Informal Care and Employment in England: Evidence from the British Household Panel Survey

More than 40% of the respondents in the British Household Panel Survey provide informal care at least for one year within the period 1991-2003 and carers are usually less likely to hold simultaneously a paid job. There is little evidence on the mechanism that links informal care provision and labour market outcomes. This paper provides evidence on the pathways through which this pattern arises using a multivariate dynamic panel data model that accounts for state-dependence, feedback effects and correlated unobserved heterogeneity. We find evidence of a causal link from informal care to employment with employment rates reduced by up to 6 percentage points. However, this effect is only found for co-residential carers who account for one third of the population of carers and less than 5 percent of the overall labor force. For the same group, a significantly smaller link from employment to care provision is found. A micro-simulation exercise using the model estimates suggest that the overall potential pressure on the provision of informal care created by a rise in the employment rate is minimal.