CEOs Pay Employees Less After Having Children?

A recent widely reported study found that male CEOs’ families significantly affect the wages of their employees.  The study, by Professors Michael Dahl, Cristian Dezso, and David Gaddis Ross, found that male CEOs who have children generally pay their employees less after the birth of each child.  The decrease in wages was less for female employees than male and was greater when the child was male.  In fact, the birth of a CEO’s first daughter was generally associated with an increase in employees’ wages.  However, the birth of subsequent daughters or any sons was associated with lower wages.   Although it was not the focus of this study, the authors also analyzed male CEO wages after the birth of a child and found that CEOs’ real wages increased after having children.

The study offers various explanations for these observations, suggesting that the birth of a child prompts male CEOs to hoard more resources for themselves and their families in an effort to fulfill the role of the “good provider.”  The study posits that women experience less of a decrease in wages because the birth of a child causes male CEOs to appreciate their wives’ “successful enactment of motherhood” and in turn engenders positive feelings and generosity towards female employees.   Similarly, the authors argue that birth of a first daughter increases generosity towards all employees while the birth of a son triggers more self-serving interests.

The study must be taken with a grain of salt, however.  The actual difference in pay observed, while statistically significant, is quite small at around 0.2% or $100 a year on average.  Furthermore, all firms used in this analysis were Danish firms. Extrapolating the results of this study to the United States ignores important differences in attitudes toward work, wages, wealth distribution, gender roles and family.

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