Foregone earnings - Journal article - Australian Institute of Family Stsudies (AIFS)

Australian Institute of Family Studies cost”; earnings were foregone as a result of these activities. The study followed the methodology of comparing the earnings of women in regression analyses, controlling for a host of human capital, demographic and fertility characteristics. That research suggested that in 1986 a first child was associated with a woman with secondary level education earning (after tax) over her lifetime about $435,000 (in 1997 terms) less than women with no children. Second and third children were associated with about $75,000 and $55,000 lower lifetime earnings respectively (Beggs and Chapman 1988). This paper reports on the results of research which conducts a similar exercise using contemporary information. It is always of interest to re-examine labour market relationships and their changing dimensions after a significant period of time. This is particularly true in a context of changes in female fertility and employment experience, which have been major social phenomena over the last half of this century. In Australia in recent decades, women with young children have increasingly combined here are a number of costs to parents of raising children. These costs can be divided into two types: direct and indirect. Direct costs are the additional costs that a household has because of the presence of children. Indirect costs, on the other hand, refer to the loss of income that a household experiences because one or both parents spends time out of paid employment or takes a lower-paying job in order to look after the children. There has been a great deal of research on both the conceptual issues surrounding the measurement of the direct costs of raising children as well as estimates of these costs (see AIFS 2000 for a summary). The indirect costs of raising children have received much less attention, with the only existing estimates for Australia being Beggs and Chapman (1988). Using data on Australian women from 1986, Beggs and Chapman (1988) inferred that earnings differences between women according to the number of children they have were the result of choices made with respect to time allocation. That is, if a woman chose to spend time in child rearing activities this was seen to have a market “opportunity C h a n g e s b e t w e e n 1 9 8 6 a n d 1 9 9 7