What is the motherhood penalty?

It won’t come as a surprise to the mums listening to this podcast, but there’s a price to pay for being a mother. Whether it’s the countless extra hours of unpaid labour, losing out on a promotion because you’ve got to pick the kids up from school, or even choosing to work part-time, this all has an enormous impact on lifetime earnings for Australian mothers.

In this podcast, Kat Clay interviews Natasha Bradshaw, co-author of a Treasury paper on children and the gender earnings gap, alongside Owain Emslie, Grattan senior associate, on his policy recommendations to reduce the motherhood penalty.

Read the Treasury paper

Read Dad Days

Read Cheaper Childcare

Transcript

Kat Clay: It won’t come as a surprise to any of the mums listening to this podcast, but there is a price to pay for being a mother. Whether it’s the countless extra hours of unpaid labour, losing out on a promotion because you’ve got to pick the kids up from school, or even choosing to work part time, this all has an enormous impact on lifetime earnings for Australian mothers.

Today on the podcast, we have Natasha Bradshaw, who is currently on secondment to Grattan from the Australian Treasury. She’s the co-author of a recently released treasury paper on children and the gender earnings gap. Along with Natasha, we’re joined by Grattan senior associate, Owain Emsley, who was the co-author of Grattan’s Cheaper Child Care and Dad Days reports.

Hi Tash and Owain. Hello. So, Tash, what prompted you and your colleagues to look at this particular area of research? Tell us how you approached it.

Natasha Bradshaw: Like many other countries, in Australia, women’s economic participation has increased substantially in recent decades and differences in earnings between men and women have narrowed time.

And these gains coincided with significant increases in women’s levels of educational attainment, which allowed them to enter more skilled profession and access better paid jobs. But there are fairly significant gaps remaining. So, the female participation rate is still almost 10 percentage points below men’s.

Women are much more likely to work part time and those who work full time still earn about 14 percent less than men. And we know that women also continue to take on the bulk of domestic unpaid work. And we know from international evidence that much of these remaining gender differences can be attributed to the impacts of having children.

And so, what we wanted to know is what does this look like in Australia? How big are these impacts and why does it always fall on women? And the more we understand about this, the more equipped we are to design relevant policy. And so, what we do in the paper is to estimate. how much having children directly impacts the earnings of men and women, and to look for evidence of why these negative earnings shocks seem to only really occur for women.

Kat Clay: I think it’s something we’re really passionate at Grattan about, and we’ll talk about some of those policy recommendations in a minute, but in your paper, you talk about this motherhood penalty and apart from sounding like a great name for a novel, what actually is it?

Natasha Bradshaw: I wish I could tell you it was fictional, but unfortunately, it’s not.

It’s very real. So, the term motherhood penalty, or it’s also sometimes called a child penalty in the international literature. It refers to the amount on average that women’s earnings fall behind men’s because they become parents. So before having kids, you do have a bit of a level difference in earnings between men and women, but they tend to grow at pretty similar rates.

And what we show in the paper is that on average, when women enter parenthood. Their earnings fall by more than half in the first five years after birth. And this doesn’t suddenly bounce back when their kids start school. In fact, we then use another data set to show that even 10 years after the birth of their first child, women’s earnings are down more than 40 percent compared to their pre-birth income.

Now this is mostly driven by a reduction in women’s labour supply. So, both by dropping out of the labour force or by reducing their hours worked. And there’s also a small impact on their hourly pay rates, which likely reflects kind of foregone opportunities for promotion. In comparison, when we look at father’s earnings after they have children, there is no impact.

On average, having children has no effect on what fathers earn. and yet we have these large impacts for women. And so, it’s this difference between mothers and fathers change in earnings that we refer to as the mother penalty. Thanks

Kat Clay: so much for that, Tash. I mean, what causes this motherhood penalty?

Natasha Bradshaw: So, it’s really important to understand what causes it, because it might be the case that families are just making choices that work best for them or fit in with their preferences.

And in that case, calling it a penalty is a bit misleading. But it’s also a really hard question to answer. So let me talk you through a few of the potential reasons. potential explanations that we think about in the paper. So, the first one is that people have a limited amount of hours in the day. And so, when you’re making decisions about how you allocate parents time between working and caring, it might make sense to think about your financial incentives.

