Effects of parental leave reform on the gender pay gap: evidence from Spain

Abstract

Do equal parental leave reduces the gender pay gap? Since 2020, Spain has implemented an 4-month obligatory leave for both fathers and mothers. This change in regulation allows one to design a quasi-natural experiment. Literature suggests that gender discrimination have a strong link with parental leave policies. Since women have historically burdened the childraising process, especially in the newborn’s first months, employers might reflect their larger parental leave in their wages, either through providing them with fewer promotions or effectively paying them worse. Since the reform equals the leave period for both men and women, any incentives to discrimination linked to the leave periods would then cease to exist, allowing one to expect the gap between genders to be shortened in the period after the reform. The difference-in-differences methodology applied here allows for comparing men and women before and after the reform, estimating the reduction in the gender pay gap. Having sampled over 400 thousand workers from Spain in two different periods, 2018 and 2022, this study shows that the gap between male and female workers has been shortened between 1.0% and 1.4%. This result is then expanded to capture possible discrimination linked to motherhood, testing how has the reform impacted the so-called motherhood penalty. Once more the model indicates a reduction in the of 39.4% in the payment penalty experienced by recent mothers after the implementation of the reform. These results are then confirmed by further robustness tests, suggesting an effective result of the reform in reducing the discrimination between male and female workers in the labor market.