Is There a Child Penalty in Pensions? The Role of Caregiver Credits in the French Retirement System

The effect of motherhood on women's labour supply has been the focus of a large body of economic literature over the last decades. Since the mid-1990s, increasing attention has been paid to the "family pay gap" or the "motherhood wage gap", i.e., the differential in wages between women with and without children. As for the long-term effects of children on pension entitlements, the empirical evidence is limited. Nevertheless, different countries have introduced pension caregiver credits into their pension systems in order to compensate parents-especially mothers-for the impact that children can have on their careers and, ultimately, on their retirement benefits. Whether or not these caregiver credits achieve this objective is still an unresolved issue. We deal with this question in the French case, as the French pension system includes the widest range of caregiver credits compared to other countries. We first compute the family pension gap at given ages for women born between 1950 and 1966, initially while ignoring caregiver credits. This gap increases with the number of children. We then show that caregiver credits do fulfil their role of compensating women for the impact of children on their pension entitlements. Taking these benefits into account offsets almost completely the difference in pension entitlements among women, whatever the number of children. For men, children have almost no impact on their pension entitlements, and caregiver credits play a minor role with the one exception that they favour the fathers of at least three children.