Czech Women: Untapped Potential
This study offers a unique international comparison of trends in economic activity in the Czech Republic, France, Great Britain and the USA. We focus on the lesser known long-term trends and indicate how the hidden potential of the labor force in the Czech Republic might be unlocked. Czech women, who occupy a unique position in the job market, are in a particularly interesting situation. In contrast to the other three countries, the employment rates among Czech women drop sharply in periods when they devote themselves to mothering and parenting.
Furthermore, the rates of employment among women with children have continued to drop over the last 15 years. Among women over 40, on the other hand, the employment rates are much higher than the corresponding rates in other countries and they even come close to the rates of employment among men of the same age. As women near retirement age, however, their employment drops sharply again.
The high supply of labor for women without small children shows their interest and ability to successfully participate in the job market. The fact women work much less when they mother intensively is linked to the lack of accessible high-quality care for pre-school children and the shortage of part-time jobs in this country. Creating opportunities to better balance career with care for small children would have an immediate positive impact on the national budget. In the long run, better work-life balance options might also stimulate women's interest in having children and reduce the wage gap between women and men.
Methodology
In this study, we compared two primary indicators of labor supply – the employment rate and the average number of hours worked. We examined how these indicators change with age and gender (by asking questions such as: What is the difference between the employment rate among 25-years-old women and 35-years-old women?). Subsequently, we analyzed how these indicators develop over time and compared the situation in the Czech Republic to the situations in France, Great Britain and the USA.
Methodologically, this study was based on a publication titled "The Extensive and Intensive Margins of Labor Supply: Trends in Hours Worked in the US, UK and France" (Blundell, Bozio a Laroque, 2011, IFS), whose authors kindly shared their data so that we could compare these three countries and the Czech Republic. We based our calculations for the Czech Republic on the individual data from the Labor Force Sample Survey, which is a representative survey carried out by the Czech Statistical Office on a quarterly basis. The average sample size is approximately 58,000 people. For the purposes of this study, we used data for the years 1994-2007, because the data about the subsequent years were heavily skewed by the temporary changes brought by the economic recession.
Men's Labor Supply
Although we focus on the situation of Czech women, it is useful to juxtapose it with the situation of men. In comparison with other countries, the indicators of employment rate and average hours worked among middle-aged men in the Czech Republic are relatively high. However, there are significant contrasts at both ends of the age spectrum. The employment rate among young Czech men under 25 years of age is low and so is the average hours worked per person. This is related to the average age at which Czechs generally complete their education and leave the education system, which is much later than their British or American counterparts. Similarly, Czech men older than 55 leave their jobs much sooner (i.e. reduce their economic activity both in terms of employment rate and hours worked) than the men of their age in Great Britain and the United States. From the international perspective, the economic activity of Czech men over 55 is relatively low despite the rising retirement age.
Women's Labor Supply
Over the last 15 years, the employment rates have been dropping among both young Czech women and young Czech men. This has also been caused by the growing number of years they spend acquiring education. The openness of the Czech education system towards women amplifies this effect. Currently, more Czech women than men earn university degrees, which illustrates this trend.
From the international perspective, the age profiles of the labor supply among Czech women seem very segmented which distinguishes them from the corresponding profiles in other countries (see graph). This is still the case today, twenty years after the Socialist life course patterns disintegrated. The employment rate profile among Czech women decreases dramatically at the time of life women usually devote themselves to raising children. In the last fifteen years, the time period linked to mothering and low labor supply has been rising toward 30 years of age. The length of this period has been growing as well, probably as a result of the variety of ages at which women today give birth to their first child. In no other country included in the comparison the data showed a similar drop in women's employment related to mothering (see graph).
The aggregate employment rate of Czech women decreases with the birth of their first child and does not equal the rates of women's employment in other countries again until the 35th year of age. After this age however, employment rates quickly rise – the employment rates among women over 40 in the Czech Republic are much higher than the corresponding rates in other countries and even come close to the rates of employment among men of the same age. After a short time (age of 55), however, the employment rates among women go down very sharply again and stay extremely low among women of retirement age. After the age of 57, the employment rates among women in the Czech Republic are lower than the rates among their counterparts in other countries (see graph).
There are notable differences between the employment rates among Czech and British women of older age and contrast very strongly to women's employment patterns in the U.S. This is true in spite of the fact that Czech women do not live significantly shorter lives. On average, Czech women die two years younger than British women. The life expectancy of American women is the same as that of Czech women. In this respect, older Czech women are similar to women in France. We have thus a reason to believe that the factors most affecting employment are not women's health and productivity but the national systems of pensions, taxes, mandatory insurance and job market legislation (Gruber & Wise, 2007). The propensity to work among individual women of the same age varies greatly and does not justify the sharp decline in employment among women in general.
Labor Supply and Motherhood
The interconnection of motherhood, parenting and labor supply for Czech women clearly begs a closer look. Calculations of employment rate in relation to the age of the youngest child in the family show that children are a determining factor in the employment of the mother.
The employment among women with little children is extremely low - only about 20% of Czech women with children younger than three work. Both the employment rate and the number of hours worked grow with the age of the child. We can conclude that children play a major role in women's employment.
