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Does having a child affect men’s wages?

Fatherhood and wage inequality in Britain, Finland, and Germany

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Portrait of cute smiling little girl putting coin in pink piggy bank, sitting with dad on the couch at home

While we know that mothers face a drop in earnings after having children, existing research debates whether fatherhood is associated with higher wages. To date, the association between fatherhood and wages has been mostly investigated within individual countries. It remains, thus, unclear whether the connection between fatherhood and wages varies along the wage distribution as well as institutional contexts (i.e. differences in family policies and level of wage inequality).

In this study, Rossella Icardi (University of Bath), Anna Erika Hägglund (University of Turku and Population Research Institute in Helsinki) and Mariña Fernández-Salgado (Universidad de Alcalá) explore whether and how fatherhood shapes the wage distribution in Finland, Germany and the United Kingdom. To do so, they use longitudinal data from the 1995 to 2016 waves of the Finnish Linked Employer-Employee data, German Socio-Economic Panel and UK Longitudinal Household Study. The study contributes to the growing literature on the impact of children on men’s labour market trajectories in two ways: (1) by systematically comparing whether and how fatherhood shapes the wage distribution across three countries; and (2) by exploring how potential differences in wage trajectories among men may affect the shape of fatherhood premiums comparatively across the wage distribution.

The results show that fatherhood only marginally affects men’s wage distribution. Their findings also shed light on how men’s selection to become fathers play out across the wage distribution and countries. Controlling for differences in wage levels between fathers and childless men indicates that men tend to positively select into fatherhood. This sufficiently accounts for wage benefits at the median. Moreover, results confirmed that the steepness of wage trajectories is a relevant factor for understanding wage differences between fathers and childless men; however, its relevance varied across the wage distribution. In fact, differences in earnings trajectories between fathers and childless men explain away premia at the top. In all three countries, fathers’ higher wages at the median and top of the wage distribution are mostly accounted for by selection, but fatherhood is negatively associated with wages particularly in the UK. Interestingly, selection does not differ substantially across the diverse policy contexts. For instance, family and social transfers are generally more generous in Finland than in the UK; yet, the transition to fatherhood is selective in both countries.

In all, the authors find that the extent to which having a child affects men’s wages across the wage distribution is similar across the three countries. While scholars conventionally have contrasted the negative effect of children on mothers’ earnings with fathers’ wage advantages, our findings add to the evidence that the ‘fatherhood premium’ is primarily the result of selection. Yet, the results also show that selection mechanisms vary across income level. Thus, they encourage scholars to assess selection dynamics in men’s fertility patterns in greater detail, systematically comparing mechanisms both across different socio-political contexts as well as groups of men.

Author(s) of the original publication
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Rossella Icardi, Anna Erika Hägglund and Mariña Fernández-Salgado