Labor force participation among low-income married women.

INTRODUCTION

According to the findings of many cross-section studies of female labor supply, participation by married women is more responsive to changes in household income than participation by married men or single women who have never married. One reason for the greater employment intermittency among married women may be the presence of credit constraints. A credit constraint will increase the chances that a wife will work when family income falls due perhaps to husbands' unemployment.

However, labor market participation by low-income women might be more or less continuous due to high male unemployment, a contributing factor to the family's low-income status. A married woman might anticipate the possibility of her spouse's unemployment over time and choose to maintain her labor market ties during periods of prosperity, foreseeing greater difficulty in obtaining future employment if she drops out of the labor force, Some married women choose to maintain their labor market ties in order to contribute to the financial support of their families. Hence, female participation might be independent of changes in household income from sources other than a wife's earnings. As a result, the labor market behavior of married women in low-income households, like that of other groups of married women, is not homogeneous.

The effect of changes over time in husband's labor market earnings and nonlabor income on the probability of participation by women residing in households drawn from the low-income subsample of the Michigan Panel Study of Income Dynamics is addressed. Chamberlain's econometric model is adopted in this paper to estimate the probability of labor force participation by low-income black and white married women.(1) Chamberlain suggests a fixed effects, conditional logit model to control for the influence of unmeasured or unobserved characteristics that contribute to the decision to participate in the labor market. It is highly likely that women from a low-income background have stronger tastes for market work than women from more affluent households since their market earnings are relied on for the support of their families. Moreover, credit constraints are likely to be binding in low-income households, when access to credit is largely determined by income and the ability to repay the debt, further increasing a woman's ties to the labor market.(2)

A LIFE CYCLE MODEL

Labor market participation, similar to other events that occur over an individual's lifetime such as educational pursuits, marriage, and family formation is governed by an objective of utility maximization. These events are not necessarily independent, but coordinated within a lifetime plan that can reflect, for example, an investment in human capital, delayed marriage and childbearing among women with a preference for labor market attachment.

Although married women have a greater propensity to cycle between market work and home activities due to family responsibilities than single women or men, most women choose to, and in general, remain labor market participants or nonparticipants over the course of their lifetimes. The persistence (Goldin; Clark and Summers), inertia (Nakamura and Nakamura) or state dependence (Heckman) in an individual's labor market status is a response to higher labor market earnings attributed to the acquisition of market experience and seniority, a taste for labor market association or a wife's earnings is necessary to the family's financial support.(3)

Some women choose to maintain their labor market ties independent of changes in income because they enjoy working in the market, desire the independence associated with market participation, or contribute to the financial support of their families among other considerations. Other women, however, may choose not to work in the market even if family income falls. Therefore, given an individual's preferences, transitory changes in household income from sources other than a wife's earnings need not affect the probability of participation by married women as suggested by the added worker model. Alternatives to female participation can be utilized to compensate for a decrease in household income such as borrowing, drawing on savings, a second job for a spouse or other family member, or a change in the family's standard of living. Women with strong preferences for nonmarket time will prefer that other alternatives be utilized to compensate for a drop in family income rather than seek employment. However, households that have limited access to credit, have limited savings or face high male unemployment need to rely on the wife's labor market efforts more heavily for the financial support of the family.

Hence, the labor market behavior of married women residing in low-income households is likely to differ from that of women in wealthier households. The growing incidence of poverty among two-income families in the United States makes this topic …