Women's Transitions in the Labor Market and Childbearing: The Challenges of Formal Sector Employment in Indonesia

Abstract It is well established that women's labor force participation drops markedly with marriage and childbearing, however, little is known about women's labor market transitions, especially in developing countries. This article uses the Indonesian Family Life Survey to track the employment histories of over 5000 women for more than 20 years, observing women as they get married and have children. The data show that large numbers of Indonesian women drop out of the labor market as a result of marriage and childbearing, particularly from the formal sector. Having worked in the formal sector prior to the birth of a first child reduces the probability of working in the year following the birth by 20 percentage points and reduces the probability of returning to the labor market thereafter by 3.6 percentage points. If women do return to work, formal sector employment is associated with greater delays in returning. There is little evidence of women switching from the formal to the informal sector. Formal sector labor market policies such as flexible work hours, part‐time work, the ability to work from home, and work‐based childcare are likely to boost women's labor force participation, with consequent boosts to economic productivity and prosperity.