Measuring Housewife Wage Premium

Abstract

It is often claimed that housewives are unproductive members of society. This thesis investigates the issue of their productivity that works through an indirect channel whereby they contribute to the earnings of their husband. This is termed the housewife wage premium. We have compared the earnings of two groups of married males: those whose wives are working and those who have housewives. Two-Stage Residual Inclusion (2SRI) estimation technique is applied to address the potential endogeneity in the relationship between the working status of the wife and the total income of her husband. Utilizing secondary data from the Household Integrated Economic Survey (2018-2019), the analysis reveals the presence of the housewife wage premium, indicating that there is a cost associated with having a working wife. The wage premium persists despite taking account of family size and availability of support in the form of mother-in-law, suggesting that these variables do not fully substitute the role of a housewife or account for dependency effects. The investigation is motivated by testing a hypothesis based on one implication of Becker’s model i.e. that married men with non-working wives earn higher incomes than those whose wives are employed, a proposition supported by context-dependent preferences. Based on the findings of this study, it is recommended that a designated portion of the husband's income, equivalent to the value of the housewife's contributions, may be allocated to the housewife as her pocket money. This policy aligns with a clause in the “Nikahnama” that allows the wife to specify her maintenance allowance. The allocation is intended to provide a financial safety net, thereby reducing her vulnerabilities.