Fertility and Women’s Old-Age Income in Germany

Abstract

In this paper, we look at how the lifetime employment patterns and number of children of German women affect their old-age income. The data used in this analysis come from linked survey and register data. We show that women’s employment and earning trajectories depend to a large degree on the number of children they have and the timing of childbirth. In western Germany, there are persistent gaps in the labour market participation rates and earnings of mothers and childless women. In eastern Germany, we find smaller differences in the labour market participation rates of mothers and childless women, but large differences in earnings that persist several years after childbirth. We also observe that a woman’s retirement income strongly depends on the number of children she has. The German welfare state subsidises the pensions of mothers, as a woman continues to accrue pension benefits during periods when she is caring for a child. However, in western Germany these subsidies have not been sufficient to close the old-age income gap between mothers who spent long periods of time out of the workplace and childless women who spent most of their adult years in full-time paid employment. We also examine whether differences between childless women and mothers diminish if we adopt a household perspective. But even after the male income is factored in, our results show that women with children, and especially mothers who have three or more children, are still slightly disadvantaged.