Women still bear the financial brunt of raising children, described as the ‘motherhood penalty’. Findings in a new Australian Government working paper demonstrate the significant and persistent penalty attached to having a child for women’s earnings, but not for those of men.
The paper uses data from the Household, Income and Labour Dynamics in Australia (HILDA) survey and the Australian Tax Office (ATO). The motherhood penalty (the divergence in earnings following entry into parenthood) averages 55% over the first five years, excluding the birth year, and is persistent over a long timeframe, averaging 43% from five to 10 years. It is driven by a reduction in workforce participation and hours worked, and to a lesser extent, a reduction in hourly wages.
Historical gender norms, including institutional and policy settings that sustain them, are more supported as an explanation, with the paper referring to international studies which reveal a strong positive correlation between a country’s motherhood penalties and the proportion of survey respondents who think that women should stay at home when they have young children.
Arguably, the most valuable insights for employers can be found through the analysis of HILDA survey responses around satisfaction and work life balance. Fathers of young children are more likely to report work impacting family life, with mothers of young children more likely to report that family life impacts their work. Combined, these measures suggest that parents may be facing constraints when choosing how to allocate household duties and paid employment opportunities.
Employers looking to attract and retain talent can differentiate themselves by offering flexibility around parental leave and part-time working arrangements. It’s important to ensure that males can take on caring responsibilities without fear of facing a ‘fatherhood penalty’ so that households are free to allocate these responsibilities based on personal preferences rather than societal gender norms.
WTW can partner with employers to develop a pay and career equity strategy, including applying a diversity and inclusion lens across the structure of leave types such as parental leave entitlements and superannuation arrangements. We can also ensure that digital solutions and calculators delivered via financial wellbeing programs assist in optimising outcomes for all employees.
This research reinforces several aspects of the cause of the gender gap in superannuation, including the gender pay gap and the impact of time out of the workforce to have children on retirement savings. WTW has explored these themes in a series of articles throughout 2022 and 2023.
