There is little doubt among scholars that the current level of gender inequality is unacceptable for the times we live in today; therefore, policy changes are crucial to overcoming this problem. This essay will speak to these concerns by suggesting realistic and affective policies that companies could implement that would significantly overcome key challenges related to labor market characteristics in the USA that act to further female economic inequality. To do this, I will first provide a brief overview of the current situation and varying aspects of gender inequality in the developed world, focusing specifically on economic inequality. I will then turn to empirical evidence that establishes that the child penalty is one of the largest drives of gender inequality in developed countries. I will then evaluate how government policies that have previously attempted to overcome the child penalty, specifically government-mandated parental leave, have been relatively ineffective in improving gender equality in the workforce. This is because such policies do not affect the fundamental nature of labor markets, which significantly drive economic inequality. This will be evident upon assessing the case of the American labor market, which rewards workers who have flexible schedules and work overtime; however, these qualities are difficult for working mothers to meet. This increases the child penalty as working mothers opt for jobs that do not stress these characteristics, which are usually low paying and low status. I will then introduce policies at the company level that would give workers more say in their schedules and discourage workers from working overtime. These policies would be fairly easy for companies to implement and would significantly decrease the child penalty experienced by working mothers in the USA.
In the past few centuries, and especially in the past few decades, women’s’ status in society and rights have made tremendous strides. While most developed countries have seen gender rights convergence in areas such as higher education, voting rights, and ownership rights, there are still many aspects and barriers of gender inequality that continue to exist today. Gender inequality is generally understood to be “the broad range of conditions by which women have been disadvantaged, including their economic opportunities, political standing, legal status, personal freedom, familial obligations, access to education, and cultural representation” (Jackson, 2006, p. 218). For the sake of brevity, this essay will focus specifically on economic inequality. As this aspect of inequality is still very apparent in today’s society, men continue to earn more, work more hours, and hold high-status positions at disproportionally high rates compared to women in virtually every country (Inequality.org, n.d., pp. 3-4).
Using the previously highlighted data, Kleven et al. (2016) conduct an event study to understand how children affect gender inequality in terms of earnings. The authors look at the birth of a first child between 1985-2003, observing parents across a 15-year period around the event. They assume the date of birth is exogenous with respect to the outcome variable, as this is as good as random. They then use data pulling and set the birth of a first child to T=0 for all the couples studied. Using a difference in difference empirical strategy, they compare relative earnings separately for men and women before and after the birth of the first child. Based on the data set, the authors can verify that the parallel trend is respected, as prior to the treatment, men and women’s earnings were not statistically different; therefore, it can be inferred that the only difference in the two is due to the treatment. After the treatment, they find the drop-in women’s earnings to be shocking. The most striking finding is that earnings between men and women never converge back after having their first child. This is what the authors call the child penalty, which measures the percentage of women fall behind compared to men in the labor market after having a child. The child penalty affects earnings due to hours worked, labor force participation, and wage rate, all of which sharply diverge right after childbirth for women while remaining unaffected for men. Overall, they find that the long-run child penalty on earnings for women is around 20%. Meaning, that in Denmark, almost immediately after women gave birth to their first child between 1980-2013, their earnings declined by 20% relative to men and never recovered afterward.
Using the previously highlighted data, Kleven et al. (2016) conduct an event study to understand how children affect gender inequality in terms of earnings. The authors look at the birth of a first child between 1985-2003, observing parents across a 15-year period around the event. They assume the date of birth is exogenous with respect to the outcome variable, as this is as good as random. They then use data pulling and set the birth of a first child to T=0 for all the couples studied. Using a difference in difference empirical strategy, they compare relative earnings separately for men and women before and after the birth of the first child. Based on the data set, the authors can verify that the parallel trend is respected, as prior to the treatment, men and women’s earnings were not statistically different; therefore, it can be inferred that the only difference in the two is due to the treatment. After the treatment, they find the drop-in women’s earnings to be shocking. The most striking finding is that earnings between men and women never converge back after having their first child. This is what the authors call the child penalty, which measures the percentage of women who fall behind compared to men in the labor market after having a child. The child penalty affects earnings due to hours worked, labor force participation, and wage rate, all of which sharply diverge right after childbirth for women while remaining unaffected for men. Overall, they find that the long-run child penalty on earnings for women is around 20%. Meaning, that in Denmark, almost immediately after women gave birth to their first child between 1980-2013, their earnings declined by 20% relative to men and never recovered afterward.
