‘Motherhood gap’ partly explains wage loss for female workers

Employers biased against entries, exits from workforce: TD study
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 11/15/2010

While education, experience, age and occupation have all helped put women on a more equal footing with men in the workforce, advances in the female participation rate for the core working age (25 to 44) have stalled in the past five years and so too has narrowing of the gender wage gap, according to a recent report from TD Economics.

One possible explanation? The “motherhood gap” — leaving work to have a baby can lead to significant wage losses for working women because employers see frequent entries and exits in the labour force as a sign of detachment and lack of commitment, said TD’s Career Interrupted: The Economic Impact of Motherhood.

Women without children tend to have their wages closely aligned with their male counterparts but working mothers tend to experience an unexplained but persistent three-per-cent wage penalty per year of absence, said TD’s report.

For example, a woman with $60,000 in after-tax income who works continuously for six years could see her real earnings rise to about $64,000, assuming a one-per-cent annual gain. But if she takes one three-year stint out of the labour force before returning and working for another 20 years, she would incur a cumulative earnings penalty of more than $325,000 (assuming a 55-per-cent income replacement ratio in the first year of a child-related absence and a three-per-cent penalty per year of absence), according to TD.

“For right or wrong, employers tend to view, some explicitly, some implicitly, that frequency of entry and exit does reflect some kind of notion of attachment or commitment,” said Pascal Gauthier, a senior economist at TD in Toronto and co-author of the report.

The penalty can be three times more severe for frequent exits than it is for long absences. So while the depreciation of skills is an issue with an extended leave, it’s not the “headwind” previously thought.

“The notion skills atrophy is responsible for the gap, it’s got something to it. But it’s not the whole story because if it was just length of time, those would be the folks who would suffer the most. Rather, it’s this kind of stop and go that’s more of a problem,” said Gauthier.

However, during average leaves of nearly two years, women incur a smaller wage penalty if they return to the same employer, found TD. This is in large part because they can somewhat preserve their employer-specific skills and relationship with the employer.

In some cases, employers invest a tremendous amount of resources in some individuals and want to make sure that investment can be recouped, said Gauthier.

“So if they feel there’s a higher probability that that might not be the case, it might lead to under-investment on the part of the employer or passing (up) that person in favour of someone who hasn’t had interruptions.”

That kind of perception is surprising, said Benedykta Mazur, a mother of two who is looking for work, having stayed home for a few years to care for her children and an ailing father.

“I would have always assumed, watching women have maternity leave and go back, I always had assumed they were the smart ones and more dedicated to the work because they did what they had to do and always went back to work,” said Mazur, who is taking the Back to Work Program at Rotman’s School of Management at the University of Toronto, which is sponsored by TD Bank Financial Group.

It might be a rational approach but employers should not read family-related leaves as a lack of commitment, said Gauthier, particularly with the upcoming labour shortage, where women will be a valuable source of skilled labour.

“It is the single largest group amongst under-represented groups out there so, definitely, women should not be neglected,” said Gauthier.

Employers can help bridge gap

Understanding the nuances behind the statistics will help firms gain a competitive hiring edge, said the report.

“Employers can also play a crucial role in their quest to attract and retain valuable employees by incorporating and developing a flexible, longer-term view of careers,” it said. “Corporations should also self-explore whether a mother’s non-linear career path is being penalized as a negative signal of labour force attachment or ambition.”

Organizations need to be more flexible and acknowledge the classic structure of work, with nine-to-five hours, is changing and technology is helping, with remote work, flexible hours and job sharing, said Gauthier.

“They may need to work different hours, part time, look for alternative shifts so they can get people to and from daycare. Or a progressed workweek or work from home, which can be very helpful when you’re trying to balance a busy life with other responsibilities,” said Peter McAdam, vice-president of employee experience at TD.

Employers should also provide some support when people return to work, with mentors who have gone through the same experience, who know the challenges, he said.

Married women are also less responsive to classic job incentives such as wages and tax breaks, said Gauthier. Many desire work-life balance so salary hikes may not have the same allure as they do for men.

“It isn’t too surprising that as female outcomes in the labour market have converged with those of men (we’re not fully there), it’s less the case you’re trading off home chores for work,” said Gauthier, because as the margin moves up, eating away into leisure time, women are less willing to trade off.

“Men aren’t trading off, they’re trading off pure leisure against work and that isn’t too intense for them.”

However, women are keen to be challenged and have responsibilities, found TD.

“A lot of people probably had a great career, took time off, and they don’t want to come back and not be recognized,” said McAdam.

Many women would find it more appetizing to return to work if they knew they would not be forced into an entry-level position and they could find a challenging position while successfully juggling home life with work life, said Mazur.

“Women are willing to do (overtime) and are excited about that, but they don’t want the career part to completely take over and vanquish all the work they’ve done at home too.”

And as men take up more family responsibilities and elder care needs grow, the issues of interruptions will be more common both for middle-aged men and women, said Gauthier.

“As employer needs become more acute with skilled labour — and it isn’t like those family-related responsibilities are going away anytime soon — they’ll become more flexible in this,” he said.

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