Human Capital and Parenthood: Does Skill Loss during Parental Leave explain Gender Gaps in Earnings?

Talk by Sonja Spitzer (Universität Wien) as part of the Research Seminar Series of the IOS Economics Department.

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 investigate tested competencies of parents before and after the birth of their child, and before and after they go on parental leave, using panel data regression analysis. Our sample consists of 9,796 adults aged 20 to 45 between 2010 and 2022. Preliminary results suggest that the birth of a child decreases work-related skills of mothers, but not of fathers; however, effects sizes are small. We find no heterogeneities by birth rank, the number of births, or skill domain. In future analyses, we will further differentiate based on parental leave duration and subsequent income. The findings will offer important insights for shaping parental leave policies and tackling skilled labour shortages.