A recent study provides new insights into how parental leave policies affect gender inequality in the workplace—especially among high-earning women. Conducted by Sevrin Waights from Humboldt University of Berlin and the Berlin School of Economics, the research uses data from tax returns and a novel statistical approach to uncover long-term patterns in earnings among couples after childbirth in Germany.
The findings challenge conventional wisdom about parental leave policy. Rather than reinforcing traditional gender roles, lower parental leave benefits for high-income mothers were found to reduce the long-term gender pay gap within couples. In fact, this narrowing of inequality persisted for at least nine years after the birth of a child.
The study focuses on Germany’s “Nordic-style” parental leave scheme, where parents receive a portion of their previous income—up to a monthly cap—during their time off. Waights leverages this cap to examine causal effects, focusing on high-earning mothers who hit the maximum benefit threshold.
Capping the benefit amount resulted in mothers being less likely to take a paid leave of six months or longer, and earning more in the years after birth.
Interestingly, for couples in which the mother had earned more than her partner before the birth, the benefits cap also resulted in the father being more likely to take a long leave and having reduced earnings several years after the birth. A plausible explanation is that these fathers took on more childcare, allowing mothers to maintain higher earnings trajectories.
In contrast, more traditional households—where the father earned more—showed an increase in mothers’ earnings only during the benefit period, with their partners being no more likely to take a long leave and not seeing any reduction in earnings.
Waights' research stands out not just for its findings, but for its methodology. Using a “regression kink design” and data from nearly 400,000 German couples, the study isolates the impact of benefit amount from other elements of the policy—a methodological advancement in policy research.
The paper carries valuable lessons for countries revisiting family leave policies. The results suggest that benefit generosity, while well-intentioned, may inadvertently reduce labor market earnings among women who were otherwise positioned to maintain strong careers. Furthermore, the results highlight the importance of partners taking leave longer paid leaves for gender equality.
The study has been conditionally accepted for publication by The Economic Journal.
About the author
Sevrin Waights
Guest Professor at Humboldt-Universität Berlin and Senior Consultant at DIW Econ. His Fields of research are applied microeconomics, labour economics, economics of the household, urban and spatial economics.
