, and the respect they receive from others. Be one of the first to submit your contact information here, and we will send you a free copy!