On -site day care centers: Determining the effects on employee organizational attachment and the resulting impact on firm productivity

The first contribution of this dissertation is to incorporate employee benefits into the Principal Agent model. From this illustration it is shown that productivity increases from on-site child care centers come from two avenues: by lessening the burdens workers experience, allowing them to be more productive at work, and by increasing the cost to a worker of getting fired. It is also shown that the productivity gain that results from the increased punishment of being fired is contingent upon the benefit not being widespread. To ensure that productivity gains persist as the benefit becomes more common, I show that they are a result of reductions in the degree of work/family conflict experienced by workers. Additional analysis at the worker level finds that workers who have day care programs are less likely to quit their jobs. At the firm level, I find that firms offering their employees a day care program have harder working workers than firms failing to offer the benefit. To further support the claim that that productivity gains persist as the benefit becomes more common aggregate analyses are conducted at the industry and area level. Industries where the benefit is offered have higher levels of labor productivity and labor productivity growth than industries in which no firms offer the benefit. Similarly, states in which the benefit is offered have higher per capita growth in Gross State Product and levels of per capita Gross State Product. Lastly, to link family friendly benefits to a direct measure of productivity, I extend the analysis to an additional data source. The Working Mother's 2006 list of 100 Best Companies is compared to a constructed list of control firms using propensity score matching. I show that return on equity is 6.99% higher for the Working Mother firms. Overall, this research shows that there are substantial benefits to a firm and its employees from offering employees a day care program that should persist as the benefit increases in popularity.