1 Introduction

Work/family balance[1] issues are becoming increasingly prominent on the policy agenda. However, proponents typically simply review trends in employment and advocate government intervention with little, if any, consideration of the theoretical basis for intervention or empirical analysis of the effects of work/family policies. This paper addresses this lacuna with an economic framework for considering the rationale for government policies and reviews the effects of measures such as parental leave, childcare, flexible working hours and part-time work in improving work/life balance.

An economic framework for analysing work/life balance issues is presented in Section 2. Recent trends in family structure and employment are presented in Section 3. Section 4 outlines the different measures that can be used to allow people to balance their work and family lives, including childcare, policies affecting organisational culture, parental leave, part-time work and flexible working hours. It draws on the international literature to review their effects. Section 5 concludes the paper.

2 An economic view of work/family policy

This section of the paper presents an economic framework for analysing the rationale for government intervention to promote work/family balance. Much of the literature on the work/family balance asserts that government intervention is necessary to provide family-friendly workplaces, without providing an economic justification for why that intervention is necessary. The typical arguments used are that trends such as longer working hours and greater female participation in the work force mean that the work/family balance is being shifted in favour of work, and that surveys show that significant proportions of respondents are dissatisfied with their work/family balance. The potential gains from enhanced worker productivity from family-friendly workplaces also often cited as policy rationales.

The economic view outlined below is based on the idea that individuals will make choices between paid work and family responsibilities. As women’s human capital has increased, the opportunity cost of staying at home and rearing children has increased, so women have entered the workforce. Given their individual work/family preferences, which may vary between men and women (in part due to differences in comparative advantage), workers negotiate wage income and family time with their employers. The outcome should be beneficial to both, since firms can garner benefits such as increased productivity. In some circumstances, however, the outcome may not be efficient and intervention could be considered.

2.1 The family

The economic theory of the family is closely associated with Becker (Becker 1991, Ermisch 2003). The theory of the family covers decisions not only about the distribution of work and the allocation of time in the family, but also about marriage, divorce, fertility and children. This model provides a general theory for the household's allocation of time (Becker 1965).

The theory is that a household produces basic goods and services, such as meals, housing and entertainment, using time and goods bought in the market. The costs of household production include the direct costs of purchase in the market and the opportunity cost (lost wages). If wages change, the payoff to working at home or in the market changes. It can become uneconomical for one member of the family to specialise in household production (for instance, child care), and more economical to enter paid work and buy services, such as schooling or meals.

The economic approach to the family acknowledges that there are intrinsic differences in comparative advantage between men and women, not just in the production of children, but also in childcare, particularly when children are infants. These differences determine the direction of decisions about subsequent investment and accumulation of human capital. Although there is no necessity that men specialise in market activities and women in household activities, women’s initial advantage in childbearing and rearing means that a gendered division of labour is often the result. Small biological differences can result in huge differences in activities as investments are channelled differently (Becker 1991).

The economic approach to human fertility emphasises parent’s income and the costs of bringing up children.[2] Parents are assumed to have preferences regarding both the number and educational level of their children, where the educational level is affected by the amount of time and other resources that parents invest in their children. As wages rise the value of the time of married women rises and the opportunity cost of raising children rises. Parents increase their investment in each child, but decrease the number of children.

The theory therefore suggests that as women’s human capital has increased, the opportunity cost of staying at home and rearing children has increased. Women have therefore increased their participation in the labour force and have chosen to have fewer children. At the same time, divorce rates have risen as women’s earning capacity has increased (Becker 1991).

Until recently much empirical work on households assumed that the family acted as if it were maximising a “family utility function” (Bergstrom 1997). However, individuals within households are not identical, and their differing preferences mean that bargaining is likely to play an important role in household decision-making about such things as expenditure and the household division of labour (Zelder 2002). Family members depend on each other materially and emotionally–-the welfare of one individual affects that of the others. Because they have interdependent utility functions they take each other’s interests’ into account in their decision-making.

Individuals are seen as rational beings who seek to improve their own well-being and that of their families. They will strive to select that balance work and family that leads to the best outcome ie, that which maximises utility. Workers receive satisfaction both from the consumption of goods and services acquired from income received by working as well as from all other uses of their time, including family commitments, termed “leisure” in standard economic models to distinguish it from paid work.[3]

Each worker makes a decision about how many hours to spend in paid and unpaid work in a day (including family activities). The work/family balance for each individual is likely to change over the life cycle as family responsibilities alter. Changes in a worker’s circumstances, such as changes in wages, an increase in demand for consumption goods or an increase in the need for non-work time can all affect this decision on the supply of labour.

Because each individual’s preferences and circumstances are different, the optimal work/family balance will vary from person to person. An individual’s optimal work/family balance will be determined by various factors, such as the relative weights placed on achieving career goals versus caring for and nurturing children; the type of job; how much stress is tolerable; family commitments; how much family time is valued and the financial returns from working (Becker 1991). There is therefore no universally optimal work/family balance.

There are strong linkages between work and family life that can be positive or negative. Freidman and Greenhaus (2000) argued that resources, involvement and emotional gratification in one role can spill over and affect the other. These spillovers can be negative or positive depending on how the two spheres of life are balanced. Resources obtained in one role, such as money, time, flexibility, acceptance, self-esteem and information can affect one’s competence, availability and emotional gratification in another role. For example flexibility in work hours allows behavioural availability to family members, which in turn leads to emotional gratification. A greater abundance of resources promotes greater work/family integration, however a scarcity of resources creates work/family conflict. Similarly, they argued that a skewed involvement in one role can lead to negative impacts on the other. Finally, emotional gratification in one role can spill over and affect the gratification received in the other role. This spillover can be either negative or positive, producing either conflict or integration. Feeling good about family lives can enhance the enjoyment of work.

A significant proportion of work/family balance issues arise because of the choices individuals have to make between paid work and family responsibilities. In the past men have tended to specialise in market activities and women in household activities as a result of inherent differences in comparative advantage. However, as women’s human capital has increased, so too has the opportunity cost of remaining at home and rearing children, and more women have entered the workforce. This trend is likely to have affected fertility rates. With more women in work, the family has been required to make more conscious decisions around paid and unpaid work in the home, decisions which include care for dependents.

The actual work/family choices are likely to vary depending on individual preferences, commitments, circumstances, career aspirations, work opportunities, and family networks. Nevertheless, women’s role in childbirth and rearing has meant that a gendered division of paid and household labour has tended to continue, and that work/family balance issues are most acute for women.