Meifeng Yang

WORKING PAPERS

When Grandmothers Step In: Grandchild Care and Labor Supply Dynamics (Job Market Paper) [Draft]

Abstract: In the United States, many older women reduce work when a first grandchild arrives. I call this the "grandchild penalty.'' Using the Health and Retirement Study, I document that after a first grandchild is born, employment falls by 13 percent and earnings fall by 25 percent, driven by a sharp rise in grandchild caregiving. The central question is whether this shift reflects grandmothers' preferences or parents' childcare needs. To separate these forces, I exploit California's Paid Family Leave (CA-PFL) program, which reduced parents' demand for informal care. CA-PFL raises grandmothers' employment by 15 percent and reduces caregiving by 25 percent, indicating that family need drives a substantial share of the penalty. To quantify lifetime consequences, I develop a dynamic life-cycle model of grandmothers' work and caregiving decisions. Counterfactual simulations show that CA-PFL raises lifetime consumption by 1.4 percent, primarily through longer careers and higher retirement benefits. Raising the Early Retirement Age from 62 to 64 increases labor supply, but grandchild care attenuates the response.