In 2019, Kleven et al. conducted a follow-up study on the child penalty, extending the countries studied to include Denmark, Sweden, Germany, Austria, the UK, and the USA. The authors use the same empirical approach, sample selection, and specifications across all the countries, allowing them to compare the child penalty across countries. They used the same event study and data pulling technique, difference in difference empirical strategy, and outcome variable as Kleven et al. 2016. They used administrative data collected by the state for Denmark, Sweden, and Austria. They relayed on long-run survey data with a large sample size for the rest of the countries, including the GSOEP for Germany, the PSID for the USA, and the BHPS for the UK. The overall results are in line with the Kleven et al.’s 2016 study, as in each country, men and women’s earnings are on a similar trajectory before having their first child. But after, they diverge significantly and never converge again, as women face a sharp drop in earnings immediately after the treatment while men are practically unaffected. The key finding of this study is that the magnitude of the long run child penalty across countries differs significantly. The Scandinavian countries experience the lowest long-run child penalty of 21-26%, the US and the UK (English speaking countries) experience about 31-44%, and the German-speaking countries, Germany and Austria, experience the highest rate of 51-61%. This study, in conjunction with the 2016 one, provides ample evidence that the child penalty is a severe problem for economic gender inequality and exists in numerous developed countries.
As it is clear that the child penalty is a fundamental driver of economic gender inequality, policies must be implemented to overcome this source of inequality. However, overcoming the child penalty with government-mandated policies has proven to be challenging. This has been especially evident when examining policies of parental leave, which have been relatively ineffective at combatting the child penalty. I will now provide evidence to demonstrate that parental leave policies have had limited success in overcoming the child penalty in various countries.
Paid parental leave is the amount of paid time employees can take off work to bond and care for their new child. In most developed countries, paid parental leave is considered a required employee benefit financed at the state level. The USA is a notable exception, as it offers a maximum of 12 weeks of unpaid leave under the Family and Medical Leave Act established in 1993 that only some women qualify for (Calder, 2018, p. 3). Paid parental leave is often viewed as a way to combat the child penalty that women face, as it provides job security and financial support for a designated period after giving birth. Meaning, that women will be able to return to their previous job after having a child, minimizing setbacks to their career. In many countries, parental leave also extends to the father. This not only allows fathers to bond with their new child but also supports them to take on more household and child-rearing responsibilities (Jackson, 2006, pp. 230-232). However, while paid parental leave sounds good on paper, research suggests that it is not an effective policy in bridging the gap of gender inequality.
Dahl et al.’s (2016) work provides a thorough analysis of paid parental leave and finds that it is ineffective and inefficient in overcoming the child penalty. The study exploits the setting of Norway, which experienced six major leave policy reforms from 1987-1992, overall, increasing the amount of paid leave from 18 to 35 weeks. The authors used data collected by the state and the social security register that covered every resident starting from 1967. For each reform, specific dates of birth were used as cut off points to determine which parents were eligible for the extended benefits. The authors used a regression discontinuity empirical design to find the causal estimate of how additional weeks of paid leave affected different outcomes. This was possible by evaluating parents who gave birth just above and just below the cutoff date as these two groups would, on average, be similar, with the main difference being the policy, as the date of birth is considered exogenous. While they tested multiple outcome variables, the ones of particular interest to this essay are participation in the labor market and effects on parents’ earnings, as these reflect gender inequality. The authors found that neither of these outcome variables were statistically significant, meaning that regardless of how many additional weeks of paid leave, there were no effects on the child penalty. And, as extending parental leave was extremely expensive for the state, these policy reforms were deemed inefficient and ineffective.
The USA’s labor market is associated with working flexible schedules and long hours as being necessary to have a high paying and high-status job (Goldin, 2014, p. 1117). This is evident as many high paying jobs in areas such as business, finance, and law usually have to be done within the typical workday, as there are high levels of contact with clients and collaboration with colleagues (Anderson et al., 2003, p. 273). However, as women disproportionally spend far more time caring for children and doing household work, they are more likely to value jobs that offer flexible and nonstandard hours compared to men. However, these types of jobs usually pay less and are considered less professional (Canon and Golan, 2016, p. 1-2). For example, even though women on average have higher levels of education compared to men, most jobs that require a college degree have inflexible work hours. As a result, the highest-paid job and top positions are less attainable for women because they are unable to meet the inflexible work hours associated with them, which increases the child penalty (Anderson et al., 2003, p. 275-280) does it account for omitted variables or endogeneity, such a comparison provides further telling evidence that government paid leave does not significantly affect the child penalty and supports Dahl et al.’s (2016) findings.
As government programs such as parental leave are not effective in overcoming the child penalty, this suggests that other factors play a role in economic gender inequality. I will now turn to the case of the USA, where labor market characteristics heavily reward employees that have flexible schedules and work overtime, which significantly affects economic inequality and exasperate the child penalty.
