Wage Penalty for Motherhood in Context: Economic Consequences of Motherhoode in the United States and Germany

Abstract

Women earn less than men, and among women, mothers earn less than non-mothers. Recent evidence reaffirms the importance of parenthood in accounting for the persistent gender gap in earnings in the United States, but the mechanisms that account for this gap are not undisputed, and the wage penalty for motherhood remains poorly understood. Against this background, the paper examines wage penalties for motherhood in the United States and Germany, two countries that differ significantly in terms of both labor market and welfare state institutions supporting the continuous employment of mothers. We find that white and African-American mothers in the US, along with women in western Germany, earn 6%-9% less than women without children, but working mothers in the states of the former East Germany experience no penalties. Much of the gap can be attributed to differences in time spent in the workforce, and to occupational and sectoral segregation. However, part-time workers experience severe penalties in the US, but not in Germany. We conclude that the adoption of convetional male-breadwinner behavior remains the best guard against wage erosion, but labor market institutions in Germany provide better protection for working mothers.