The Motherhood Wage Penalty in Times of Transition

Depopulation trend in Ukraine caused to a large extent by the lowest low fertility rates raises serious concerns about long-term economic growth and the country’s future in general. In this paper we investigate the existence and the extent of the motherhood wage penalty as a potential impediment to having (more) children in a unique institutional environment. This environment is characterized by: de jure family supportive labor laws but de facto no legal enforcement of these laws; publicly subsidized childcare; and low cultural support for maternal employment, combined with extensive involvement of grand-parents. Relying on the data from the Ukrainian Longitudinal Monitoring Survey over the period from 1997 to 2007, we find that the overall motherhood wage penalty in Ukraine is much lower than in countries with similar de jure family policies and cultural norms. It constitutes approximately 19%, controlling for individual unobserved heterogeneity, a number of human capital characteristics, actual time in the labor force, and selection into employment. We also find that the motherhood wage penalty differs by education, age at birth of first child, and marital status.