Will the Rise of WFH Increase the Likelihood that Women Work and Have Children?

This Substack will zigzag as I discuss 50 years of economic demography research (focused on the work of Gary Becker and Jacob Mincer) and then I will pivot and discuss my demography research before I conclude by discussing some of the Nobel Laureate Claudia Goldin’s work.

I am posting this Column today because the NBER has released my new co-authored Working Paper (joint with Emma Harrington).

Building on Gary Becker’s work on Fertility Economics

Demography represents a critical interdisciplinary field that examines population dynamics and their economic implications. Gary Becker, was one of my mentors, made foundational contributions to the economics of demography through his analysis of family economics. His work highlighted key trade-offs, including the quantity-quality dilemma in child-rearing decisions.

The Quantity-Quality Trade-Off

Becker's model posits that households derive utility from children, contingent upon their perceived quality. Quality encompasses various dimensions, such as educational attainment, professional achievements (e.g., becoming a distinguished musician or researcher), or societal contributions. Central to Becker's analysis is the trade-off between child quantity and quality. Given finite time resources—there are only 24 hours per day— and children are time intensive, parents must choose how much time to invest in their children. Parents know the child quality production function. Their time spent with kids and market inputs such as tutors and teachers are inputs in producing a higher quality child.

Opportunity Costs in Parental Time Allocation and Fertility Decisions

One of Becker’s key insights is incorporating the concept of the opportunity cost of time spent parenting particularly by mothers, in child-rearing. Becker conceptualized these costs as foregone wages; for instance, an additional hour devoted to a child equates to lost earnings for one hour of work. In my own case, my mother, a practicing attorney with a degree from NYU Law School by the time I was four, faced such trade-offs. As women’s educational attainment has increased in recent decades, during the same time that more of the population lives in or close to cities, fertility rates decline. Becker’s model predicts this. More educated women have greater labor market opportunities and earn more per hour. This raises the “price” of raising children because the time spent with one’s kids could be spent working!

This framework elucidates patterns observed in high-achieving individuals, such as Hillary and Bill Clinton, who had one child amid demanding careers in politics and public service. Similarly, Dora and I both work full time and we have one child.

Contemporary Fertility Trends and Societal Consequences

Becker's fertility research gains renewed salience amid declining global birth rates below replacement levels. Educated individuals increasingly delay marriage, forgo parenthood, or limit family size, mirroring trends in my own experience. Projections suggest potential population contraction by the late 21st century, contrasting earlier overpopulation concerns articulated in Paul Ehrlich's The Population Bomb.

Such demographic shifts imply aging populations, potentially diminishing economic innovation and vitality, as younger cohorts historically drive growth. To mitigate this, policies must foster environments where young women can integrate motherhood with career aspirations, aligning with visions of a balanced life.

My Power Couples Research

In the late 1990s, Dora Costa and I extended Becker's insights in our paper, "Power Couples: The Locational Choice of the College Educated" . Our paper built on Jacob Mincer’s work. Jacob Mincer, a leading labor economist, argued in the 1960s and 1970s that married women, often secondary earners, functioned as "tied workers" in male-dominated labor markets. Relocation driven by husbands' careers constrained wives' opportunities; for example, a physicist's move to join the faculty at Cornell University in Ithaca limited his spouse’s local labor market opportunities because Ithaca is a small city. This phenomenon historically depressed married women's earnings relative to their potential in broader markets.

Our paper’s contribution introduced the "power couple" concept, exemplified by figures like Bill and Hillary Clinton. We posited that large metropolitan areas—such as New York, San Francisco, and Boston—alleviate co-location constraints by offering diverse employment opportunities. Despite high housing costs due to restrictive zoning and high demand, these markets enable both partners to pursue careers without marital dissolution. Empirical analysis of data from 1940 to 1990 revealed increasing concentration of power couples in major cities, attributable to thick, diversified labor markets.