In this light, it is interesting to examine the substantial changes that have taken place in the Czech Republic in the last 15 years. Among women under 26 years of age (both with and without children), the employment rates have dropped dramatically since 1994. It is primarily the above-mentioned long period of time spent acquiring education that accounts for this trend and it is unrelated to motherhood. After the 26th year of age, employment among women without children has been rising significantly over the last 15 years. In contrast, among women with children younger than 12, the employment rate has undergone a strong decrease (particularly among women with children under 3, ages 4-6 and 7-12). The drop in employment between 1994 and 2007 was the most dramatic among women with children 4 to 6 years old. Among women 25 to 30 years old who have children of pre-school age, employment decreased by a total of 18%.
Reasons Behind the Reduced Participation of Czech Women with Small Children
In comparison with their international counterparts, Czech women without children show high rates of employment and high numbers of hours worked which almost reach the employment rates among men. The high rates of labor supply among women before and after the period of intensive mothering show that women are very interested and able to successfully participate in the labor market. This means that the situation of Czech women is not determined by the cultural and historical traditions that highlight the homemaking role of women, as we have observed in some EU countries. This lead us to believe that reasons such as the lack of pre-school care might play a more important role in women's participation in the labor market than the changes in women's personal priorities. On the contrary, the number of factors that motivate mothers to work is growing (higher levels of education, lower physical demands of jobs).
In the Czech Republic, there are very few nurseries offering childcare for children under three and the only other way to secure care is to ask the grandparents for help, as long as the grandparents live locally. Hiring a private babysitter is expensive and thus accessible only to a small group of families. Kindegartens, which offer childcare for 3 to 6 year-olds are available more widely, provided they are geographically and financially within reach. Although it is not systematically monitored, there is plenty of fragmented evidence that the accessibility of pre-school care in the Czech Republic varies from region to region. In this situation, a large portion of women choose to look after their children full-time rather than seek employment.
Children between 7 and 12 years old usually still need the company of their (grand)parents on their way to and from school and given the lack of part-time and flexible jobs in the Czech Republic, this represents another limitation to mothers' or parents' employment. These are reasons to conclude that an increased supply of part-time and flexible jobs in combination with an increased capacity in pre-schools might enable many mothers who are currently unemployed to successfully participate in the job market.
Calculation of Income Lost to National Budget Due to the Economic Inactivity of Women with Small Children
This is our gross estimation of the employment drop caused by the starting families by Czech women. Employment among women drops from 66% to 55% between the 27th and 33rd year of age (see graph for 2007 data). If this drop was prevented by keeping women of this age employed (27-33 years-old Czech women would be employed as intensively as 26-years-old and 34-years-old women, together forming the employment rate of 66%) and provided these women, who would represent an "added labor force", would work as many hours per year as the other women in their age group, the total number of hours worked per year in the Czech Republic would rise by 61 million. This number equates to 7.63 billion 8-hours-long workdays. Let us also suppose that the number of hours worked in 2010 would grow by this number and the productivity of this work would correspond to women's gross wages (CZK 22.666 per month in 2010). Based on these estimations, the income lost to the national budget per year amounts to CZK 1.6 billion in income taxes and CZK 3.6 billion in health and social security insurance fees.
Other Consequences of the Low Participation of Women with Small Children in the Labor Market
For the majority of Czech women, having to choose between work and having children is a decision between two extremes. It seems very difficult to do both at the same time. The difference between the employment rates among women without children and among women with children younger than 6 is as high as 41 percentage points, which is the most dramatic in Europe.
Immediate unemployment and forgone hours worked are not the only consequences of this trend, however. The fact that women can reasonably expect difficulties with balancing their family and career in the future may prevent them from having more than one child, particularly among women with high levels of education. This factor might already play a role in the extremely low fertility rate in the Czech Republic. The current fertility rate is about 1.5 children per woman, which is below EU average. In Great Britain and France, the fertility rates are almost 2 children per woman. Low fertility contributes to the ageing of the population and to the unsustainability of the current system of retirement benefits in the Czech Republic.
There are other economic consequences of women's (un)employment. When women stop participating in the labor market in order to stay at home and look after children, their human potential becomes obsolete faster than if they continued working and women's opportunities for career growth diminish. The "glass ceiling" is an indirect effect of this situation. Another consequence and evidence of the negative effect of taking a career break is the gender wage gap. The differences between the average salary of men and women 35 to 44 years old are the highest in the EU. Obviously, this age group includes women who are just returning to work after taking a relatively long time off they took to raise their children. Lower employment and productivity among women also adversely effects the system of retirement benefits in the Czech Republic, because the funding comes from regular contributions of its participants. These are lower if the participants are not regularly employed. Finally, women themselves feel these negative effects as they receive improportionately low benefits as a result of their reduced contributions.
The lower participation of women in the job market after the birth of their first child might be involuntary and not a result of their free choice. It represents a great source of untapped productive potential and an economic loss in the form of immediate household income as well as lost productivity, taxes and insurance fees in the future. These negative effects stand in stark contrast to the education levels of Czech women, which have been steadily increasing over the last 20 years. Unlike previous generations, we are losing potential of unprecedented productivity.
Graph: Women's Employment Rates: Comparison of Czech Republic, France, Great Britain and the USA (2007).
Source: Czech Republic - author's own calculations based on data from the Labor Force Sample Survey. France, Great Britain and USA: (Blundell, Bozio a Laroque, 2011).