Great maternity leave can actually backfire and lower a mother's pay because it makes her more desperate to take any job she can find.
March 23, 2026
Original Paper
From Liberalisation to Penalisation: Structural Origins of the Motherhood Penalty under China's Two-Child Policy
SSRN · 6451784
The Takeaway
When maternity benefits are tied to having a job, mothers view employment as an 'option' for future paid leave rather than just a paycheck. Consequently, they rush back to work at lower-quality, lower-paying companies just to 'lock in' their eligibility for the next child, inadvertently creating a permanent wage penalty.
From the abstract
Following China’s 2016 Two-Child Policy, mothers’ employment income declined sharply and female labour force participation fell. This paper identifies a supplyside mechanism rooted in employment-contingent maternity benefits. We develop a dynamic search model with sequential fertility decisions in which employment at parity one acquires option value as a platform for accessing future paid maternity leave. This induces one-child mothers to lower reservation wages, generating an endogenous wage pe