Financial consequences of career breaks. A latent growth model on register data

In Belgium, the Career Break Scheme allows employees to interrupt their careers temporarily while receiving a (limited) replacement income from the government. The scheme was brought to life in 1985 as an answer to the high unemployment rate. The underlying idea was to create more space on the labor market for the unemployed. Throughout the years the scheme gradually shifted from an economic to a more individual-oriented measure by adding thematic leaves (i.e. parental leave, leave for medical support or leave for palliative care). In 2002, this policy shift was recognized and confirmed with the name change to „Time Credit‟ in the private sector (Vanderweyden, 2002). The new Career Break Scheme is promoted as a way to increase the quality of life with a specific emphasis on the work-life balance or as the introduction on the brochure of Career breaks in Belgium states: “Take a career break to make time for yourself or for the ones nearby (for example to study, to raise your children, to travel, as a transition to pension,…)” (RVA, 2010).

The career break scheme enjoys a great popularity and the number of people entering the system of career breaks still increases rapidly every year in Belgium. Over the years, the number of people doubled from 111 994 in 2001 to 223 319 in 2007, up to a record of 261 059 in 2010 (RVA, 2010). The majority of people taking a career break are situated in Flanders where the government provides additional financial incentives to take a career break. Less people are taking a full-time career interruption, but more and more people find their way to the part-time break. The career break scheme is yet to discover its limit.

Little is in fact known about the consequences of the Career Break Scheme. In international research, it is generally believed that employees who interrupt their careers will be penalized on the labor market. Studies have shown the negative effects of taking a career break on career development in terms of fewer promotions and wage depreciation compared to individuals with continuous working patterns (e.g. Spivey, 2005, Theunissen, et.al., 2009). Since career interrupters might not always be aware of these negative effects before taking a career break, it is important to investigate the effects of career breaks. In this report, we will focus on the wage differentials after a career break. From the literature, it is still unclear how much wage loss can be expected. From longitudinal administrative data we derive a sample of employees living in Flanders from 1998 to 2006 to examine wage differentials after a career break. For wage comparisons a control group without a career break is employed.

In the first part, we introduce the Career Break Scheme and the different possibilities of taking a career break in Flanders in more detail (i.e. full-time career break, part-time career break and thematic leaves). The most important findings on the consequences of career breaks of previous studies are then discussed in the literature review. From this literature review, we can distill some hypotheses concerning the effects of career breaks in a longitudinal perspective. Subsequently, the data and methods used in this study are discussed. Here we will look at the data that have been sampled from the Belgian administrative database as well as the selections that were made for the analyses in more detail. Then, the method – multilevel growth modeling – is introduced. After this, the results from the multilevel growth modeling will be presented.