Smart Money Podcast: Why Moms Face a Pay Penalty — and What to Do About It

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This episode is dedicated to exploring the motherhood pay gap and potential solutions.

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Our take

You might have heard about the gender pay gap — or the difference in earnings between men and women — but what about the “motherhood penalty”? According to a recent report from the Pew Research Center, the gender pay gap grows more pronounced during a time when adults are likely starting and building their families: between ages 35 and 44.

But what does that look like in real numbers? Calculations from the National Women’s Law Center show that women who work full time year-round make 84 cents for every dollar men make. Mothers make only 74 cents for every dollar fathers make, amounting to $17,000 less per year.

In this episode, we explore the financial hit women take when they become mothers. We speak to experts who help us understand not only what’s driving the gender pay gap but also why it’s so difficult for women to recover financially after they have kids. We also learn more about policy changes at the federal, state and employer levels — from pay transparency to paid leave — that can help to close the gender pay gap for all women, not just mothers.

To a large extent, simply having more knowledge can empower women to ask for more when accepting a job offer or negotiating a raise.

More about parenthood, pay equity and finance on NerdWallet:

How a Business Can Move Toward Pay Equity

Smart Money Podcast: Nerdy Deep Dive: Why Is Child Care So Expensive?

What Is Pay Transparency and Which States Require It?

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Happy Mother's Day, Amanda.

Amanda Barroso: Thank you, Sean. I'm sitting here in my closet where I record all the podcasts, and my toddler is right outside the door. I'm feeling about 20 months pregnant with our second. So needless to say, I'm feeling very much like a mother right now.

Sean Pyles: You are channeling and embodying Mother's Day right now.

Amanda Barroso: Yes. Yes.

Sean Pyles: So how are you celebrating your day?

Amanda Barroso: So aside from a delicious brunch cooked by my husband and some family time, I'm setting aside some time to chat with you about the gender pay gap and how it widens for women once they become moms.

Jasmine Tucker: So I think we really need a multipronged approach to this. We need stuff to happen at the employer level. We need stuff to happen at the state level. We need stuff to happen at the federal level.

Sean Pyles: Welcome to the NerdWallet Smart Money podcast. I'm Sean Pyles. I'm here with NerdWallet writer Amanda Barroso for a special Mother's Day episode about the gender pay gap and the motherhood penalty women face. Welcome back to Smart Money, Amanda.

Amanda Barroso: Hey, Sean. I'm happy to be here with you. The gender pay gap probably isn't the first thing that comes to mind when people think about Mother's Day. They're probably thinking about flowers, brunch, chocolate. But this is something that's personal to me.

Aside from being a mother, I've been thinking about and researching this topic for a long time. So before I came to NerdWallet, I got my doctorate in women’s and gender studies and then worked in D.C. for about five years at nonprofits that researched this issue. So it's been on my mind for a while.

Recently, one of my former colleagues at the Pew Research Center published a report about the just persistent and enduring nature of the gender pay gap, and it turns out that parenthood is part of what's made this thing stick around for so many years. The thing about the gender pay gap, though, is typically women never really recover from it financially, especially once they become moms. So the topic is on my mind, especially as I prepare to have our second child in just a few months.

Sean Pyles: All right, so in this episode, you're going to help us understand what the gender pay gap really is, why it's worse for mothers and maybe even talk about some solutions to what can feel like an insurmountable problem.

Amanda Barroso: That is the goal, at least.

Sean Pyles: OK. Well, let's start with the basics. Can you lay out for us what exactly the gender pay gap is?

Amanda Barroso: Sure. So simply put, the gender pay gap is the difference in earnings between women and men. Every year, researchers are updating their calculations. One source of data from the National Women's Law Center shows that women who work full time and year-round typically make 84 cents for every dollar that men make. For moms, this drops to 74 cents for every dollar that fathers make. This amounts to a $17,000 loss in income every year.

Sean Pyles: $17,000. That's enormous, Amanda. I mean, just think about all that a mom could do with that amount of money.

Amanda Barroso: Totally. I mean, it's not pocket change for a Target run, that's for sure. The reason that I wanted to make this podcast, actually, is because it was unclear to me what it is exactly about motherhood that penalizes women financially, but then on the flip side, rewards men who become fathers at the same time. In research, this is something called the fatherhood bonus. So I'm just thinking, what's going on here?

Sean Pyles: OK, so just to make sure that I'm following you, there's the motherhood penalty, and then there's also the fatherhood bonus. These terms seem pretty self-explanatory, but can you give us a quick definition of each so that we're all on the same page?

