That's one Expensive Bundle of Joy

Last Updated May 5, 2011 10:19 AM EDT

If you knew that having a child would decrease the amount of money you made over your lifetime by six percent, would you still do it? How about if it dented your lifetime earnings by 24 percent?

That's the question raised by a paper from Harvard University's David Elwood, Columbia University's Elizabeth Ty Wilde, and New York University's Lily Batchelder. The researchers tried to determine if there's an economic cost to women who have children, and if so, whether that cost is affected by the skill level of the women or the age at which they have kids. The results, in contrast to earlier research on the topic, are stark: High-skilled women pay a huge penalty, in terms of earnings, for their little bundles of joy. And for those women, there's good economic reason to postpone motherhood: The longer high-skilled women wait to have kids, the smaller their economic sacrifice becomes.

Specifically:
  • Low-skilled women don't get very big raises, and having kids does little to change that. The so-called wage trajectories (think of a line graph showing a worker's wages growing over time) of low-skilled women are much flatter than those of high-skilled women. Having children didn't change those trajectories very much.
  • For high-skilled women, kids spell the end of raises. High-skilled women have steep wage trajectories. Those trajectories flatten out almost precisely at the moment they have children.
  • Low-skilled women don't seem to make their lost wages back. Ten years after having children, low-skilled women have wages that are six percent lower than their counterparts.
  • High-skilled women don't make that money back, either. Ten years after having children, high-skilled women have wages that are 24 percent lower than their counterparts.
  • Becoming a parent seems to have no effect on men's wages.
These figures do allow for the fact that many women take a temporary break from the labor force after having kids. The mothers in this study are only compared to other women with an identical amount of work experience. Even women who take only the medically-necessary maternity leaves and go back to full-time work at their old jobs suffer a dramatic loss in wages.

Unexpectedly Harsh
Why did this study find such dramatic differences in the wages of mothers and others, when other studies have found only single-digit differences?
  • This study looks at wage growth, not absolute wages. So it looks at how quickly women's salaries were growing before they had kids, and then looks at what happens to that growth afterwards. This is made possible by using data from the National Longitudinal Survey of Youth 1979. That survey followed 12,686 people from 1979, when they ranged in age from 14 to 22, to 2006, when they ranged in age from 41 to 49.
  • The researchers say women who do not have children are generally on a flatter wage trajectory that women who eventually become mothers, even before anyone has kids. Of women who don't have kids, the researchers write: "On average, these women clearly are not similar to those who do indeed bear children." So comparing women who have children to those who don't ignores the fact that women who eventually have children have been on a different wage path than their childless counterparts for years.
  • This study uses scores on the Armed Forces Qualification Test, which all NLSY79 participants took, as a proxy for skill. Using this test, rather than educational achievement, lets the researchers include women with very high aptitudes who may not have completed their education because they became mothers at a young age.
Why would high-skilled women pay such big economic price for having children, especially if they return to full-time work immediately afterward?

RELATED Image courtesy flickr user Gonzalo Merat
Kimberly Weisul is a freelance writer, editor and consultant. Follow her on twitter at www.twitter.com/weisul.
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    Kimberly Weisul is the co-founder of One Thing New, the free email newsletter for smart, busy women. She was previously Senior Editor at BusinessWeek, responsible for all coverage of entrepreneurship and for launching BusinessWeek SmallBiz, a bimonthly magazine. She is also a freelance writer, editor and editorial consultant.

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