Is There a Motherhood Wage Penalty in the Finnish Private Sector?

Abstract

This paper investigates the effects of children on women's wages in the Finnish private sector. The paper finds evidence of the motherhood wage penalty, the penalty varying with the length of the child-related career break. Mothers staying at home no longer than for 2 years face considerably smaller penalties than mothers spending longer periods at home. The negative wage effects of children decrease, however, quickly with time. For example, mothers who experience a career break of 2 years or less do not lag behind non-mothers in terms of wages after the second year from the return to employment. There is also variation in the motherhood wage penalty across the wage distribution. The penalty is higher at the top of the distribution than in the middle of it, especially in the cases of prolonged child-related career breaks.