Living Economics

In 1994, Dolly Oberoi, CEO of C2 Technologies, had a baby. Many may assume that she would have suffered a serious set-back in her career due to discrimination, or else left the work force entirely. However, Ms. Oberoi not only managed to keep her job, but acquired a lucrative government contract. How did she do it? At a meeting of prospective bidders on the contract, Ms. Oberoi pushed a stroller around asking questions of competitors. Assuming that she was just "someone's wife," no one had any qualms about answering her questions.

While Ms. Oberoi's success is becoming increasingly common for women who lead mid-sized family businesses, it is not true for most women. Far more typical is the story of one New York attorney who, after showing up pregnant for an interview with a recruiter, failed to have her e-mails returned. Despite the fact that she had strong recommendations, a fabulous resume, a previous successful phone interview, and numerous assurances that a planned eight-week leave would not affect her job performance, she "never heard another word."

Over the last several years, much attention has been paid to the "gender gap" between men's wages and women's wages. The oft quoted statistic is that women earn, on average, seventy-seven cents for every dollar that men earn. Perhaps even more controversial is that this ratio has not changed at all over the past ten years. Several reasons for this have been proposed, but new research shows that the lack of further progress may be due to the growing "family gap."

The "family gap" is the difference between the wages of women with children and those without children. While the gender gap has been slowly narrowing since the 1970s, the family gap has been increasing. Current research indicates that the family penalty for women with children is roughly 10 to 15% of the wages they would have earned without children.

The ratio of wages for non-mothers to the mean wages for men was 90.1% in 1991. For women with children, that same ratio was 72.6%. Since 1991, wages for non-mothers have been increasing, while wages for mothers have declined. The increasing family gap is a reflection of more general changes in the economy. The wages for high-skill and low-skill jobs continue to diverge in a labor market that places a premium on human capital. While the returns on education, firm-specific training, and work experience have been increasing, the costs of missed time due to childbirth have also increased.

But, aside from issues of fairness, there is nothing wrong with this situation. After all, there is no market failure; women who chose to have children must obviously derive higher utility from motherhood than the lost earnings. So, is this still a matter of concern? As it turns out, the answer is yes. There is some evidence that highly skilled and highly educated women are either foregoing childbirth or having fewer children. Since better-educated parents are more likely to produce children with better education (see Baby Dilemma), the family gap may lead to fewer skilled workers, yielding either lower productivity or necessitating greater immigration.