Facts: Children affect their parents’ earnings all over the world. Most frequently, it is mothers who get ‘penalized’: their paycheck is smaller compared to that of childless women. In sharp contrast, fathers often get awarded a ‘wage premium’: they earn more than men without children.
Implications: Not much is known about fathers on the Russian labour market. It has often been claimed that they earn more than their childless peers. However, new research states that there is no such ‘premium’ for being a father in Russia. Nevertheless, men with kids still have higher salaries.
Having analyzed the Russian Longitudinal Monitoring Survey (RLMS) panel micro-data for 2010-2018, Aleksey Oshchepkov from HSE Centre for Labour Market Studies established a surprising fact: although there is essentially no such thing as a ‘wage premium for fatherhood’ in Russia, on average fathers earn 25% more than men without kids. The difference stems from the fact that fathers in Russia are most often people of a certain social and demographic status and with initially higher levels of income. Only one category of fathers turned out to be ‘rewarded’, and their wage premium was just 2.5-3%. However, all men officially married receive a marital ‘premium’ of 3%.
People's position in the labour market is closely associated with their parental status. Career opportunities for women with kids usually decrease, just like their earnings over time. There is even a specific term, family gap,used to denote the gap between the job compensation of childless women and women with kids. A great deal of academic research has been dedicated to the study of this.
In the meantime, the question of children's impact on fathers' income attracts the attention of scientists much less often. The first research was not conducted in the United States and Great Britain until the late 1990s. Unlike women, men with children appear to have higher incomes. On average, they earn more than their childless peers. Economists used the term ‘fatherhood wage premium’ to refer to the calculated variance in earnings. While articles on this topic can be found in foreign publications from time to time, only one relevant article had been published in Russia until recently.
Why are women paid less than men / The Economist
There are different reasons for higher pay for fathers. Academic literature puts forward two hypotheses: impact and (self) selection.
According to the impact hypothesis, income is directly affected by the very fact of having kids. As soon as a baby appears, the gender-based division of labour becomes more prominent: women get to be busier at home, and men focus on their official job. Children motivate men to earn more to live up to the role of breadwinner. With this in mind, employers are more loyal to employees who are fathers, assuming that they will work more efficiently and want to hold on to their job.
The (self) selection hypothesis states otherwise—fathers are inherently different from childless men. Only men with a certain set of characteristics (they are determined, reliable, responsible, etc.) become parents. They also hold a better position in the labour market, which translates into a higher salary.
In view of these hypotheses, the ‘fatherhood wage premium’ may be associated with a number of various factors, for instance, marital status (the role of a provider is more prominent in case of an official marriage). It may also depend on the characteristics of the children: age (the older children are, the more money parents need to support them), number of children (with each new child, the ‘premium’ should grow due to a stronger incentive to earn more) and even kinship (if a child is biological or adopted).
What is the actual situation in Russia? Do fathers really get paternity wage premiums and, if so, what do these ‘premiums’ amount to? Or is it still true that all fathers are men who initially have a higher income and other characteristics which make them more suitable for marriage and having children?
To test both hypotheses, Alexey Oshchepkov used the RLMS-HSE for 2010-2018. He analyzed a total of 32,000 responses from men aged 25 to 59 (fertile age).
HSE Russian Longitudinal Monitoring Survey (RLMS-HSE) is a longitudinal survey of households. It is conducted as a series of annual nationwide representative surveys based on a probabilistic stratified multistage area data selection.
The earnings of fathers and childless men were assessed by applying a special Minсer earnings function. You can find more details by clicking here:
ln(wage)it = а0 + βFatherit + y1Xit + у2Zit + ai + δt + υit
ln(wage) — base logarithm of actual monthly wage;
Father — a variable reflecting whether a man has children;
Xit — control exogenous variables (marital status, age and age squared, level of education, type of settlement and region of residence);
Zit — variables used to determine the mechanism of children's independent impact (hours of work and duration of special experience;
ai — individual unobservable characteristics of men (for example, personal traits, which in this case are not measured, but taken into account using a fixed-effects model);
δt — annual temporal effects;
υit — error.
The assessment was done in stages so that various factors could be taken into account. Initially, only one key independent variable was considered, namely, whether there are minors in the family. After that, other variables were tracked down: marital status, age, education; individual characteristics of men; employment parameters—length of service and working hours.
The first stage of analysis showed that between 2010 and 2018, men with children made 15-30% more than their childless colleagues. ‘This is indicative of the ‘fatherhood wage premium’, which is quite high. Putting this in perspective, the gap between men and women’s pay for the same sample is around 40%,’ Alexey Oshchepkov says.
However, children are not the only thing that distinguishes fathers from childless men:
on average, fathers are six months younger (most frequently, they are between 30 and 49 years old);
there are more people with vocational secondary or higher education among fathers;
almost all fathers—more than 98%—are officially married or have permanent partners (vs approximately 56% of childless men);
employment rate is also higher among fathers;
they are also ahead in terms of their working hours and length of service.
All these factors are crucial for their income level. It is no surprise that as soon as these factors were taken into account, the 25% gap reduced by more than half and disappeared completely following the consideration of unobservable individual characteristics.
It turns out that there is no such thing as a ‘fatherhood wage premium’ in Russia. Earnings growth is not influenced by children, but rather by (self) selection effects, which are certain characteristics of men—social, demographic, and psychological—which make them more likely to become fathers and at the same time achieve success in the labour market.
It should be noted that the impact hypothesis proved to be true for one category of fathers. The key variable—children—was measured separately, depending on their number, age and kinship (biological or adopted). It turned out that men who have one child of their own under the age of three earn 2.7% more because of that.
This ‘premium’ is comparatively insignificant and is lower than the motherhood ‘penalty’ in Russia. Russian academic papers provide various estimates. According to one of the recent surveys based on the RLMS-HSE data, this is around 4%.
The actual impact of marriage and children on men in the Russian labour market was essentially unknown prior to this work. This area was a ‘blind spot’ for both researchers and government officials.
Russia today is still a country with traditional segregation of gender roles within families. Therefore, misplaced beliefs about women's ‘penalties’ compensating for men's ‘premiums’ in case of childbirth can lead to mistakes in social policy measures. Clearly, the loss of income in households when children are born cannot be fully compensated by the family's father, except for those cases when he takes on additional work (and this can have an adverse impact on his ability to communicate with the child and support his wife and, as a result, may lead to marital problems and family breakdown). Therefore, it appears that the lost income of the mother should be replaced with child benefits and other social support measures.
The other aspect is that, at least in Russia, a marriage and a young child is not enough of an incentive for a man to earn more. Their professions simply fail to offer them enough career opportunities for that. Most men do not get married and have children until their earnings increase, their education enhances, and their social status rises. All this makes men more attractive in the eyes of women. They see potential fathers in those who are capable of providing for their families. Demographic policy should therefore take into account these factors and contribute to the education of men, labour mobility development, as well as their qualification and professional skills. These measures may prove to be more effective in terms of increasing the birth rate than a maternity capital [special financial assistance for women who give birth or adopt a second or consecutive child].
* the article is written without using Alexey Oshchepkov's research