Multinationals could help close parenthood wage gaps. This is how

Closing the gender wage gap has widely been recognized as crucial for reducing global gender inequality and achieving sustainable development for societies at large. Firms play a decisive role in these aspirations. As important economic agents providing employment, they directly determine hiring and promotion policies and ultimately wage differentials.

A key factor contributing to gender wage gaps is parenthood: the fact that mothers earn less than their childless female peers, while fathers earn more than their childless male peers. In our recent study, we turned our attention to the role of multinationals in the creation of these parenthood wage gaps. With the five-fold increase in their cross-border activities over the past three decades, and the associated international business travel and working across time-zones, we expected work-life challenges for working parents to be more pronounced in multinationals.

Thus, we examined parenthood wage gaps in multinationals and compared it with the gap in domestic firms to assess whether multinationals are doing any better – or worse – at tackling this social inequality. Our study aimed to address the following key questions: Are parents better or worse off working for multinationals when it comes to wages? And is there any significant difference in the way mothers and fathers are compensated by multinationals on a global scale?

The "motherhood penalty" is a well-known phenomenon and refers to the decrease in earnings experienced by women after they become mothers, compared to women without children. Overall, the penalty of becoming a mother is estimated to be between 4% and 13%, depending on country, job and individual characteristics. The motherhood penalty is observed across professions and industries and is attributed to factors such as the challenges of balancing work and caregiving responsibilities, as well as potential biases and stereotypes in the workplace.

On average, mothers take on the majority of childcare within the household, which makes it especially hard for them to combine their paid labour with the time and scheduling demands of parenthood such as opening hours of daycare, school hours, and extracurricular activities. Moreover, a mother’s productivity at work may be affected when childcare and paid work compete for her energy and concentration.

Employers may also be biased against mothers, and perceive them as less productive and dedicated to their jobs accordingly. Claudia Goldin’s Nobel-prize winning work posits that, especially in organizations that demand long hours, continuity and flexibility, employers associate motherhood with less motivation and commitment, and as a signal of unwillingness to work hard.

The "fatherhood bonus" refers to the phenomenon where men experience an increase in earnings after becoming fathers, compared to men without children. This concept is the counterpart to the motherhood penalty and highlights the potential positive effects of fatherhood for men in the workplace. This fatherhood bonus is estimated to be between 3% and 10%.

The fatherhood bonus has been attributed to positive biases associated with fatherhood and breadwinning. This may lead employers to favour fathers over childless men: fathers are perceived as the most motivated, dedicated, hard-working, dependable, and loyal employees. Fathers may accordingly be given more opportunities to demonstrate their abilities, be rewarded more for achievements compared to their childless and female peers, or receive less scrutiny for poor performance.

Working in an international environment requires a relatively higher level of flexibility such as availability outside regular business hours to communicate with people in other time zones and/or for international travel, often on short notice. We expected this to amplify the motherhood penalty in multinationals. However, in our sample, the motherhood penalty is comparable across multinationals and local firms.

On the other hand, our study shows that the fatherhood bonus is considerably larger in multinationals than it is in local firms. While fathers earn a bonus of $1 per hour (compared to their male peers without children) on average in local firms, the bonus is twice as high in multinationals.

Multinationals’ specific characteristics may contribute to their high fatherhood bonus. For instance, in multinationals, many employees are global professionals: they either regularly interact with others across borders, travel internationally, and/or have taken on expatriate assignments. Men, in particular those with families, are overrepresented in these roles, as traditional gender roles make it easier for them to reconcile working outside of office hours, being away from home, and relocate, compared to women. Moreover, men have a higher chance of being selected for these roles, especially when they are fathers, because of the aforementioned perceptions of fathers as reliable and responsible employees.

Considering the relatively more generous reward and compensation schemes for international roles and expatriate assignments, and additional compensation for fathers relocating with their families, this could result in a higher wage premium for fathers in multinationals’ subsidiaries, compared to their peers in domestic firms. Moreover, multinationals are believed to have a relatively masculine corporate culture, in which positive biases towards men with masculine traits such as fatherhood may be stronger.

Our study calls for a profound reflection on multinationals’ influence on gender inequality. The results obtained show that multinationals do just as well, or poorly, as other firms in addressing the well-known disadvantages associated with motherhood. However, a key factor in gender wage gaps in multinationals is the advantages that men, and especially men with children, accumulate. (Re)thinking their policies and practices – specifically with men in mind – is crucial to achieve gender parity.