Penalties or Premiums: Explaining Effects of Having Children on Women's Wages in 13 High and Middle Income Countries

Wage gaps between mothers and non-mothers have been an object of scientific attention since the 1990s. Several authors have presented evidence of working mothers’ lower wages compared to childless women in the US and Western Europe. More sparse and less consistent evidence exists regarding the effects of children on women’s wages in Eastern Europe, Latin America, Africa and Asia. We study wage effects of having children for working women in thirteen high- and middle-income countries. We ask whether the child penalties that have been found in highly industrialised countries exist in middle-income countries too.

Secondly, we ask to what extent wage effects can be explained by mothers’ different labour market position. Mothers’ disadvantage may be created at least in part by processes of self-selection and adaptation. If so, mothers and non-mothers will be expected to occupy different labour market positions and may differ from each other in terms of human capital, the types of jobs they hold and firms they work in. Mothers may accumulate less human capital, if they take time out of the labour market around childbirth. Mothers may work in sectors and occupations that are associated with lower pay or work part-time jobs and be less willing to commute.

We use the 2013 WageIndicator continuous online volunteer survey on wages and working conditions to analyse women’s wages in 13 countries in Latin America (Argentina, Brazil), South East Asia (Indonesia), Africa (South Africa), Western Europe (Belgium, Germany, Netherland), Central Eastern Europe (Czech Republic, Slovakia) and Eastern Europe (Belarus, Kazakhstan, Russia, Ukraine). We control for selection into employment using ILO EAPEP estimates of female labour force participation rates. Using multilevel random effects models and Blinder-Oaxaca decompositions, we analyse the size of the wage gap and the explanatory power of human capital, jobs and firms.

We find that in ten out of thirteen countries a raw child penalty does exist. Once we control for human capital, job and firm characteristics, only Ukraine and Brazil have significant child penalties. This indicates that a large share of the wage gap between mothers and non-mothers is driven by processes of labour market segmentation. The Blinder-Oaxaca decompositions show that these mechanisms do not work in the same way in all thirteen countries. Mothers are primarily penalized for time out of the labour market in some countries, whereas in others they have lower earnings due to their working in lower paid occupations or sectors.