In about two thirds of households, before they have children, the male partner out earns the female partner, if you’re a heterosexual couple. And so, what we thought is, maybe people are just making this choice that the lower earner is the one who stays home and looks after the kids. And what we found actually was quite surprising.

And that’s that the size of the motherhood penalty was completely unrelated to what parents earned before they had children. Even women who were significantly out earning their partners prior to having children faced this really high earnings penalty. So, it didn’t seem like financial incentives seemed to be the reason.

Next, we thought about whether the preferences between genders are just different. Now, of course, people’s preferences are going to play a big role in these decisions. The survey evidence we looked at suggested that there’s at least some dissatisfaction with the current arrangements. So, we see mothers who are quite unsatisfied with their career opportunities after becoming parents.

And we see a lot of fathers who find that their careers really restrict their ability to participate in family life. While many households might be happy with their arrangements, it seems that there are also a lot who aren’t. It’s also really hard to disentangle people’s preferences from society’s attitudes and norms around gender roles, as both of these things tend to influence each other.

So, what we show in the paper is that countries with more conservative attitudes towards gender roles tend to have larger motherhood penalties. For example, if you compare Australia to the U S or to Denmark, Australians tend to have more conservative attitudes about women’s roles. And we also have a higher motherhood penalty than these other countries.

And so, these norms and attitudes really seem to matter. And finally, we show some suggestive evidence that the ability to work flexibly does matter. So, women in really inflexible jobs are much more likely to drop out of the workforce after they have children, probably because these jobs are really hard to balance with having children.

But women in more flexible jobs While they’re more likely to stay in the workforce, they face larger declines in their hourly wages, which likely represents that they’re less likely to take promotion opportunities. It seems as if there are some real barriers to couples sharing work and care more equally, if they would like to, and that comes in the form of social norms and institutions, in the workplace or in policy.

Kat Clay: It’s something that, we’re really proud of, I think, at Grattan is that we do have a lot of mums here and we do have quite flexible working conditions, but it is something that is going to come up time and time again after the pandemic because people have got used to working flexibly and working around, you know, the schedule for the kids.

And I think overall, this is a really positive thing. One thing I did want to know is does this penalty increase the more kids that you have.

Natasha Bradshaw: Yeah, it does. So, in general, what we see is that the penalty is a bit smaller if you only have one child, and it’s higher the more children you have, as you might expect.

But nonetheless, even for women who just have one child, the penalty is very high and very persistent.

Kat Clay: So, I mean, this might seem like an obvious question, especially for women and the mums podcast, but why is it important that the penalty is addressed?

Natasha Bradshaw: Yeah, so there’s a few reasons. The first one is that neither gender seems perfectly happy with current arrangements, and so removing any barriers to the options available to couples to choose how they allocate work and care will generally help people’s outcomes.

The second thing is that from a purely economic standpoint, we’re facing an aging population and labour shortages in several female dominated occupations and industries. At the same time, women are now more educated than men on average, and many are the primary owner in their household. And so there are quite significant economic gains to be made from women participating more in paid work.

And very importantly, these losses in earnings and therefore in superannuation contributions are large and they present real risks to women’s financial security. And that’s especially the case where there are instances of separation or when there are issues with financial abuse or coercive control in the relationship.

Kat Clay: Yeah, I think there’s a chart that’s seared into my mind from Grattan about women who are separated and the, the difference that that makes in terms of, you know, their financial position, especially late in life. And there’s a lot of insecurity from everything from housing to kind of your retirement incomes.

So, turning to policy, I mean, Owain, you’re a dad and you’ve also done significant research into some of the policy measures that can help allay this motherhood penalty. And I mean, there’s three key areas that we’re going to go through, but the first is cheaper childcare. And it’s very significant as the federal government recently invested 4.

7 billion into cheaper childcare at the federal budget. And there’s also been recent investments into childcare by the New South Wales and Victorian state governments. And I mean, you were part of the team which wrote our report called cheaper childcare in 2020. The question is why are these investments important?

