Executive summary

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Researchers and policy makers are interested in the effects of childbirth on the labour supply and the earnings of the mothers, and extensive studies have been conducted in these areas. More recently, two strands of literature on childbirth and the labour market outcomes of women have drawn particular interests: one focuses on the effect of maternity-leave policies on the post-childbirth employment of the mothers; and the other concerns the 'family gap,' the pay or earnings difference between women who have children and childless women.

The two strands of literature are closely related. The birth of a child has an immediate negative effect on the employment of the mother because the benefits of staying at home and the costs of working rise for the new mother, and if she decides to stay at home and she stays for too long, her human capital may depreciate, or a productive job-worker match may disappear. As a result, her pay rate and earnings would be negatively affected, not only during the years immediately after the birth, but also over a number of post-childbirth years.

Available studies tend to focus on the immediate or the short-term effect of childbirth, paying little attention to the long-term employment and earnings impacts of childbirth, often because of data limitations. On the other hand, studies on the family gap typically estimate a single 'motherhood effect' on the wage or earnings of the mother, and they rarely examine how the effect evolves along the post-childbirth years.

In contrast to previous work, we investigate the employment and job mobility patterns of Canadian mothers in both the short and the long run. We pay particular attention to the evolution of the short- and long-run post-childbirth employment over the past 20 years in Canada. The underlying population of interest consists of women who had held a paid job for a certain time period before giving birth. Based on this population, we first establish a 'broad' sample of Canadian mothers who satisfied certain employment conditions that enabled them to enjoy the job-protected maternity leaves and maternity/parental benefits.

Based on this broad sample, we found that (a) the short-term post-childbirth employment rates of Canadian mothers rose from the early 1980s to the year 2000, and declined since then; (b) the long- term post-childbirth employment rates of Canadian women who had given birth in the early 2000s were much higher than their counterparts who had given birth in the mid-1980s; (c) and, Canadian mothers have become less likely to quit over time, when compared with their 'non-mother' counterparts.

In the context of the family-gap literature, this study also examines the earnings trajectories of Canadian mothers. But, due to a number of data limitations, we focus on a 'narrow' sample of Canadian mothers—those who had strong labour market attachment—in this part of the study. Nevertheless, we are able to make two contributions to the literature. On the one hand, several studies indicate that interruptions to one's career as a paid employee lead to earnings losses that can never be fully regained. Our result indicates that the motherhood earnings penalties declined over the post-childbirth years and may disappear eventually. On the other hand, it can be argued that the motherhood earnings penalty is weak for mothers who have strong labour force attachment. If this is the case, our results should help to gauge the lower limit of the motherhood earnings penalty.

Based on the narrow sample of Canadian mothers, we first found that the earnings of mothers did not decline in the pre-childbirth years: a result that casts some doubts on the endogenous motherhood hypothesis; second, we found that the motherhood earnings penalties were sizeable: in the year of childbirth and the year after, mothers from our sample experienced about 40% and 30% earnings drops, and they continued to incur earnings losses during a number of post-childbirth years; and, third, the earnings effects of childbirth were not constant; rather, they declined over the post-childbirth years, and the result from our most flexible model indicates that the motherhood earnings penalties disappeared seven years after childbirth.

Furthermore, earnings losses for mothers who returned to and worked for their pre-childbirth employers were negligible beyond the second year of childbirth when the individual earnings growth trend is taken into consideration. This result suggests that firm-specific human capital is likely an important factorin the earnings recovery process for Canadian mothers.