The Effect of Childbirth on Women’s Formal Labour Market Trajectories: Evidence from Uruguayan Administrative Data

The motherhood penalty for developed countries is well-established in the economic literature. Childbirth intensifies the traditional gender roles that affect paid and unpaid work and contributes to the persistence of the gender labour gap. However, little is known about this phenomenon for developing contexts. This paper investigates the motherhood effects on women’s formal employment and wage trajectories in Uruguay. We document significant and robust motherhood penalties in the labour market, applying an event study method to almost 20 years of social security administrative data. One year after childbirth, formal monthly labour earnings decrease by 22 per cent. This drop fails to recover over time, and ten years after the arrival of children, women’s earnings are 40 per cent below their level just before childbirth. This penalty is mainly driven by a drop in formal employment and, to a lesser extent, a wage decline for those remaining employed. Heterogeneous analysis shows that low-wage women face higher motherhood penalties than high-wage women. Interestingly, these negative effects on wages and formal employment have reduced over time, and recent mothers face lower motherhood penalties.