22.10.2024Informed Moms, Equal Future

After the birth of their first child, women often reduce their workload, lowering both income and retirement savings—a phenomenon called the “child penalty.” While the child penalty is well-documented, the motivations behind women’s decision-making processes have not yet been studied extensively by researchers.

A new study explores the reasons behind mothers' labor market choices: are women accounting for the long-term financial implications of reducing their labor supply after having children? Could information about the financial consequences of their decisions mitigate the long-term financial consequences?

A Unique Field Experiment

To study this question, researchers Ana Costa-Ramón, Michaela Slotwinski and Anne Brenøe from the University of Zurich, and Ursina Schaede from Tufts University, conducted a field experiment involving over 2,500 Swiss female public school teachers in a setting with a pronounced child penalty. In Switzerland, mothers' earnings drop by 70% following the birth of a child. The study was carried out just before teachers had to decide on their workload for the upcoming year. Through a collaboration with educational departments, which allowed the researchers to combine survey data with administrative data, the authors were able to examine the impact on actual labor supply, not just intentions, providing robust evidence of the intervention's effectiveness.

The Impact of Financial Awareness

In the experiment, the researchers provided randomly selected mothers with information about the long-term financial consequences of part-time employment. They wanted to find out if this information could influence their employment choices. It turned out that mothers who were previously unaware of the long-term costs of part-time work and were exposed to this information became more financially aware. The impact that the authors measure translates into about 30% of these women increasing their workload by half a day per week. This results in an 18% reduction in lifetime income loss and a 15% increase in occupational pensions.