Amanda Barroso: So the motherhood penalty is the earnings hit that women take when they become mothers. Sometimes it's because they have to step back or scale back from the workplace to become primary caregivers, and of course that impacts their overall earnings. But for men who become fathers, the data shows that they get a boost in their earnings, actually. And this may be because employers are more likely to see fathers as providers, offer them more hours, more opportunities, and the fathers can then take advantage of that because, surprise, they have someone at home taking care of the kids and the housework.

Sean Pyles: Got it. I think there may also be psychological and cultural pressures going on as well. A lot of dads may feel like it's important to step up and work harder once they have a kid, or they're afraid that if they do try to take time off and prioritize child care, that they'll be judged harshly and their careers might suffer.

Amanda Barroso: Totally. So to understand the origins of the parental pay gap, I talked with Jasmine Tucker — she's the vice president for research at the National Women's Law Center — and that's who you heard at the beginning of the episode.

Jasmine Tucker: So what we see in the data is that women face a wage gap right as they begin their careers, but it's smaller. So people are just graduating college, people are just graduating high school and entering the workforce. Women are making 90 cents for every man's dollar.

Amanda Barroso: So the playing field is more equal when young men and young women are first starting their careers because, you think about it, they're both starting at entry-level positions at the lower end of the pay range. But then something starts to happen as they enter their 30s. And this is where you see that motherhood penalty and the fatherhood bonus emerge that we were talking about earlier, Sean.

So to understand this, I talked to Rakesh Kochhar — he's a senior researcher at the Pew Research Center — and he's the one who wrote the report that I mentioned earlier. So I wanted to learn a little more about this window of time and what exactly happens to mothers and fathers.

Rakesh Kochhar: The most significant increase in the pay gap happens around age 35 to 44. Beyond that, it pretty much stays steady, so it doesn't rebound back to pre-parenthood days, but it stays widened. Parenthood widens it, and that widening does not go away.

Sean Pyles: OK. So what Rakesh is saying is that not only is there a gender pay gap, but that this gap widens between mothers and fathers between the ages of 35 to 44. So under one roof, you could have one parent reaping the benefits of this gap, while the other's pay is suffering.

Amanda Barroso: And that gap never closes, even as women age. Plus, this data isn't even factoring in same-sex households. I mean, another thing that we should also clarify from Rakesh's work is his research shows that women with kids at home earn less than women without kids at home. And here's where the fatherhood bonus really comes into play. Fathers earn more than other workers in general, including men without children.

Sean Pyles: And I know there's a ton of data out there around the pay gap, but I want to zoom out. There are still a lot of people who don't think the pay gap is well, real. Or they believe that women simply pick fields with lower wages, things like being a teacher or a service job, while men happen to choose jobs with higher earning power, like something in tech or banking or engineering.

Amanda Barroso: There's obviously a lot more at play than men and women just simply choosing different jobs. The true meaning of occupational segregation takes into account how a particular group, so here we're talking about men and women, how they're overrepresented in a certain job, and this is often due to social forces and pressures or policies that create this division. It's certainly more than just men and women just happen to choose these separate and distinct fields, right?

Sean Pyles: Yeah. Well, the other thing that critics of the gender pay gap dispute is the role of discrimination. Did the experts that you talked with get into that at all?

Amanda Barroso: Yeah. On the question of whether the pay gap is real or not, Jasmine was just like, "Look, here's the data."

Jasmine Tucker: We see a wage gap in 94% of occupations. We see a wage gap when you look at different education levels and especially women of color gaining higher education, like Black women and Latinas, they're still losing millions of dollars over a career compared to white non-Hispanic men.

Sean Pyles: So Jasmine has the data to back up the wage gap, but what about the occupational segregation and discrimination question? Did she or Rakesh talk about that?

Amanda Barroso: So Rakesh was basically like, "Look, occupational segregation is a thing. It is an undeniable thing that happens, but so is discrimination." But that last piece is just a little harder to precisely measure.

Rakesh Kochhar: Yes. So both are factors. One, as you noted, is easier to measure than the other. The easier one to pick up on is what are the types of jobs men and women do, or what are their occupations? And there are distinct differences that continue to linger. For example, women, much more so than men, are represented in education or health care jobs. Men, on the other hand, are more likely than women to be in STEM jobs or in managerial occupations and some other occupations. And the differences have narrowed over time. But this narrowing also halted around the turn of the century.

