Long Maternal Leaves and The Gender Wage Gap (thesis)

Abstract

This article examines the effect of long parental leave policies on the gender wage gap. I analyze the general equilibrium consequences of the introduction of generous job-protected parental leaves on female wages and female labor force composition. My evidence supports the hypothesis that generous child support for families can be costly for firms; and moreover, that these costs are passed on to women in childbearing age that participate in the labor market. Longer maternal leaves increase job discontinuity for female workers and therefore reduce the benefits of job experience and human capital accumulation on an employee's performance. Hence, firms impute these costs when making hiring or wage pricing decisions. This paper makes use of the natural experiment of a series of extension of parental leave entitlements in Germany in the 1980s and early 1990s. Difference-in-difference estimates from a sample from the German Socio Economic Panel, a longitudinal household survey, show that longer maternal leaves decreased the relative labor income for women in childbearing age compared to men of the same age group by 0.55 percentage points and increased the share of women in part-time positions. These findings support the theory that mothers who are offered longer leaves make use of them and are more likely to return to a part-time job than a full-time job during the period of a leave entitlement. Hence, this paper shows that policies that support mothers and their child can result in greater labor market discrimination of women.