Financial Literacy

Women see their incomes stagnate for up to five years after having a child

By: Jessica Mach on April 3, 2019

In the first four years after having a child, women between the ages of 25 and 38 see their earnings drop by 4% compared to those without children, says a new report.

As for men? They actually make more when they become parents.

Of the women surveyed by the Royal Bank of Canada (RBC), those on the younger end of the spectrum — aged 25 to 34 — took the biggest financial hit, losing nearly half their income in the first year after their child was born. While decreased earnings are expected during this period — in Canada, parents have the option to take up to 18 months of parental leave, during which they may not be paid — RBC found that a slowdown in income lasts for about five years after mothers return to work.

Younger women also see a bigger drop in earnings in the long term: those aged 25 to 29 lost an additional 14% on top of the 4% average seen by women aged 25 to 38.

One reason for this difference, said Andrew Agopsowicz, senior economist at RBC, might be timing: women on the younger end of the age spectrum are generally at a “key period” for career development and advancement. When they leave the workforce temporarily to have a child, their career — and earning potential — can take a hit.

On the other hand, older women tend to be more established in their careers.

“Focusing on women who have their first child between the ages of 30 and 34, we find that while there is again a substantial initial cost, earnings quickly return to, and even surpass, the level of those without children,” said Agopsowicz.

“This suggests that having children early in one's career can have an outsized impact on earnings.”

Meanwhile, men actually make more money after they have a child: those aged 25 to 34 saw their incomes increase by 8% in the first year of becoming a parent.

“Whether this is because employers see fathers as harder working or more committed than non-fathers is up for debate and further study, but the fact remains that career costs of parenthood are largely placed on women,” said Agopsowicz.

The RBC report found that women still take on the majority of unpaid labor, like childcare and care for the elderly. Last year, about a third of women between the ages of 25 to 34 reported doing paid work only part-time, so they could care for children.

Less than 5% of men in the same age group reported doing the same.

 

Comments