Children and the Gender Earnings Gap: Evidence for Australia*

Abstract

We estimate the impact of children on the gender earnings gap in Australia using an event study approach. We show that the arrival of children has a large and persistent impact on the gender earnings gap, reducing female annual earnings by 53 per cent, on average, in the first 5 years of parenthood. We attribute the gap in earnings to lower participation rates and reduced working hours among mothers, including a shift to part-time work. Although the decline in earnings for women is similar regardless of their breadwinner status prior to children, women with greater access to workplace flexibility are more likely to remain employed after having children.