Working time flexibility and inequality


Badania porównawcze ujawniają dwie uderzające własności nierówności na rynku pracy: nierówności występują praktycznie wszędzie i zmieniają się bardzo powoli. Gdy uwzględni się te różnice, a płace nadal pozostają nierówne, rodzi się potrzeba zrozumienia natury tego zjawiska. Jedno z potencjalnych wyjaśnień zaproponowała Claudia Goldin: na niektórych stanowiskach wymagana jest znaczna doza dyspozycyjności. Pracownicy, którzy z różnych względów nie są w stanie sprostać temu oczekiwaniu (np. pełnienie funkcji opiekuńczych, uczestniczenie w edukacji) uzyskują niższe wynagrodzenie, niż pozostali. Czy nierówności na rynku pracy można wytłumaczyć rozbieżnościami pomiędzy wymogiem dyspozycyjności po stronie pracodawcy i zdolnością do bycia dyspozycyjnym po stronie pracownika?

With Claudia Goldin's presidential address, a new literature flourishes on the role played by time endowments in determining wage inequality.There appear to be higher rewards to working long hours, but also from rewards to working specific hours. An indirect effect of such pattern is that workers will sort into different jobs not only according to their productivity, but also due to their expected time availability. Expecting greater time constraints some workers might sort into occupations that provide lower returns to working long hours, at the expense of lower wages. 


Źródło finansowania | Financing: Narodowe Centrum Nauki, DAINA, joint with ​Vilnius University

Projekt realizowany | Timeline: 12/2018 -- 12/2021

Kierownik | Principal Investigator: Joanna Tyrowicz

Budżet łączny | Total budget: 554 453 zł

  • wynagrodzenia dla podstawowych wykonawców | compensation to researchers: 252 400 zł
  • stypendia dla młodych badaczy | scholarships for young scholars: 72 000 zł
  • komputery i oprogramowanie | hardware and software: 13 700 zł
  • konferencje i inne wyjazdy | conference travels: 26 700 zł
  • materiały, dane i usługi obce | data, usables and outsourced services: 50 543 zł
  • koszty pośrednie dla FAME | overheads for FAME: 107 110 zł

Goldin (2014, AER) argues that societies have made a remarkable progress in closing the wage and employment gaps in the last fifty years; yet, they have failed to achieve full labor market equality. Goldin boils down the remaining difference to the concept of time flexibility, which should be understood both from employee and the employer perspectives. For example, primary care givers have lower time endowment to allocate to market work. By the same token, groups disadvantaged due to remote location, disability etc. may be at disadvantage when compared to workers without such handicaps. While the conjecture of Goldin is attractive, empirical evidence is scarce and at times contradictory. In this project, we provide a battery of tests Goldin’s conjecture, analyzing the role of working time flexibility in determining wages and employment.

First, from an employee perspective, we hypothesize that demand for flexibility varies at different stages of the life-cycle. If the demand for flexibility indeed drives the (adjusted) wage gaps, then one expect a life-cycle pattern in adjusted wage gaps. In the absence of flexible arrangements, the demand for flexibility might also be reflected in more selective employment patterns. This hypothesis will be tested empirically, with the use of a novel proposed estimation method, which allows to isolate age, cohort and time effects in adjusted wage gaps. The study will be done for a wide variety of countries. Second, also taking the employee perspective, we will infer the true value of working time flexibility to workers. Non-standard work arrangements allow to engage in other spheres of life, but in many societies carry a social stigma. We will propose a large-scale framed field experiment to infer the true value of working time flexibility among workers, controlling for their outside options and household situation.

Third, from an employer perspective, we formulate the hypothesis that managers from a disadvantaged group will not tolerate high wage penalty on time inflexibility among their subordinates. To this end, we will develop and utilize a novel dataset on female managers across Europe and industry-level adjusted gender wage gaps (as well as their between firm dispersion). We will provide a variety of identification strategies to inspect the causality in this relationship.

Fourth, from a household perspective, taxes and social transfers may disproportionally tax the second earner’s labor supply, thus making it disadvantageous to supply labor. So may the childcare costs. We will extend a standard tax-benefit microsimulation model to account for the latter for a selection of the European countries, thus obtaining a shadow price of working time flexibility across countries. Finally, fifth, we will analyze the links between the supply of flexible work agreements and labor market inequality. We will explore ways flexible working arrangements influence labor market inequality across the EU, including selective patterns of employment, changes in within gender inequality and assortative mating.

