The Search for Parental Leave and the Early-Career Gender Wage Gap

I show that highly educated millennial Americans search for employers that provide parental leave, and that women’s stronger willingness to pay for this benefit contributes to the early-career growth in the gender wage gap. Using an hedonic job search model, I estimate that workers are offered higher wages when hired by employers providing paid and unpaid parental leave, but women are willing to pay, respectively, 40% more and 56% more than men for these benefits. While all workers search for jobs and experience wage growth by entering firms offering both high pay and valuable benefits, the gender wage gap increases as young women accept lower wages, compared to men, upon receiving job offers from employers who provide parental leave. While the early-career growth in the gender wage gap would decline by 75% if willingness to pay for parental leave did not differ across genders, a policy mandating and subsidizing parental leave provision could itself halve the early-career wage-gap growth. The widespread availability of parental leave would lessen workers’ need to accept lower wages in exchange for its provision, reducing the gap in accepted wages between men and women entering leave-providing firms.