Owain Emslie: The short answer is they’re important because they open up choices for women to stay more attached to paid work. Our report showed that childcare availability and childcare cost. are major barriers to women often doing as much paid work as they’d like to. A lot of women are the second earner in the household and in that role, they face big financial disincentives to working, especially increasing their hours of work to work four or five days a week.

We found after tax, loss of benefits, paying for childcare, many women were working for as little as 2 an hour or even paying for the privilege of working in some cases, which doesn’t sound all that appealing. So, so that’s why it’s not surprising that Australia has one of the highest rates of part time work for women in the world.

So, it is great that governments have been making changes to improve this situation. So, the former coalition federal government made changes to increase the subsidy, the childcare subsidy for families with two or more kids in care. The current labour government has a bill before parliament that goes further to increase subsidies, helping a wider range of families.

And doing more to drive down those financial disincentives. And, as you mentioned, state governments in, in New South Wales and Victoria are targeting availability with universal preschool and targeting childcare supply. So, you know, some really, some really good things that are happening that’s going to improve that situation.

Kat Clay: The second policy area that could help is gender equal parental leave, which you researched in your report, Dad Days. You’re also a dad. What difference does getting fathers involved in the early years make to women’s economic participation?

Owain Emslie: Well, it makes a big difference because when fathers are more involved in parenting during the first.

Year of their child’s lives, they become more confident with parenting, more involved, more capable. This frees up mothers, to, if, if they choose to, to more easily be able to re-enter the workforce. Basically, if they have a, a capable and keen, partner in parenting to, to be able to pick up some of the slack.

So, studies, in various countries have shown that that’s the case. one in particular in, in, in Quebec, they brought in a scheme that had five weeks of parental leave set aside for fathers. Years later, mothers who’d, you know, had children, around the time of that scheme were doing an extra hour of paid work per day.

And the fathers were doing about 40 minutes less paid work per day. So, there was a, there was a net gain, and a, you know, a significant sort of switch between, the genders as far as who was doing what. So that would have, you know, that would have had a quite an impact on that, that motherhood penalty.

But the great thing with more gender equal parental leave is that, you know, that’s not all it does. It’s not just the economic impact. These kinds of schemes that set aside a portion of leave for each parent that, so they, you know, so as to allow parents the choice and to encourage that choice to take a more equal share.

They’ve been shown to be good for dads, good for moms, and good for kids as well. Taking, dad leave is Associated with fathers having better reporting, better job satisfaction and life satisfaction can also lead to an improvement in family relationships and less parenting stress. studies in a few countries have shown that one in Iceland in particular found that where fathers have taken parental leave, the parents are more likely to still be together 15 years later, which is a finding represented to a few different female stakeholders, none of whom were the least bit surprised, I can, I can assure you at that finding and for the kids, it’s been shown that children who have two involved parents, be that two dads, two moms, or one of each.

Thank you very much. having that kind of diverse interaction is correlated with them, later reporting better cognitive ability, emotional development, social aptitude. So, the, you know, the benefits just go on and on from, from these, these more gender equal parental leave policies.

Kat Clay: And I mean, does flexible work help with this as well?

Owain Emslie: Yeah, absolutely. Flexible work is great for parents. it enables them to stay involved at work and juggle caring. There’s more, more of this, more options to do those kinds of things post COVID. You know, we’ve had the working from home revolution and, you know, Part time and flexible hours don’t seem so, such a big ask as they used to.

but there is one sort of concern with this that if it ends up being only mothers that are using these kind of arrangements, we run the risk of creating a bit of a two tier workforce where, people who are present in the office and visible and having those, having conversations with important people and whose work is being seen are on sort of on the, on the, on the promotion track and, and, and women are sort of on the, on what gets called the mummy track of with lower chances of promotion and sort of being seen as a maybe less of a contributor.

So, what that’s, that’s why I get really excited about a policy like gender equal parental leave that can really get in on the ground floor and help to change those social norms. So, you stand in the track, it’s. more likely that it will be fathers as well as mothers who are, who are saying, you know what, I’d like to put my hand up for these kind of flexible working arrangements and picking up the kids after school or, you know, working from home or whatever other sort of arrangement there is.

