• A woman’s earnings are penalised by having a child, whereas a man’s improves, finds new research from the Rotterdam School of Management Erasmus University (RSM)
• Multinational enterprises (MNEs) were found to be amongst the worst offenders. In these larger companies, the fatherhood bonus is higher in than in domestic firms
• To combat this, we should be critically evaluating gender-related policies, particularly in MNEs

Vanessa Hudgens recently debuted her surprise baby bump at the 2024 Oscars Ceremony.

The musician and actor joined a host of celebrities who have announced their pregnancies this year, including singer and ‘Daisy Jones and the Six’ actor Suki Waterhouse, ‘Handmaid’s Tale’ actor Elizabeth Moss and influencer Sofia Richie Grainge.

As famous women with successful careers in the spotlight, these individuals are unlikely to be too affected by the rising costs of parenthood. It’s likely that they can afford to fork out thousands for daycare, school fees and general day-to-day costs.

For the average person, however, having a child is expensive and makes a significant dent in their income. Because of the rising costs of childcare –  the average annual cost in the UK of a full-time nursery place for a child under the age of two is now £15,709, and rising – many individuals prefer to take care of their children themselves, giving up their full-time job. This sacrifice too often falls on the mother.

Women are significantly more likely to work part time or be out of work completely, because of childcare. Research from the Office of National Statistics revealed that among 25 to 49-year-olds (when people are most likely to have dependent children), 54.1 percent of women and just 11.9 percent of men were economically inactive because they were looking after their home or family. 

Fathers benefit more financially from parenthood

Infuriatingly, those women who do decide to return to work after giving birth are often hit by a further financial hurdle, the motherhood pay gap: the fact that a woman’s earnings are penalised by having a child, whereas a man’s improves.

New research at the Rotterdam School of Management Erasmus University (RSM) analysed the disparities in pay and progression for men and women working at multinational enterprises (MNEs) and domestic firms around the world both before and after they became parents.

Comparing the wages of more than 36,000 fathers, mothers, and employees without children across 57 countries (using data taken from the WageIndicator surveys), researcher Dr Khadija van der Straaten found that men benefitted financially from parenthood, whilst women were penalised.

Men who become fathers benefit from ‘overvaluation’ in their professional lives, the research revealed, whereas mothers experience the opposite, often undervalued by employers and underpaid as a result.

‘We are paying men too much’

Some research suggests that this gender wage gap could be due to reduced productivity at work for mothers as a result of a more demanding home life, whilst fathers are characterised as more committed, reliable and deserving than other male colleagues, explains Dr van der Straaten.

“However, the absence of a larger penalty for mothers in MNEs compared to local firms proves that motherhood itself is not the only reason for gender inequality in the workplace,” she said.

Because of this, existing policies designed to help redress the balance between male and female workers such as offering flexibilities in working hours, whilst useful for many, do not fully address the core issue of gender parity.

Policies targeted at women may not lessen the positive biases towards men and masculine corporate cultures, says Dr van der Straaten. We know that women already face additional professional hurdles compared to men as a result of their gender rather than their capabilities and, as a result, achieving gender parity within organisations can become near impossible to accomplish.

Instead, we should be ensuring that any policies designed to support women are fully fit for purpose, critically evaluating gender-related policies, particularly in multinational corporations where the problem is exaggerated.

“Businesses could start by setting up their organisation for more gender equality by thinking who has the advantages, not just focusing on who is disadvantaged,” says Dr van der Straaten. “We are not only paying women too little; we are also paying men too much.”

Multinational corporations exasperate the problem

Interestingly, multinational enterprises (MNEs) were found to be amongst the worst offenders. In these larger companies, the fatherhood bonus is higher in than in domestic firms.

“Fathers received a wage premium compared to their childless male peers, across both MNE subsidiaries and in domestic firms” says Professor van der Straaten. “But this premium was US$2 per hour in multinationals, and US$1 per hour, in domestic firms.”

Geography and culture may also come into play here, with the study highlighting that the MNE’s home country might also play a role in gendered perspectives for subsidiary firms.

Mothers, on the other hand, suffered regardless of where they worked. The study revealed a wage penalty for mothers across the board. This time MNEs were comparable to local firms.

Dr van der Straaten states the disparity is a result of how gender identity is construed within organisations, as well as that women still hold 9 percent of senior-level positions within the world’s largest MNEs.

“While MNEs are widely recognised for providing employment to a significant number of women, work-life balance can be exceptionally challenging in such organisations because of travel, working across time zones and a typically competitive, masculine corporate culture, says Dr van der Straaten.

“The reality of being a working parent is very different for mothers compared to fathers.”

Interested in this topic? You might also like this…