Human Capital and Parenthood: Does Skill Loss During Parental Leave Explain Gender Gaps in Earnings?

Sonja Spitzer , Wittgenstein Centre for Demography and Global Human Capital
Claudia Reiter, Institute for Advanced Studies

This study provides a missing puzzle piece for understanding the persistent gender differences in earnings. Prior research has shown that the longer child-related career interruptions of mothers are related to their lower income, but the mechanisms behind this link are still unclear. One explanation could be that mothers lose work-related skills during extended parental leave; however, empirical evidence for this link is missing. We aim at filling this research gap by investigating whether human capital depreciation during parental leave widens the gender disparities in earnings. The analysis is based on a longitudinal dataset for German adults, which matches administrative data on income and labour market histories with test scores on work-related skills. It allows us to analyse tested competencies of parents before and after they go on parental leave. Our preliminary results suggest that the birth of a child decreases work-related skills for both women and men. Depending on the skill domain, the drop is much steeper for mothers than for fathers. We also show that longer parental leave is associated with lower work-related skills. To elicit the causal effect of parental leave on work-related skills and earnings, we will employ a regression discontinuity design that utilises a German parental leave reform from 2007 as a policy experiment. The findings will offer important insights for shaping parental leave policies and tackling skilled labour shortages.

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 Presented in Session 81. Human Capital Transmissions