The project contributes to the literature in three respects. First, we provide a wide battery of tests to an important hypothesis concerning the origins of labor market inequality in a wide, comparative context across countries. Second, we provide several methodological innovations (concerning estimation techniques and identification strategies) as well as methodological diversity (econometrics, simulations and experiments). Third, we will separate the role of the supply side factors (on the side of the employers) from demand side factors (the working time flexibility to combine personal and professional life).

The benefits of international cooperation are threefold. First, the teams complement each other in terms of skills, which permits pushing the frontier of research. Second, given the international composition of the team, the comparative economics angle can be based on local expertise on top of being data driven. Third, the capacity building for both partners will permit broader reach of this and future research in the field, thus contributing to the internationalization of Polish and Lithuanian science in our field.

The project is implemented in Polish-Lithuanian Cooperation. The Lithuanian partners come from Vilnus University.

Jose Garcia-Louzao

Jose Garcia-Louzao is a Senior Research Economist at the Bank of Lithuania and Affiliated Assistant Professor at Vilnius University. He has received his PhD in June 2019 from Universitat Autonoma de Barcelona and Barcelona GSE for his thesis “Essays in Job Mobility” under supervision of Ana Rute Cardoso (IAE-CSIC and Barcelona GSE). He has also been a visiting scholar at the Microdata Laboratory of the Bank of Portugal (BPlim). His research combines large administrative datasets and micro-econometrics techniques to study the determinants of worker mobility and wage dynamics. He has publications in international journals like British Journal of Industrial Relations.

Jekaterina Navicke

Jekaterina Navicke is at the Department of Sociology at the University of Vilnius and a member of the EUROMOD consortium. In the project she will extend the EUROMOD tool to comprise the costs of child rearing.

Linas Tarasonis

Linas Tarasonis is vice dean at the Faculty of Economics and Business Administration of Vilnius University and works as at the Bank of Lithuania. His work on the project focuses on accounting for employment selectivity in estimating the wage gaps between men and women.


Romas Lazutka

Originally, the team included also Romas Lazutka, who specializes in sociology of inequality and will lead the Lithuanian team. 

Meeting 1: Warsaw, February 25-26th, 2019

All the team members met for two days of fruitful discussions and kick-starting the joint work. We established the labor division and preliminary schedules for the two joint studies. We also presented the current stage of research in the studies implemented by each of the two teams. The next meeting was set to August in Vilnius.

Meeting 2: Vilnius, August 22nd-23rd, 2019

In lovely weather and beautiful surroundings of Vilnius, the team met to discuss the progress on the work packages and start the preparation for our jointly organized conference GenderGaps. In particular, the Polish team presented the progress on the paper exploiting the scope of statistical discrimination among labor market entrants. The Lithuanian team informed about the great administrative data that could be used for the greatest research on gender differences in wage bargaining ever, stay tuned! We will soon meet again during EALE 2019 where both Lithuanian and Polish teams present research related to this project. Things look really smooth. The next meeting was set to March 2020 in Warsaw.

Meeting 3: Warsaw, (scheduled for March 2020)

Due to pandemic, the meeting has been canceled. Instead, we set up a number of bilateral talks to continue working on the project progress.


Opublikowane | Published

  • Income inequality and redistribution in Lithuania: The role of policy, labor market, income, and demographics | Review of Income and Wealth

    We model the household disposable income distribution in Lithuania and explore the drivers of the increase in income inequality between 2007 and 2015. We quantify the contributions of four factors to changes in the disposable income distribution: (i) demographics; (ii) labor market structure; (iii) returns and prices; and (iv) tax–benefit system. Results show that the effects of the factors were substantial and reflected heterogeneous developments over two subperiods: changes in the tax and benefit system cushioned a rapid rise in market income inequality because of the global financial crisis during 2007–2011, but failed to do so during the subsequent years of economic expansion, when rising returns in the labor and capital markets significantly increased disposable income inequality. We also find that declining marriage rates contributed to the increase in income inequality in Lithuania.

  • The changing nature of gender selection into employment over the Great Recession | Economic Policy

    The Great Recession has strongly influenced employment patterns across skill and gender groups in EU countries. We analyze how these changes in workforce composition might distort comparisons of conventional measures of gender wage gaps via non-random selection of workers into EU labour markets. We document that male selection (traditionally disregarded) has become positive during the recession, particularly in Southern Europe. As for female selection (traditionally positive), our findings are twofold. Following an increase in the LFP of less-skilled women, due to an added-worker effect, these biases declined in some countries where new female entrants were able to find jobs, whereas they went up in other countries which suffered large female employment losses. Finally, we document that most of these changes in selection patterns were reversed during the subsequent recovery phase, confirming their cyclical nature.

