Between-firm sorting and parenthood wage gaps in the US service sector

Area of Science:

• Labor Economics
• Sociology of Work
• Gender Studies

Background:

• Parenthood significantly impacts wages in the U.S., with mothers often earning less and fathers earning more than their childless counterparts.
• Existing research on parental wage gaps largely overlooks the role of firms in wage setting and worker sorting.

Purpose of the Study:

• To investigate how the distribution of parents across firms contributes to parenthood wage gaps in the U.S. low-wage labor market.
• To examine the influence of understudied compensating differentials related to precarious work on parental wage gaps.

Main Methods:

• Utilized novel employer-employee matched data from 74,086 hourly service-sector workers.
• Decomposed parental wage gaps into within-firm and between-firm components.
• Analyzed compensating differentials to determine their role in sorting parents across firms.

Main Results:

• Mothers are disproportionately employed in lower-wage firms, explaining 68% of their wage gap.
• Fathers' wage gap is primarily driven by within-firm wage disparities.
• Limited evidence suggests compensating differentials, including schedule quality, explain parental wage gaps.

Conclusions:

• Demonstrates for the first time that mothers in a major U.S. industry are segregated in low-paying firms, while fathers experience within-firm wage advantages.
• Findings challenge the notion of parents voluntarily trading wages for job quality, highlighting the need for further research into firm practices.
• Emphasizes the critical role of firm-level dynamics in understanding and addressing the parenthood wage gap.