Declining Rankings of Universities in Smaller Markets and Co-Location Issues

We identified a concomitant trend: universities in smaller locales, including Cornell, the University of Rochester, and the University of Michigan, experiencing relative ranking declines. This correlates with historical periods of lower female labor participation. We attribute the recruiting challenges that these strong universities in small cities faced to the binding colocation problem. In an economy where many married women seek great employment opportunities, small cities are less likely to offer such opportunities and these power couples are thus attracted to live in the Big Cities. In contrast, urban institutions like Columbia University attract dual-career academics by providing access to expansive professional networks for both partners.

The Child Penalty: Empirical Evidence and Implications

Around the world, a recent research agenda has documented a “Child Penalty” for women when they become mothers. The probability that these new parents continue to work declines after the birth of a child. No “Child penalty” is observed for men who become fathers.

This anticipated penalty acts as a disincentive to motherhood, exacerbating concerns about macro level fertility declines. Economic theory suggests that if the “Child Penalty” declined then this would increase birth rates as young women could “have it all” (namely career and family). It is also known that modern labor markets have trouble reintegrating women back into the labor force when their youngest child moves out. Such women ages roughly 45 to 55 have trouble returning to the work force. Thus, the “child penalty” leads to an underutilization of human capital among women.

WFH Reduces the Child Penalty!

The 2020 shift to remote work, accelerated by the pandemic, offers insights into alleviating the child penalty. Even before 2020, some people were engaging in WFH.Our analysis demonstrates that remote-capable occupations reduce the penalty, enabling sustained employment alongside motherhood. Contrary to views treating the penalty as immutable, we find that remote work diminishes its impact.

Utilizing college majors as an exogenous variable (e.g., computer programming vs. nursing), we observed higher post-motherhood employment in remote-friendly fields like computer programming. This suggests remote work facilitates the dual pursuit of career and family.

Revisiting a Famous Paper on the Gender Divide

A seminal 2012 study by Claudia Goldin, Marianne Bertrand, and Lawrence Katz in the American Economic Journal examined graduates from an unnamed top business school (likely the University of Chicago Booth School). Longitudinal data revealed initial parity in employment and earnings between genders. However, by seven years post-graduation, a gender gap emerged: women's participation and earnings declined, driven by workforce exits and lower average pay among remainers, while men sustained high engagement. The authors interpreted this as a trade-off between family and career. Young highly educated women who paid the expensive tuition and spent years in graduate training were systematically choosing to “opt out” while their male counterparts kept climbing the corporate ladder.

My Bold Claim

I claim that the rise of WFH creates the possibility that going forward that this “opt out” dual trajectory finding from the 2012 study will be less likely to be observed among future MBA cohorts when these future cohorts turn age 35. Why? In a remote-enabled economy, women could negotiate flexible arrangements around childbearing, fostering continued mentorship and skill investment. This shifts from suboptimal equilibria—where anticipated exits deter employer commitment—to more productive ones, encouraging workforce retention and potentially higher fertility rates. Such dynamics warrant further empirical tests.

References

Becker, Gary S., and H. Gregg Lewis. 1973. "On the Interaction between the Quantity and Quality of Children." Journal of Political Economy 81 (2, Part 2): S279–S288.

Bertrand, Marianne, Claudia Goldin, and Lawrence F. Katz. 2010. "Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors." American Economic Journal: Applied Economics 2 (3): 228–55.

Costa, Dora L., and Matthew E. Kahn. 2000. "Power Couples: Changes in the Locational Choice of the College Educated, 1940–1990." Quarterly Journal of Economics 115 (4): 1287–1315.

Goldin, Claudia, and Lawrence F. Katz. 2008. "Transitions: Career and Family Life Cycles of the Educational Elite." American Economic Review 98 (2): 363–69.

Harrington, Emma, and Matthew E. Kahn. 2023. "Has the Rise of Work-from-Home Reduced the Motherhood Penalty in the Labor Market?" Working Paper.

Mincer, Jacob. 1978. "Family Migration Decisions." Journal of Political Economy 86 (5): 749–73.