The USA’s labor market is associated with working flexible schedules and long hours as being necessary to have a high paying and high-status job (Goldin, 2014, p. 1117). This is evident as many high paying jobs in areas such as business, finance, and law usually have to be done within the typical workday, as there are high levels of contact with clients and collaboration with colleagues (Anderson et al., 2003, p. 273). However, as women disproportionally spend far more time caring for children and doing household work, they are more likely to value jobs that offer flexible and nonstandard hours compared to men. However, these types of jobs usually pay less and are considered less professional (Canon and Golan, 2016, p. 1-2). For example, even though women on average have higher levels of education compared to men, most jobs that require a college degree have inflexible work hours. As a result, the highest-paid jobs and top positions are less attainable for women because they are unable to meet the inflexible work hours associated with them, which increases the child penalty (Anderson et al., 2003, p. 275-280).
Additionally, in the USA, working more hours is heavily correlated with significantly increased earnings as well was getting promotions. This is evident as a majority of high status and highly paid professional and managerial jobs increasingly require employees to work over 50 hours a week (Hegewisch and Lacarte, 2019, p. 32). As women spend more time taking care of children compared to men, they are disproportionately more likely to work fewer hours than men so that they can take care of their child (Goldin, 2015, p. 9). This is evident as only 18.2% of women, compared to 31.8% of men, on average, work more than 40 hours a week in the USA (Hegewisch and Lacarte, 2019, p. 30). While both men and women who work less than 40 hours a week experience the same wage penalty, on average, women fall into this category overwhelming more than men; therefore, women experience the wage penalty far more than men (Goldin, 2015, p. 23).
As the USA labor market heavily values characteristics of working flexible and long hours, which disproportionally affect working mothers, I will now evaluate policies that could be implemented at the company level to ease the burden of the child penalty on women. In terms of schedule flexibility, companies should provide workers with more flexibility in choosing when they work. Therefore, companies should implement policies of efficient scheduling practices and promote remote work. New scheduling technology has made it easier than ever and cost-effective for employers to create schedules and determine shift work in such a way that meets not only business’s needs, but also employees’ needs (Goldin, 2015, pp. 2-5). By adopting scheduling tools that would allow employees to have a say in their schedules, working mothers would be more inclined to work more hours as they would be able to reliability control when they worked. Such a policy would also prevent women from exiting the labor force entirely after having children.
Another policy that companies could implement to allow for more flexibility works hours is facilitating and encouraging employees to work remotely and from home. While some sectors and jobs would be unable to implement this practice, a fair amount would be able to (Anderson et al., 2003, p. 290). It would also be easier than ever for companies to implement such policies due to new technological advancements. Numerous companies have already taken this step. For example, in the USA from 2005- 2017, the number of workers who work from home, at least part-time, increased by 159% (Hegewisch and Lacarte, 2019, p. 37). Companies should promote policies that encourage working at home because, while working from home does not change the number of hours one works, it significantly decreases time spent commuting. Therefore, employees would have more energy and undistracted attention to put into their work, which would make them more productive.
Regarding working long hours and overtime, companies should implement policies that strongly discourage employees from working overtime, by changing social norms and expectations around working long hours (Anderson et al., 2003, p. 276). In the USA, many people feel forced to work more hours than they would prefer to because they feel pressure from their boss or fear they will lose their job (Hegewisch and Lacarte, 2019, p. 33). However, the perception that working longer hours leads to higher productivity is false. Instead, overworked employees often become dissatisfied with their work and a significant decline in productivity (Canon and Golan, 2016, pp. 1-2). Therefore, companies should create policies that reward the quality of work the employees deliver, rather than the amount of time they put in. Doing so would likely be very beneficial for employers as this would incentivize employees to be more productive during their time at work and would especially benefit working mothers as they would be able to work reasonable hours, without jeopardizing their careers.
In conclusion, this essay has illustrated how gender inequality is still a major problem in today’s world but that policies at the company level can be implemented to overcome the gendered economic inequality gap that arises due to the unique labor market characteristics specifically in the USA. I began by providing a brief overview of the current situation of gender inequality in developed countries and demonstrated why I focused specifically on economic inequality. I then evaluated empirical evidence that examined why women face such a significant gap in economic inequality compared to men, which revealed that having children, or the child penalty, is a key factor. Establishing this, I then evaluated how previous policies have attempted to close this gap, focusing specifically on government-mandated paid parental leave policies. However, further evidence revealed that paid parental leave, and expanding the period of benefits, had little to no effect on overcoming the child penalty and improving economic gender inequality. This is likely because there are other factors that affect the child penalty, specifically underlying characteristics in labor markets. This was made evident by looking at the case of the USA, where the labor market significantly rewards employees that have flexible work schedules and work overtime. As these characteristics are incompatible with working mothers’ lives, working mothers often opt for jobs that deviate from this pattern, which are usually low paying and low status. I then suggested realistic policy options that could be implemented at the company level, including providing flexible scheduling and working remotely and discouraging overworking through changes in company culture. These policies would be effective in overcoming the child penalty, thereby reducing the gendered economic inequality gap, specifically in the USA.
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