The other side of the equation you mentioned is discrimination. That is where an employer may treat men and women differently at the workplace or during the hiring process itself. Many experiments have revealed it as a likely factor. So there is evidence of discrimination, but precisely how much and where it happens, that's harder to measure.

Sean Pyles: All right, I'm glad we cleared that up. But what I'm wondering about now is where does this pay gap come from? There are people behind the decisions to pay a mother one amount and a father a different amount. What's actually driving the gender pay gap?

Amanda Barroso: You know, Sean, I asked Rakesh that exact question. Here's what he said.

Rakesh Kochhar: In a survey we did accompanying this report, we find that women with children at home are much more likely than men to feel a great deal of pressure to focus on family needs. So partly a result of these pressures and perhaps partly by choice — it's hard to sort out or disentangle these two forces.

What we see is that with the onset of motherhood, when about two-thirds of women ages 35 to 44 have children at home, we find that they tend to retreat from the labor force. Labor force participation decreases, and at the same time, women tend to work fewer hours on average per week.

So in effect, what this means is parenthood impacts the amount of workplace experience women acquire relative to the workplace experience that men are able to acquire. And men are seen to work harder because they actually increase the number of hours they work on average per week and they become more active in the labor force when they become fathers. So partly through a withdrawal on the part of women and partly through more engagement on the part of men, we see the gender pay gap widen around that time. And this increase happens most noticeably around ages 35 to 44.

Amanda Barroso: So, as Rakesh mentions, there are significant cultural forces involved here, but I wanted to hear a little more from Jasmine about how this plays out, especially around notions of who is a breadwinner.

Jasmine Tucker: What I think is at play are a couple of things. So first is outdated notions about who’s caring for families, who is dedicated to the work, who needs the money. And so if you think about dads in the workplace, you're like, "Oh, well so-and-so just had a kid. We need to put him up for promotion because he's supporting three people now instead of two," whatever.

And I think that despite all of this evidence that shows that women are breadwinners in their families, either primary or co-breadwinners, there is this outdated notion that when women have kids, they become less dedicated to their work. And so they have to leave at 4 p.m. to go pick up kids. And so that means that they're not dedicated to their work, forget that she's answering emails or whatever she's doing late at night after the kids are in bed. Child care is definitely playing a big role here. If child care is unaffordable and it's making up large shares of women's earnings, they might be more likely to leave the labor force.

Amanda Barroso: That point about child care really hits home, and it's something that we've covered together on the podcast before, Sean. The other thing that she mentions are caregiving responsibilities, which when you think about it, they only multiply with each child that parents have, right?

Sean Pyles: And we know that women tend to take on more caregiving responsibilities than men, too. So women are being paid less for the same job and also having to shoulder more work around the home.

Amanda Barroso: Exactly. So this is what I wanted to know. Does the impact of the gender pay gap then intensify with every child? Here's what they had to say. Let's hear from Rakesh first.

Rakesh Kochhar: In the past, we did look at what happens to work effort depending on the number of children you have at home. And the more children you have, the greater the number of hours worked by men or fathers. And the shorter the workweek among women. So having more children definitely has more of an impact on engagement with the workforce on either side, negatively among women and positively, you might say, among men.

Amanda Barroso: So with the birth of each child, mothers are withdrawing from the workplace for one reason or another, while fathers are putting in more time. But what does this mean for actual earnings? Here's what Jasmine said.

Jasmine Tucker: There are some studies that show there's like a 7% drop in earnings, like per kid, that you have for women. But we see the opposite when it comes to men. When they have kids, their earnings tend to go up. And so I think over time this creates this divide that widens, right, it just continues to widen and get worse over time.

Amanda Barroso: So is it just a general issue with the imbalance of division of labor? So women are the ones who are assumed to be doing the caregiving. So they're the ones leaving work early, and then it snowballs from there.

Jasmine Tucker: It all reinforces each other. We saw this in the pandemic. We saw more women leave the labor force than we saw men, and we saw women out for longer periods of time. So we know that early days, in 2020 and 2021, we saw lots of women remain out of the labor force because they were providing unpaid care for their children. And so if somebody needs to take time out of the labor force, who's it going to be?

Amanda Barroso: Jasmine has a good point here. The pandemic really upended the working lives of many mothers across the U.S. because when you think about it, Sean, so much of that infrastructure that they relied on to be workers, was just no longer available. So things like child care, in-person schooling, after-school activities or weekend activities, things like that that made their working lives possible were just unavailable.

