2025 Reports

Unpacking the Child Penalty Using Personnel Data: How Promotion Practices Widen the Gender Pay Gap

Okuyama, Yoko; Murooka, Takeshi; Yamaguchi, Shintaro

We estimate the child penalty using detailed personnel records that allow decomposition into distinct pay components. The penalty initially arises from reductions in time-based pay after childbirth. Over time, job-rank-based pay becomes increasingly significant, becoming the dominant factor by the 15-year mark. These effects are interconnected: reduced working hours lead to lower performance evaluations, which subsequently limit promotion opportunities. Our model demonstrates that current promotion practices, which reward extended hours at entry-level positions, can generate production inefficiency. This finding suggests that addressing promotion practices could simultaneously reduce gender inequality and improve talent allocation, making a business case for organizational reform.