Dynamic Wage and Employment Effects of Elder Parent Care
by Meghan Skira, Boston College
This paper formulates and estimates a dynamic discrete-choice model of elder parent care and work to analyze how caregiving affects a woman’s current and future labor force participation and wages. Since a typical caregiver is in her 50s or early 60s, and hence in her prime working years, understanding both the short and long-term effects of caregiving on work and wages is an important policy issue. The model incorporates several dynamic elements that are lacking in the previous literature, such as the health of the elderly parent, human capital accumulation, and the availability of job offers. These extensions are important since they allow for long-term costs of informal care that may arise due to the accumulation of foregone or lower wages and/or decreased job opportunities during and after a caregiving spell. Such long-term costs have been overlooked in the previous literature. The model is estimated on a sample of midlife women using eight waves of data from the Health and Retirement Study by efficient method of moments. Using the estimates from the structural model, I will simulate several elder care work leave policy experiments that have been debated at the national and state level. Specifically, I will simulate an unpaid leave longer than currently available under the Family and Medical Leave Act of 1993 and a paid work leave to analyze their effects on a woman’s caregiving and work decisions and whether they allow women to better maintain employment throughout and after a caregiving spell.