Sean Pyles: Well, what's interesting is that in recent months, women have returned to work. In February 2023, the number of women in the workforce was higher than before the pandemic, but that was after a steep, sudden drop-off early in the pandemic and then a slow climb back up over the past three or so years. Do you think that that time away from work would have an impact on their earning potential?

Amanda Barroso: Exactly. But the thing is, once women leave the labor force, it's really hard for economists to understand what it means for their future earnings, even if they return to work again at a future time. And this is something that Rakesh talks about in his report.

Rakesh Kochhar: Now in our data, we only observe the earnings of people who are working, who are employed. And if we look at just employed men and women, we are not anymore looking at women who have withdrawn from the labor force. Some will have withdrawn permanently, some will have withdrawn only for two, three months or four months, and some may be for two, three, four years until a child goes to kindergarten or elementary school. So there's going to be a varying degree of losses felt by women.

And what we do not observe is this loss in potential earnings: What might have been the earnings of a woman who took, say, five years off from work? We also do not know what might have been the earnings of women who’ve permanently withdrawn because they decided for whatever reason to be at home to look after kids until they're off to college, maybe, or never returned to the labor force. So there is some loss in the potential earnings of women, their lifetime earnings, that we are not able to observe.

Amanda Barroso: Rakesh points to a blind spot in collecting pay gap data on women, especially as they become mothers and exit the workforce for a time. And as Jasmine mentioned, the pandemic has been especially hard on mothers' employment.

Jasmine Tucker: So I think early in the pandemic, there was a lot of worry about moms and women just generally leaving the labor force and what that would mean for their careers. We saw 20 million plus jobs just completely gone in two months time, from February to April 2020. And I think initially in the early days of the pandemic, there was, I think, a really scary moment of what's going to happen to the wage gap? How is this going to impact it? How is this going to set women back?

And so I think the data from the Census Bureau over the last couple of years, it's been hard to compare it to previous years. Because the labor market looks completely different than it did in 2019, which we would have to consider pre-pandemic.

So what we have seen since 2020 is some closure in the wage gap. And part of that is because we saw a lot of the jobs that were lost were low-paid jobs. So who was left right in the pool of people working full time and year-round were higher-paid workers. So we lost all of these women in low-paid jobs. And so that appeared to shrink the gap.

Sean Pyles: It seems like both the gender pay gap problem and the motherhood penalty that exacerbate it are really complex.

Amanda Barroso: I mean, there's not a one-size-fits-all solution. I think Rakesh put it really nicely.

Rakesh Kochhar: So it's that drilling down to individual choices and cultural pressures and family pressures and workplace issues. It's very heterogeneous; it's very diverse. It's very difficult to perhaps eliminate with a sweeping policy.

Sean Pyles: All right, well, that does seem a tall order, but I also see a glimmer of hope in Rakesh's answer. There are a number of different areas we can mine for solutions on an individual level, family level, culturally and in the workforce.

Amanda Barroso: I know it seems bleak, and in a lot of ways, these issues are so much bigger than an individual mother can solve on her own. Trust me, I feel the weight of this. I'm a mom, I am expecting another one, and I obviously care about my earnings. But you're right; there are some things and some ways that we can move forward and continue to make progress in closing the gap from others. So I dug into this a little bit with Jasmine.

Jasmine Tucker: So I think we really need a multipronged approach to this. We need stuff to happen at the employer level. We need stuff to happen at the state level. We need stuff to happen at the federal level. So we could do things like pass equal pay bills, like the Paycheck Fairness Act at the federal level. There is right now a lot of momentum in state legislatures this year around pay, salary transparency bills, which is great because it essentially says if you're posting a job, you have to provide a range in the salaries. The data shows that women underestimate the salary and men ask for the moon, which contributes to this.

Amanda Barroso: So what are some things that employers can be doing? It does seem like some of the issues here are revolving around how managers or HR or people in control are thinking about motherhood and fatherhood.

Jasmine Tucker: I think that there's a lot that employers can be doing. They can be doing internal audits of how much are they paying people by race and by gender, and what does that look like? And doing some course-correction there. I think that they could be hiring more women and in particular women of color in C-suite positions and in other leadership roles, because if you have a workplace that only is made up of men and in particular white men, I don't see how those workplaces are going to be family-friendly or actually meet the needs of moms in that workplace.

