The October 2022 Treasury Round-Up paper titled Children and the Gender Earnings Gap said that women’s earnings are reduced by an average of 55 per cent in the first five years of parenthood.

The gap in earnings — termed the “motherhood penalty” — remains significant a decade into motherhood, though the authors noted that there is a slight recovery in the later years.

The motherhood penalty will be discussed in detail at the inaugural Women in Law Forum 2022 in November, along with strategies employers could implement to eradicate it.

The motherhood penalty for women who have only one child is smaller than the penalty estimated for those with multiple children but remains persistent, the authors said.

“Importantly, for women with one child, there is no significant recovery in earnings at year five when children generally start school,” they said.

While men’s and women’s earnings follow similar paths until parenthood (at which point their earnings begin to diverge), men’s earnings are unaffected by entry into parenthood.

How choices around work and care impact pay

The authors of the paper — Elif Bahar, Nathan Deutscher, Natasha Bradshaw and Maxine Montaigne — attributed the motherhood penalty to a combination of lower participation rates and reduced working hours, and to a lesser extent, a reduced hourly wage.

VIEW ALL

There is a steep drop in the probability of employment of about 45 per cent in the year the first child arrives, with only a modest recovery after five years, according to the report.

For women who remain employed, hours worked declines by about 35 per cent across the first five years, with minimal recovery over this period, while hourly wages are about 5 per cent lower than if they had not had children (though the authors said these estimates are imprecise).

A potential explanation for the motherhood penalty is the choices couples make about allocation of household work and care based on relative earnings, with the authors finding the same penalty regardless of a woman’s breadwinner’s status before children (including for women who significantly out-earn their partner).

“Furthermore, highly educated women experience a larger penalty, despite the higher opportunity cost of reducing their participation — suggesting again that choices around work and care are not always responding purely to financial considerations,” they said.

Satisfaction not guaranteed post-motherhood

Mothers feel less satisfied with their employment opportunities after having children, in line with their worsening employment outcomes.

This begins to fall the year prior to children and becomes significant one year after, signalling an anticipation in fewer work opportunities before parenthood.

On the other hand, men’s satisfaction with their employment opportunities does not change markedly over time, the authors said.

However, fathers with young children are more likely than mothers to report that their work affects their family life, while mothers are more likely than fathers to report that family life impacts their work regardless of the age of their youngest child.

“Parents appear unsatisfied in ways that suggest a more equal allocation of paid and unpaid work could be beneficial, lifting the employment opportunities for women and improving work/life balance for both genders,” the authors said.

Solutions to close the gap

Flexible working conditions could combat the motherhood penalty, as women who had greater access to flexible conditions before having children are more likely to remain employed after having children.

For women who remain employed, the hourly wage penalty is larger for those in more flexible occupations, potentially reflecting foregone promotion opportunities.

“These results suggest a role for workplace settings, particularly around the availability of flexibility, in potentially mitigating the motherhood penalty in employment and hours worked, but potentially at the cost of hourly wages,” the authors said.

Noting that motherhood disproportionately leads women to more likely be in a flexible workplace but less likely to be in management, the authors mused that “workplace flexibility is only half the story”.

“Goldin (2014) argues that disproportionate rewards for long and particular hours in some sectors result in larger gender pay gaps that could be ameliorated with more considered job design. This would benefit women, but also men, seeking greater flexibility at work,” they said.

Gender norms (where there is a belief that women should stay home when either their child is under school age or their youngest child is in school) play a role in exacerbating the motherhood penalty.

The link between policy and the motherhood penalty is more tenuous as expansions in parental leave and childcare in Austria had little impact on the penalty and underscored the importance of norms (and its complex interaction with policy).

Removing multiple barriers is key

Nevertheless, the authors said changing social and workplace attitudes in unison with a supportive policy environment could result in substantial progress in Australia’s “sizeable motherhood penalty”.

They concluded that removing barriers that exist within social norms, workplace norms and policies, and government policy settings is necessary to achieve further gains in female labour force participation, the allocation of talent across paid and unpaid work, and improved diversity in the workplace.

“Improving the utilisation of women’s skills would increase the returns on investments made in women’s human capital,” the authors said.

Australian women are more educated than men on average, with 37 per cent of women attaining a bachelor’s degree or above in 2020, compared to only 29 per cent of men, according to the Australian Bureau of Statistics.

To hear about how organisations could implement workplace policies that dismantle the motherhood penalty and systemic disadvantages and stigma associated with family planning and motherhood, come along to the Women in Law Forum 2022.

It will be held on 24 November at Grand Hyatt Melbourne.

Click here to book your tickets and don’t miss out!

For more information, including agenda and speakers, click here.