How the Labor Standards Law (LSL) affects the female labor market in Taiwan: Empirical tests for the effects of maternity and pregnancy benefits (1984--1944)

There are three main results in this paper. First, the hours restrictions of the legislation have had very little effect on total hours worked, and thus they should have a very little effect on wage rates and employment. Second, the wages of young females in Taiwan were reduced by the Labor Standards Law (LSL), especially because of its provision of maternity and pregnancy benefits. Third, the employment of young women also has declined as a result of this legislation, mainly because fewer young women are hired by firms in the covered sector.; The hours restrictions have more effects for women than men. Restrictions have greater effect on women because women are not allowed to work as many hours as men. We find there is no large reduction in extra hours worked by women as a result of the hours restrictions, although these restrictions do have some effects on the distribution of hours worked. The hours restrictions mainly increase compliance among those workers whose hours are close to the legal limit. Because the LSL has no apparent effect on total hours worked by women, the restrictions will not raise the labor cost for women. Thus, the hours restrictions were not expected to have a large effect on wage rates and employment.; The LSL requires employers to offer maternity and pregnancy benefits. But these requirements increase the cost to firms of employing young women, those most likely to become pregnant and give birth. As a result of these requirements, the labor demand curve for young women should shift to the left and the supply curve should shift to the right. If wages are fully flexible, wages should fall and there should be no effect on employment. If wages are only partially flexible, then wages and employment should both fall. We find that, in those sectors of the economy covered by the legislation, wage rates of young women have fallen relative to those of young men and also relative to the wages of old women. These reductions in the relative wage of young women peaked in two time periods. The first is from 1988 to 1990, the period in which the Council of Labor Affairs was set up to enforce the LSL. The other is from 1992 to 1994, the period after enforcement was further tightened as a result of passage of the Labor Inspection Law. But other factors, including increased foreign unskilled workers competing with native young women, could be responsible for the 92--94 results. The wage reduction of young women as a result of maternity/pregnancy benefits suggests that firms will adjust wages downward 7 percent and employment downward at least 11 percent to compensate for the cost of maternity/pregnancy benefits. The employment declines appear to result more from hiring reductions than from the termination of existing workers. Both wage rates and employment reductions may be greater if the results for 1994 are mainly due to the Labor Inspection Law rather than increased immigration of foreign workers.