The effect of parental leave duration on early‐career wage growth

Abstract

AbstractWork–family policies are meant to support labor force participants, but they often result in lower rewards for those who use them. Based on the ideal worker norm framework and signalling theory, we hypothesise that parental leave duration will result in lower wage growth, above and beyond that of having children. The 1997 National Longitudinal Survey of Youth data from 2000 to 2015 are used to test the hypotheses with a longitudinal sample (14 waves) of individuals in the United States who worked before and after taking parental leave (n = 6723). Discontinuous growth models are used to predict the penalty for parental leave duration for men and women. We find that both men and women suffer from a lower hourly wage growth for taking longer parental leave and that there are more severe penalties for taking paid parental leave than taking unpaid parental leave.Practitioner notesWhat is currently known? utilization of parental leave is significantly related to the wellbeing of employees and their families. However, employees are penalized for taking parental leave. What this study adds? Paid parental leave, which is mostly available to skilled, professional employees carries a noticeable early‐career wage penalty, but the use of unpaid leave, does not. Both men and women are penalized for taking parental leave, but the longer parental leaves women take increase the gender pay gap. Implications for practitioners: HR practitioners should monitor whether employees are penalized for taking parental leave. HR practitioners should try incentivizing male employees to take parental leave that is comparable to the one taken by their female employees.