The Family Gaps in Pay : Empirical Evidence From Japan

Abstract: Japan has the second largest gender wage gap among the OECD nations and is falling behind in the progress of gender equality. As research indicates that parenthood greatly contributes to the gender wage gap, this thesis quantifies the magnitudes of the Japanese family pay gaps among women and men and examines which factors mainly contribute to their existence. Moreover, the motherhood pay gap is further analysed with the use of subsamples by educational attainment and age group to identify additional sources of the motherhood wage penalty. With the use of a longitudinal data set from Japan Household Panel Survey, fixed effects models are utilized for analysis by controlling for a variety of factors including unobserved time-invariant heterogeneity, measures of human capital and job characteristics. The results show that the presence of dependent children significantly impacts the wages of women negatively, causing sizeable wage gaps between mothers and nonmothers. By contrast, the wages of men are completely unaffected by the presence of children. The analysis further indicates that household specialization and part-time employment mainly give rise to the wage penalties faced by Japanese women. For men, the wage premium experienced by fathers can be entirely explained by positive selection into fatherhood and household specialization. Consistent with the work effort hypothesis, subanalyses show that highly educated women experience the largest child penalty. Furthermore, the family pay gap is greatest among women in their 20s and narrows as they age. However, the analysis confirms that mothers in their midage still have not caught up with their childless counterparts as statistically significant pay gaps persist in the ages of 40-55.