On the Economics of the Pill

Interesting report here in the New York Times:

The recent controversy over contraception and health insurance has focused on who should pay for the pill. But there is a wealth of economic evidence about the value of the pill – to taxpayers, as my colleague Motoko Rich writes, as well as to women in general.

Indeed, as the economist Betsey Stevenson has noted, a number of studies have shown that by allowing women to delay marriage and childbearing, the pill has also helped them invest in their skills and education, join the work force in greater numbers, move into higher-status and better-paying professions and make more money over all.

One of the most influential and frequently cited studies of the impact the pill has had on women’s lives comes from Claudia Goldin and Lawrence F. Katz. The two Harvard economists argue that the pill gave women “far greater certainty regarding the pregnancy consequences of sex.” That “lowered the costs of engaging in long-term career investments,” freeing women to finish high school or go to college, for instance, rather than settling down.

The pill also helped make the marriage market “thicker,” they write. By decoupling sex from marriage, young people were able to put off getting married and spend more time shopping around for a prospective partner.

Those changes have had enormous impacts on the economy, studies show: increasing the number of women in the labor force, raising the number of hours that women work and giving women access to traditionally male and highly lucrative professions in fields like law and medicine.

A study by Martha J. Bailey, Brad Hershbein and Amalia R. Miller helps assign a dollar value to those tectonic shifts. For instance, they show that young women who won access to the pill in the 1960s ended up earning an 8 percent premium on their hourly wages by age 50.

Such trends have helped narrow the earnings gap between men and women. Indeed, the paper suggests that the pill accounted for 30 percent – 30 percent! – of the convergence of men’s and women’s earnings from 1990 to 2000.

Interestingly, the study also found that the pill had the greatest economic benefits for women with average IQ scores. “Almost all of the wage gains accrued to women in the middle of the IQ distribution,” the paper said. For this group, it said, women with early access to the pill “enjoyed greater hourly wages throughout their twenties and the premium grew to a statistically significant 20 percent at ages 30 to 49.” Why? The pill helped “middle ability” women in “planning for and opting into paid work,” the researchers theorized.

The above article focuses on the economic value of the pill to women generally (and, I suppose, through increased earning power, to the taxpayer), but here’s the specific Brookings Institution paper (“Policy Solutions for Preventing Unplanned Pregnancy” by Adam Thomas, Georgetown University) on the direct value to the taxpayer of certain forms of government-subsidized pregnancy prevention programs.

Here are some extracts:

The research also shows that each dollar spent on these policies would produce taxpayer savings of between two and six dollars…Nearly half of all pregnancies in the United States are unintended, and the parents and children involved in these pregnancies tend to be disadvantaged in a number of ways. For example, Figure 1 shows that unintended pregnancies are disproportionately concentrated among women who are unmarried, teenaged, and poor. Some studies have used sophisticated statistical techniques in an attempt to determine the extent to which pregnancy intentions have a causal effect on maternal and child outcomes. These studies generally suggest that unintended pregnancy and childbearing depress levels of educational attainment and labor force participation among mothers and lead to higher crime rates and poorer academic, economic, and health outcomes among children.

In addition, unintended pregnancy has important implications for public sector balance sheets. For instance, Emily Monea and I estimate that taxpayer spending on Medicaid-subsidized medical care related to unintended pregnancy totals more than $12 billion annually. This figure is substantially more than the federal government spends on the Head Start and Early Head Start programs each year. Unintended pregnancies are also much more likely than intended pregnancies to be terminated. Unintended pregnancies account for more than 90 percent of all abortions—and a substantial majority of Americans of all political stripes support the goal of reducing abortions.

Just one paper, of course, and the Brookings Institution comes with its own institutional bias, but intuitively it makes quite a bit of sense, and, as a taxpayer, leaves me less than thrilled by the direction of some of the rhetoric coming from some sections of the GOP. Read it for yourself and see what you think.

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