Today I want to to discuss a topic that rarely gets talked about but has a huge impact on women’s income potential – the cost of motherhood.
When I was completing my MBA at Chicago Booth, I took part in a women's group that regularly held Lunch and Learns. We held a quarterly event where we often invited guest speakers.
This time around, we were welcoming Professor Marianne Bertrand to come and speak about her research concerning the costs of motherhood. She talked about a data set she had collected, where alumni (both men and women) filled out their earnings over a 20-year period.
Spoiler alert: She didn’t have good news for us.
She shared that over time there’s a huge earnings gap with women who take time off work to stay home and raise their children. Unfortunately, most women are not aware of the extent of this earnings gap.
The data shows that is gap is approximately $100,000 a year for women who take more than two years off.
I do want to point out that this data set is following alumni with MBAs, so they’re going to start off with a higher salary and then accelerate from there. The average earnings for MBAs can reach about $300-400,00, but women seem to be capped at about the $200,000 mark. This creates a difference over time that is $100,000 a year. And that is a significant gap.
So what does this information mean for us?
I share with information with the point that when you decide to take time off, it should be a conscious decision. Often what I find with my peers, is that they’re managing a demanding career and a demanding household, and eventually they feel that something has to give.
In the New York Times article,The Costs of Motherhood Are Rising, and Catching Women Off Guard, it explores why the percentage of women who choose to stay home for childbearing has remained at the 15-18% level.
It questions why there are more women going to college, advancing in their careers and earning higher salaries, yet this percentage has continued to stay consistent.
A few of the reasons they list are:
1) Raising children is demanding.
Often women underestimate how demanding raising children can be, and that means that someone needs to take time off (and this responsibility usually falls on the woman).
2) Balance is hard.
Trying to manage a household and a demanding career can prove to be a difficult task. At a certain point, many women feel like something has to give and they end up committing full-time to their families.
3) It’s an economic luxury.
Many of my fellow students during my MBA married classmates who also possess graduate degrees. Some women have the capability to make the conscious choice to stay home with their children as their husband’s salary will be enough to support the family.
There’s no judgment – whatever your reason may be for making the choice to be a stay at home parent. I have many friends in all of these categories. I share this information with you so that whatever decision you make, it can be a conscious decision.
I want to talk about this so we can create a different paradigm, where it doesn’t always have to be the woman who takes time off.
Something I often suggest to my clients is to split time off equally between partners. The data shows that the earnings gap is much less significant when the total time off is less than two years. If you and your partner make a mutual decision that you’d like to have a parent at home with the children, why not have the mother take one year off and the father take one off as well? In splitting up these two years, both partners are allowed to prioritize time off with their family while not significantly affecting their career trajectory or income potential.
It’s time we have a broader dialogue about what the economic impact is, especially for women, about taking time off. This is often one of those topics that aren’t discussed. These are the sort of reasons I created my online financial education platform, to share and talk about money topics that tend to get brushed to the side or not be discussed with transparency.
One hundred thousand dollars ($100,000) per year is no small amount. That economic impact is on us ladies. It’s time we become aware of it – so we can make more conscious decisions for our families, our career and our finances.
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