  • Driving factors behind the changes in income distribution in the Baltics: income, policy, demography | Journal of Baltic Studies

    This paper aims at disentangling factors behind the changes in income inequality and relative poverty in the Baltics. The evaluation of the income, policy and demographic effects was based on counterfactual scenarios constructed using tax-benefit microsimulation and re-weighting techniques. Decomposition showed that income and policy effects were dominant for changes in inequality and relative poverty. The policy effects were inequality- and poverty-reducing before the crisis and after the EU accession as a whole. The income effects for the same periods were inequality- and poverty-increasing. Despite rapid demographic changes, the demographic effect on income inequality and relative poverty was marginal.

  • All on board? New evidence on board gender diversity from a large panel of firms | European Management Journal

    Using a unique database of over 20 million firms over two decades, we examine the industry sector and national institution drivers of the prevalence of women directors on supervisory and management boards in both public and private firms across 41 advanced and emerging European economies. We demonstrate that gender board diversity has generally increased, yet women remain rare in both boards of firms in Europe: approximately 70% have no women directors on their supervisory boards, and 60% have no women directors on management boards. We leverage institutional and resource dependency theoretical frameworks to demonstrate that few systematic factors are associated with greater gender diversity for both supervisory and management boards among both private and public firms: the same factor may exhibit a positive correlation to a management board, and a negative correlation to a supervisory board, or vice versa. We interpret these findings as evidence that country-level gender equality and cultural institutions exhibit differentiated correlations with the presence of women directors in management and supervisory boards. We also find little evidence that sector-level competition and innovativeness are systematically associated with the presence of women on either board in either group of firms.

    P.S. Not to brag, but we were a runner up (finalist) in the Emerald Best International Symposium Award of the 2019 Academy of Management Annual Meeting.

  • How to make a country look equal | PLOS ONE

    Methods for estimating the the scope of inequality in various outcome measures such as income, education, health or poverty are fairly accurate in detecting differences adjusted for individual characteristics. However, the actual estimated inequality may depend on the interaction between (the weakness of) the method and (the weakness of) the institutional environment. We make a case by comparing the country rankings for the adjusted gender wage gap among 23 EU countries. We show that the effects of these interactions are indeed large by comparing the estimates from various methods obtained from the same database. In fact, depending on the control variables and estimation method, a country may change its position in the ranking by as much as 10 positions -- both towards greater equality and towards greater inequality. We argue that this variability in country ranking position may yield important policy insights into prioritizing intervention. We also infer that given the intimate and unbreakable relationship between institutional deficiencies and features of the adjustment methods, ranking per se may be misguiding the public debate and thus should be abandoned or substantially refined.

    Gender wage gaps are typically measured by the means of decomposition. Proliferation of methods makes the choice of the correct estimator for a given data a conceptual challenge, especially if data availability necessitates simplifications. The challenge lies in accounting for observable differences adequately, which in itself is not only a data issue, but also a conceptual issue. Ideally, one would want to compare men and women actually “alike” in terms of all relevant characteristics, including hours effectively worked, commitment, talent. However, many of these characteristics are not observable (or are imperfectly measured, e.g. human capital).

    Decompositions are prone to multiple risks. For example, the urge to compare only the comparable implies that a decision needs to be made about the use of observations which clearly are not comparable. Nopo (2008) proposes to use these observations to infer about the possible selectivity in this process, but alternative approaches consist of reweighing or neglecting this issue. Similar choices concern the treatment of distributional issues. Finally, for the parametric methods, the dependence on the functional form may influence the results as well. Consequently, depending on the features of a given labor market, an estimate of gender wage gap obtained with a given method is likely to overstate or understate the extent of true unjustified inequality in wages.

