The Parenthood Gap: Firms and Earnings Inequality After Kids

Abstract:

This paper studies the dynamics of career paths around parenthood, capturing worker advancement within firms and across firms of differing pay. Using a novel linkage between administrative data on U.S. workers' fertility and labor-market histories, we show that the parental earnings gap is partly explained by mothers transitioning to lower-paying firms. This firm downgrading is driven by parents who take an extended absence from the labor force. Mothers move to jobs that allow shorter hours, reduced commutes, and more remote work, suggesting greater flexibility, but also to firms offering lower levels of employer-based health insurance. Overall, firm characteristics account for up to one-quarter of the decrease in earnings among employed mothers.