The Unemployment of Their Spouses

This study analyzes the cyclical and short-term determinants of the labor supply of married women in two-earner families. Working wives often face conflicting signals in responding to cyclical downturns in labor market conditions and the unemployment of their spouses; they may, for example, want to increase hours of work because of lower family income but find themselves unable to do so because of poor labor market conditions. A sample of married couples taken from the Michigan Panel Study of Income Dynamics is used to disentangle the determinants of this labor supply behavior. The analysis finds that married women who worked in each of six successive years (1975-1980) reduced their hours of work during recessionary periods. The assumption that the. unemployment of husbands encourages their wives to work more hours in the labor market is not borne out by this study. Wives tended to work fewer hours in the years that their spouses experienced unemployment. This result may be caused by unmeasured local demand conditions that brought about the husband's unemployment and also limited or discouraged tile wife's ability to work in the marketplace. Examples of local demand conditions not fully captured by measured unemployment rates might be the concurrent layoffs of the spouses in the same industry, or the indirect impact that the husband's layoff would have on the wife's employment opportunities in the immediate area. THE LABOR-SUPPLY RESPONSE OF WORKING WIVES TO CYCLICAL LABOR MARKET CONDITIONS AND THE UNEMPLOYMENT OF THEIR SPOUSES The involvement of married women in the labor market has increased steadily over the past few decades. About 30 percent of wives whose husbands were present participated in the labor force in 1960. By 1980 this figure had grown to more than 50 percent. Consequently, there has been a proliferation in two-earner families in society, and in 1981 the labor market earnings of wives constituted more than 25 percent of total family income. 1 It has become increasingly important to understand the labor supply behavior of these working wives. This study examines the cyclical and transitory determinants of the labor supply of a group of married women who maintained their attachment to employment over an observed portion of their lifetimes. Two particular factors affecting this labor supply behavior are considered: the impact of labor market conditions and the effect of unemployment experienced by the husbands. A sample of married couples is chosen from the Panel Study of Income Dynamics (PSID) and followed over a six-year period. With familyspecific data, we can observe the wife's response to local labor market conditions and a variety of personal and family circumstances. With multiple observations, the transitory and permanent determinants of this behavior can be disentangled. The motivation for this study comes from earlier research on familyspecific income fluctuations (Gottschalk and Maloney, 1983). In supplemental regressions it was found that family incomes dropped precipitously with the unemployment of the husband, even among two-earner families