The Motherhood Penalty

How Working Moms Experience Pay Decreases

In light of the holiday, it felt fitting that today we write about something many Americans (and particularly men) are unaware of. 

Yesterday was Mother’s Day, and we hope you all celebrated your creators accordingly. 

If you’ve been a Rise & Hedge subscriber for a while, reading about this country’s systemic problems is nothing new to you. 

We’ve discussed the insurance crisis, congressional profiteering, the unretirement trend and gambling addiction. 

We’ve also talked about America’s healthcare predicament, housing crisis and warmongering.

But in each of those instances, there’s a silver lining. A lemons and lemonade angle. An investable opportunity.

Today, there isn’t. 

That doesn’t make this issue unfit for our audience, though. When you consider the data we’re about to put forth, chances are it affects someone you know. 

According to U.S. Bureau of Labor statistics, 72.3% of mothers with children under 18 participate in the workforce, and for single, widowed or divorced moms, that figure increases to 77.6%. 

And for all the hard work they’re putting in between parenting and employment … they’re being penalized. 

What Is the Motherhood Penalty?

It’s hard for Americans to survive on single incomes anymore. For a parent, it’s even harder. Housing, food and childcare costs have significantly outpaced income gains.

But even though those challenges are negatively impacting birth rates, global fertility isn’t expected to fall below replacement level until between 2050–2100.

So for the women who are still having children and remain committed to their careers, they’re almost guaranteed to experience the motherhood penalty: the phenomenon by which women’s pay decreases once they become mothers.

43% of women workers will have at least one year with no earnings due to giving birth and caring for newborns. And when they return to the workplace, disadvantages await. 

In some instances, that’s because the U.S. doesn’t guarantee family or parental leave. Taking three months off to bond with your newborn means you’re at risk of losing your job. But even if you are able to keep it, chances are you’ll be getting paid less going forward. 

According to research by Columbia University, women who took just one year off from work earn 39% less than women who didn’t.

The Fatherhood Bonus 

Compounding the issue, there’s evidence that the opposite effect occurs for fathers in the workplace. 

Michelle Budig, a UMass Amherst sociology professor who’s studied the parenthood pay gap for 25 years, found that “high-income men get the biggest bump [in pay] for having children, and low-income women pay the biggest price.” 

According to Budig, men’s earnings increased more than 6% after having children whereas women’s earnings decreased by 4% for each child they had.

Data from the longitudinal study found:

•  Childless unmarried women earn 96 cents for every $1 a man earns.
  
• Married mothers earn 76 cents for every $1 a man earns.

In another study conducted by Shelley Correll, a sociology professor at Stanford University, researchers sent fake resumes to hundreds of employers. The resumes were identical except some included a line about being a member of a school PTA, suggesting the applicant was a parent. 

That study found:

• Mothers were half as likely to be called back.
  
• Fathers were slightly more likely to be called back than men whose resumes didn’t mention parenthood.
  
• When jobs were offered, mothers were presented with $11,000 less than childless women and $13,000 less than fathers. 

Additionally, a study by the U.S. Census Bureau found that “between two years before the birth of a couple’s first child and a year after, the earnings gap between opposite-sex spouses doubles.”

What To Do About It?

If you’re a working mom and you know you’re being unfairly compensated, it’s time to have some conversations. 

The first conversation should be with coworkers. Benchmark what colleagues of all genders and all experiences are being paid to do the same job and compare that to your own pay. 

This used to be considered taboo because employers don’t want you knowing that you’re unfairly compensated. 

Use it to your advantage. The next conversation occurs when you approach management.

If you’re unsuccessful in negotiating an equitable pay raise, you require no more evidence that your employer undervalues you.

As we discussed two weeks ago, the FTC recently banned non-compete agreements. This means more opportunities available to workers with better employers that pay competitive wages. 

In turn, the third conversation is with the employer refusing to pay you par value … when you tender your resignation.

What If I’m Not a Working Mom?

Advocate for them.  

This is unlikely to happen if you’re a spiteful, morally-vacant corporate shill suffering from social dominance orientation. 

But in the event that those (hopefully) aren’t personality traits you possess, consider discussing inequitable compensation at your department’s next budget meeting. 

If you’re a hiring manager, don’t disqualify candidates based on preconceived biases that are better left in 1950s America. 

If your role is at the leadership level, introduce a policy proposal that ensures all employees are compensated by an objective rubric that doesn’t factor for things like number of dependents or whether you sit or stand when you pee. 

No matter what your salary is, you can research gender-based wage gaps in your state and look into advocacy groups that pressure legislators to effect change in your community.

A belated happy Mother’s Day from the team at Rise & Hedge. If not for you moms, we wouldn’t be here democratizing access to information on personal finance, investing and employment. 

Thank you.