Choice to have children costs women five years of earnings: RBC

Written by: Leo Almazora, Shared by:

It’s no secret to academics and experts in the financial industry that family obligations tend to have an outsized impact on working women. That differential impact creates a number of gaps, not least of which involves income.

One study from RBC Economics Research reinforces that point. Referring to the 2016 census, it concluded that after having their first child, women aged 25 to 34 saw their earnings fall by half relative to their peers without children — not so surprising as most take parental leave and hold off on paid work for as long as 18 months in Canada.

But the story of the income gap doesn’t stop there. “A more worrying statistic is that women experience a significant earnings penalty spanning five years after the birth of a child,” Andrew Agopsowicz, senior economist at RBC, told CBC News.

Looking at data for women aged 25 to 38, the study saw an earnings drop of 4% in the five years after they gave birth for the first time, compared to those with no children. Tightening the frame further, those aged 25 to 29 lost an additional 14% in earnings over the same period — likely because their newfound motherhood coincides with a key window for career development and advancement, according to RBC.

“Focusing on women who have their first child between the ages of 30 and 34, we find that while there is again a substantial initial cost, earnings quickly return to, and even surpass, the level of those without children,” Agopsowicz said. “This suggests that having children early in one's career can have an outsized impact on earnings.”

New fathers get off much easier; in fact, they actually get a boost. The RBC Economics report that men actually see their earnings increase after they join the new-dad club. “Whether this is because employers see fathers as harder working or more committed than non-fathers is up for debate and further study,” Agopsowicz said.

The study also noted that women generally have to balance work and family to a greater extent than men, leading them to spend “substantially” more time on unpaid work, which includes childcare. Among Canadians aged 25 to 34, roughly one third of women reported working part-time in order to care for children, as opposed to fewer than 5% of men in the same age group.

“A woman working part-time earns 74 cents for every dollar a full-time female worker earns, compounding even further the wage gap,” Agopsowicz said. He added that a record of doing part-time work could hurt one’s chances of being considered for promotion into higher-paying management roles.

The impact of parenthood on one’s career may not be lost on women. The report found that from 2001 to 2016, the average age of new mothers changed from around 27 to 29 years old, suggesting that women are waiting for their careers to be more established before they start a family.

It also noted that women are working less not just to rear children, but also to care for older family members — a burden that also tends to fall less on men’s shoulders. “This trend is projected to continue, creating a new imperative for policymakers to help women manage the responsibilities of not only raising children, but caring for the elderly as well,” RBC said.

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