Amanda Barroso: Your earlier point about employers examining their own pay practices seems really important. And I don't want to overlook your point about race, either. I mean, the calculations that you've done show that Black, Latina and Native women are making even less than that overall 84 cents per dollar figure that we talked about earlier. According to your data, Black women make 67 cents for every dollar, and Latina and Native women make 57 cents. And again, this is compared with white non-Hispanic men. And that's just the overall number, not the number for moms of color. So that means their total annual losses are much higher.

Jasmine Tucker: Yeah. It's life-changing money. It could be a down payment for a house; it could be an investment in your education so that you can move from your low-paid field to a higher-paid field. It could be savings toward a kid's education fund. There, I think, are so many wealth-building opportunities that women and moms are missing out on because they're being paid less.

Amanda Barroso: What other policies can be implemented or changed to help close the gender pay gap for moms?

Jasmine Tucker: The unionized workplace is good for women. We see wages go up; we see wage gaps decrease.

Amanda Barroso: Workplaces adopting family-friendly policies alone won't fix the pay gap, though. Rakesh even points to other European countries where these policies are part of workers' everyday lives already and found something interesting.

Rakesh Kochhar: When we look at Scandinavian countries, such as Denmark, where family-friendly policies are commonplace, you still see that parenthood drives an increase in the wage gap because men and women react differently to parenthood.

Amanda Barroso: This reaction to parenthood Rakesh talks about could point to a bunch of things. I think some of it's likely a response to cultural and social pressures that fathers face, thinking about putting in more hours in the office, what that might mean, it might mean seeing your child less, added stress. There's this financial piece of the fatherhood bonus that seems like a positive one, but still there are costs.

Sean Pyles: So we've talked about potential solutions at the state and federal levels, but there have to be things that parents can push for in their own workplaces.

Amanda Barroso: I think you're exactly right, Sean. Look, OK, let's look at NerdWallet, for example. The company does offer a really generous paid leave policy, around five months leave at 100% pay, which not only means that parents can bond and care for their newborn, but they also don't have to dig into savings to cover time away from work. I mean financially, that's huge, right? But in addition to that, all new job ads that NerdWallet puts out provide a salary range, which means that potential candidates have a leg up. So when they get asked that dreaded question that we've all been asked in a job interview, “What's your desired salary?”, they have some information to work with, right? They're not pulling a number out of the air.

So as of March 9, actually eight states have made salary transparency a requirement on job ads, and 15 states are considering similar legislation, and that's according to the Center for American Progress. So I think that that's a step in the right direction.

NerdWallet also recently started providing employees with the salary bands for their job title based on their title and location. So I can log in and see where I fall in that pay band, and when it comes time for review or negotiations, I just have a little more leverage. I have more information and knowledge that I can work with. I think these last two things are huge, especially for women. So studies have shown women tend to undervalue themselves. They ask for less in negotiations or when they're starting a new job. And in this case, I think for women, knowledge is power.

Sean Pyles: And it just goes to show how big an impact one company's policies can have on the way you can structure your life, your family, your ability to earn money. And it gets back to the fact that it's a little unfortunate for many workers that they don't have those benefits where they work. And we should state that Amanda was not told by NerdWallet to say any of that. It's just a legit perk that's made a big impact on her ability to balance motherhood and having a career. Is that right?

Amanda Barroso: That's absolutely right. But the thing is, there are templates for this. There are companies who are employing some of these policies and measures, and we can learn from those things. I think a big thing is just talking about money, talking about these policies. You hear that your friend or your neighbor that they work at a place like NerdWallet, great. Let's figure out how they're doing it so I can bring that back to my employer and see what I can make happen for myself and my colleagues.

Sean Pyles: Exactly. Well, Amanda, thank you so much for coming on the Smart Money podcast to help us explore this really important topic. I appreciate it.

Amanda Barroso: I always love being here and talking about these things with you, Sean, and I am very much looking forward to enjoying that five-month paid leave and catching you on the flip side of that.

Sean Pyles: All right. Well, I'm expecting many baby pictures while you're out.

Amanda Barroso: Absolutely.

Sean Pyles: And that's all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at [email protected]. Also visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you're getting this podcast.

Amanda Barroso: This episode was produced by Sean Pyles and myself. Liz Weston helped with editing. Sheri Gordon helped with fact-checking, Kaely Montanan mixed our audio, and a big thank-you to the folks on the NerdWallet copy desk as always for their help.

Sean Pyles: Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Amanda Barroso: And with that said, until next time, turn to the Nerds.