Career sidestep, wage setback? The impact of different types of career breaks on wages

The career literature stresses the increasingly fragmented and often discontinuous nature of careers. Part of this evolution is the fact that, nowadays, people are interrupting their career more often. They may for instance quit wage employment temporarily to take care of their family, to get a degree or to start up a business. Some governments and policymakers introduce incentives for career breaks (Gould, 2004; Jones, 2005). These policies are based on the belief that career breaks may have an added value for individuals and the labour market. They may improve work-life balance, diminish the pressure on the active population, encourage lifelong learning, promote entrepreneurship and extend the labour market participation of older workers. For instance, the Employment Guidelines of the European Commission inspired several countries to develop institutionalized career break systems.

But are these positive effects of career breaks not overestimated? Critics could argue that career breaks may impede career progression. Employees who achieve a better work-life balance by taking a career break, may have to pay for this advantage by a slower career progression, fewer opportunities for promotion and a slower wage increase compared to their full-time working colleagues. Insight in the effects of career breaks is crucial to evaluate career break policies. In this paper, we study the effect of career breaks on later wages.