Mothers with low pre-childbirth hourly wages incur the largest earnings losses at the arrival of a child

Pierre Pora, Lionel Wilner (Insee - Crest)

The arrival of a child results in substantial earnings losses for women, but not for men. Childbirths leads women to decrease their labor supply at either extensive or intensive margin: these decisions result in a 20% decrease in average in their labor earnings 5 year after childbirth. Besides, each additional child induces a 5% loss in hourly wages, and this loss persists at least 5 years after childbirth. In contrast, the arrival of a child does not lead to any substantial change in fathers’ earnings, with the exception of those with the highest pre-childbirth hourly wages who tend to increase their labor supply.

Mothers’ earnings losses vary substantially depending on their initial hourly wages: these "child penalties" are very steep for those with the lowest pre-childbirth hourly wages (up to 40%), and almost negligible for those with the highest pre-childbirth hourly wages. This heterogeneity is due to labor supply decisions, while hourly wages losses are fairly homogeneous.

Households seem to make their decision based on financial incentives: women with the lowest hourly wages have the strongest incentives to decrease their labor supply. These incentives include the opportunity cost of a decrease in labor supply and the cost of external childcare after subsidies provided by French family insurance and fiscal systems are taken into account.

Insee Analyses
No 48
Paru le : Paru le 10/10/2019
Pierre Pora, Lionel Wilner (Insee - Crest)
Insee Analyses  No 48 - October 2019