Workplace Flexibility and the Motherhood Penalty: Evidence from the Diffusion of Remote Work

We study whether workplace flexibility is a key driver of the motherhood penalty. Exploiting the sharp and heterogeneous diffusion of work-from-home (WFH) contracts after COVID-19 in a difference-in-differences framework, we combine administrative data on the universe of Italian WFH contracts with matched employer--employee records, mother-father links, fertility records, and firm balance sheets. Greater exposure to flexible work substantially reduces mothers' post-childbirth earnings losses, primarily through higher weeks worked, lower part-time incidence, lower parental leave take-up, and improved career progression. IV estimates indicate that holding a WFH contract offsets about 77% of mothers' earnings losses around childbirth. Gains are larger among younger, lower-earning, and commuting mothers, in households where the father is the dominant earner, and in occupations with steeper hours-earnings profiles, consistent with flexibility relaxing constraints where most binding. Fathers' own earnings do not respond to flexibility around childbirth, yet fathers' exposure to flexible work reduces mothers' earnings losses by a comparable magnitude, pointing to household-level time constraints as a central mechanism. Consistent with this interpretation, fertility, a joint household decision, rises for women more exposed to flexibility, as flexibility lowers the labor-market cost of the marginal child. A counterfactual exercise shows that the life-cycle widening of the gender earnings gap would have been 10.7% smaller under current WFH diffusion and up to 29.4% smaller if all remotable jobs had adopted flexible arrangements.