    We make available a dataset which provides a full selection of gender wage gap estimates for the EU countries, using data from EU-SILC. Across countries and years, everybody can see for themselves, what is the source of the gender wage inequality in a given European country. We provide:

    • A dta file with the full set of estimates for the gender wage gaps and a generating dofile
    • Data documentation
    van der Velde

W toku | Work in progress

  • Statistical gender discrimination: evidence from young workers across four decades and 56 countries

    Statistical discrimination offers a compelling narrative on gender wage gaps among younger workers. Employers could discount women's wages to adjust for probable costs linked to childbearing. Given trends towards lower and delayed fertility one should observe a lower discount in wages and a reduction in the gender wage gap among entrants. We put this conjecture to test. We provide a novel collection of adjusted gender wage gap (AGWG) estimates among young workers from 56 countries spanning four decades. We use these estimates to study the effects of postponing childbirth on AGWG. We find that postponing first parity by a year reduces AGWG by two percentage points (15%). We further benchmark the implied gender inequality with the help of time-use data

    van der Velde
  • Matching it up: non-standard work and job satisfaction

    We leverage the flexibility enactment theory to study the link between working arrangements and job satisfaction. We propose that this link is moderated by individual inclination to non-standard working arrangements. Thus, we provide novel insights on the (mis)match between preferred and actual working arrangements. We apply this approach to data from the European Working Conditions Survey and empirically characterize the extent of mismatch in working arrangements across European countries. We shed new light on several phenomena. First, the extent of mismatch is substantial and reallocating workers between jobs could substantially boost overall job satisfaction in European countries. Second, the mismatch more frequently affects women and parents. Finally, we demonstrate that the extent of mismatch differs across European countries, which hints that one-size-fits-all policies, whether they deregulate or curb non-standard arrangements, are not likely to maximize the happiness of workers.

    van der Velde
  • Paying for ideal discretion: a framed field experiment on working time arrangements

    The notion of ideal worker necessitates being available at the discretion of the employer in terms of time. By contrast, the ability to set one's own schedule is widely considered a cornerstone of work-life balance and job satisfaction. We provide causal evidence on the pecuniary and social valuation of the discretion to decide about working schedules. We embed our study in the context of gender and compare employee-initiated and employer-initiated request for a change towards more discretion over working hours. We show that employer-initiated availability should be reflected in higher wages, but the premium is small. There appears to be no penalty to employee-initiated request for autonomy to decide about working schedules. While our results lend support to the ideal worker model, they cast doubt on explanations linking  gender wage inequality to labor market flexibility.

    van der Velde
  • Labor code reform and flexible work arrangements in Lithuania: gender differences in demand and outcomes

    The aim of the paper is to analyze the impact of the Labor code reform in Lithuania on the flexible work arrangements with regards to gender differences in its outcomes. We observe positive labor market trends in Lithuania for the period of 2014-2019 and since the introduction of the Labor code reform, i.e.: increase in employment rate for both men, women and for people with care-related responsibilities, increased share of permanent contracts, increased flexibility of the working schedules and more favorable evaluation of the working time as optimal by both sexes. However, the argument is that these positive changes would have happened in the Lithuanian labor market in the first year after the reform even if there was no change in employment laws. Our strategy for identifying the reform effects is based on an assumption that higher effect of the new legislation, if any, can be expected on women with care-related responsibilities due to their higher demand for flexibility, compared to both women with no such responsibilities and men with or without care-related responsibilities. The identified reform effects after controlling for other effects and individual characteristics are significant in three areas: reduction in the employment level, reduction in the prevalence of contracted work and a high positive effect in the prevalence of permanent contracts. No reform effect was identified for changes in the prevalence of full-time versus part-time work, standard versus non-standard working hours and evaluation of working time as being more or less optimal by workers. Hence, it can be stated that the Labor code reform has not, at least within its first year of functioning, achieved more flexibility in the labor market for those who have higher demands for it and no associated increase in the satisfaction with the time balance between work and care-related responsibilities.

  • Estimating gender wage gap in the presence of efficiency wages - evidence from European data

    Gender wage gap (adjusted for individual characteristics) as a phenomenon means that women are paid unjustifiably less than men, i.e. below their productivity. Meanwhile, efficiency wages as a phenomenon mean that a group of workers is paid in excess of productivity. However, productivity is typically unobservable, hence it is proxied by some observable characteristics. If efficiency wages are effective only in selected occupations and/or industries, and these happen to be dominated by men, measures of adjusted gender wage gaps will confound (possibly) below productivity compensating of women with above productivity efficiency wage prevalence. We propose to utilize endogenous switching models to estimate adjusted gender wage gaps. We find that without correction for the prevalence of efficiency wages, the estimates of the adjusted gender wage gaps tend to be substantially inflated.