The gender pay gap in NZ has generally been decreasing since 1998, and in the 2017 June quarter fell to 9.7%, its lowest since 2012. However, the gap is still a long way from zero, and a high proportion of it cannot be explained by differences in observable characteristics or by differences in productivity between males and females. This research paper explores what can be learnt about the drivers of the gender pay gap in New Zealand from combining administrative wage data, birth records, and survey data on hours worked and earnings. The particular focus is the role of parenthood penalties in this pay gap. It follows on from the release in 2017 of Empirical evidence of the gender pay gap in New Zealand.
Purpose
This paper is an initial exploration of what we can learn regarding the drivers of the gender pay gap in New Zealand (NZ) from combining administrative wage data, birth records, and survey data on hours worked and earnings. Our particular focus is the role of parenthood penalties in this pay gap.
Methodology
Two cohort studies form the basis for Parenthood and the labour market.
The first study used the Integrated Data Infrastructure† to study over 13,000 parents who had a first child in 2005 and their subsequent labour market patterns. The researchers looked at their employment and monthly earnings over a fifteen year period – five years before the first child and up to ten years later.
The second study used the Household Labour Force Survey to understand parental pay gaps for those who had their first child in the period 2003-2010. Parents out of the country for six months or more were excluded from the research.
Key Results
This study combines administrative monthly earnings data, birth records, and survey data on hours worked and earnings to describe the labour market outcomes of men and women as they have children, and how parenthood contributes to the gender pay gap in New Zealand. We consider the hourly earnings and hours worked in 2006-15 of a sample of non-parents and parents who had their first child in 2003-10, and the monthly earnings and employment in 2000-15 of the population of parents who had their first child in 2005.
Hourly earnings
- Women on average experience a 4.4 percent decrease in hourly wages upon becoming mothers. The decrease is smaller for those who return to work within six months and larger for those who return to work more slowly. Among mothers who take longer than 12 months to return to work, the average decrease is 8.3 percent.
- Men, in contrast, experience no significant decrease in hourly wages upon becoming fathers. Parenthood thus increases the gender gap in hourly wages.
- Some but not all of the decrease in hourly wages experienced by mothers can be explained by them taking jobs in lower-paying industries or occupations post-children.
Hours worked
- Among those who are employed, women decrease the weekly hours they work from a median of 40 hours pre-parenthood to 27 hours post.
- Women who are out of work for longer after having children tend to work fewer hours each week upon their return to employment.
- Median hours worked by men remain constant at 41 hours when they become parents.
- Nearly all the gender difference in propensity to work part-time is driven by mothers being more likely than fathers or non-parents of either gender to work part-time.
Monthly earnings
- The average monthly earnings of employed women fall dramatically when they become parents, driven by the combination of fewer hours and lower hourly wages. Their monthly earnings do not return to their pre-parenthood trends within ten years, meaning their lifetime earnings are substantially reduced.
- Decreases are greater for mothers who had higher income before becoming parents and for those who are out of work for longer.
- High-income women who return to work quickly experience slower growth in monthly earnings post parenthood than they did before becoming parents.
- Men’s monthly incomes continue to increase smoothly as they become parents, increasing their average earnings advantage over women.
Employment
- After 12 months, 61% of women have returned to work for at least one month1; by 24 months, the percentage has increased to 69%.
- Women of all income groups are less likely to be employed after becoming parents.
- Women with higher earnings before becoming parents return to employment more quickly post-children and are more likely to subsequently remain employed.
- Men show no tendency to decrease their employment post parenthood regardless of prior earnings. Parenthood thus increases employment gaps between men and women.