Effects of sharing the parental leave on pensioners’ poverty and gender inequality in old age: A simulation in IFSIM

Female old age poverty is affected by family policy reforms which are meant to promote gender equality when young. Using our in house agent based simulation model IFSIM we show that sharing equally the parental leave can increase or reduce poverty among elderly women depending on the macro and behavioural (i.e. labour supply) responses that the reform off-sets. In general, the reform can be good for highly educated women, who will have an incentive to work more full time thanks to their higher earnings, which can compensate any loss in household income due to the man's staying home. For lower educated however, work might not pay as much and a reduction in labour supply might actually ensue (e.g. to reduce childcare costs). This will reduce also their pension rights at retirement. Furthermore, keeping men at home might slow down economic growth, and consequently growth of income pension accounts will be lower. This effect, combined with lower pension contributions (due to reduced labour supply), might result in higher poverty rates for women with lower education, compared to a scenario where the woman takes the whole leave. Other policies, such as more subsidised child care, might be an alternative worth considering to reduce female poverty in old age more evenly across educational levels.