And, you know, it’s, it’s not a, it’s not a gender, gender divide as much then, and you know, everyone can, can take advantage of these opportunities.

Kat Clay: As a dad, I mean, have you taken advantage of this kind of thing to participate in your daughter’s lives?

Owain Emslie: Yeah, absolutely. I’ve, I’ve worked four days a week for, a long time now to get involved more with the caring and I’ve been able, been fortunate to be able to, structure my week so as to knock off early certain days to for school pick up.

So, I’ve even, you know, grant must be good enough to allow me to work four days sort of spread across five and those kinds of things have been really good as my daughters are a bit older. I’ve gone back to working full time, but what enables that, what makes that work is being able to work from home some of the days.

So, I can still. Pop out for a bit to do the school pick up and then log back on at home. so, a lot of those things are, you know, have been, have been great for me. And I think I’d encourage as many people who can, can do those kinds of things to, to look into those options.

Kat Clay: Yeah, I’m sure there’s some dads listening who would be really interested to hear from your experiences there.

Turning back to the bigger picture, I suppose, what would you like to see next done by governments?

Owain Emslie: So, we mentioned before governments are doing things on childcare, the federal government also has announced in the budget that they’re going to expand parental leave to 26 weeks. So, the biggest thing is kind of to make sure these, these policies are done right.

And so that they, they work to get the outcomes we want. So on, on childcare, a big part is. Making sure the, the, the childcare industry can expand to meet additional demand, addressing staff shortages and tackling the problem of chronically low pay in the childcare sector, and also ensuring that the higher subsidy actually hits the pockets of parents rather than being siphoned off into higher profits for childcare providers.

So, the government. Could look at using the hourly rate cap, to try and achieve that, but also ensuring that the ACCC keeps a close eye on prices. When the subsidy increases, also having better oversight of care quality to ensure that the policy is delivering better education outcomes for the children, which is an outcome that I’ve really talked a lot about, but as well as the workforce participation outcomes.

that can be a real, a real great thing as well. So, on parental leave, the, it’s yet to, it’s been intimated that the idea is to have that extra leave, as part of that as a use it or lose it component for, set aside for each parent. One thing is to make sure that that is what happens, that there’s a significant portion, about six weeks I think would be great to have set aside as a use it or lose it component for each parent.

So, we really do get the benefits from, encouraging a more gender equal share of parenting. Looking back at the recommendations from our Dad Days report, I’m glad to see that the government are doing a couple of the other things that we mentioned, like making the eligibility based on household earnings rather than Mother’s earnings, which is great.

One thing they could do is try to make Centrelink’s processes a little more streamlined and make that application for parental leave a bit easier. I’ve certainly heard horror stories of, parents who’ve, who’ve quote unquote lost the will to live while trying to get through Centrelink’s processes.

I understand the intention is to make changes to make that a bit easier. So, to make sure that happens. And another thing on parental leave that I think would be great is to evaluate the new scheme after three years or so and regularly after that to assess, the, to assess the take up of the scheme.

And to see how families are using leave and to assess some of those benefits, we’re hoping to see like father’s involvement in care beyond the leave period, then use that to look at tweaks to the scheme, whether perhaps changing the amount that’s paid to encourage more, more high earning parents to, to take that.

Leave because it’s currently paid at minimum wage or whether the scheme could be adjusted to encourage fathers to take more time as a primary carer, there’s, there’s a few things that could be done, but monitoring the scheme to, and evaluating it would be a great thing to put in place.

Kat Clay: Thank you so much, Tash and Owain. We have talked about an absolute wealth of research this episode and I will put links to the reports that we’ve discussed in the show notes, so you don’t have to miss out on reading those in more detail. If you want to talk to us or vent about the motherhood penalty, please contact us on social media at Grattan Inst on Twitter and all other social media channels on Grattan Institute.

We are a not for profit and we do rely on donations from our lovely listeners to keep going. So please, if you can support us, go to grattan.edu.au/donate. As always, please take care and thanks so much for listening.