The Effect of Children on Wages in the Segmented Labor Market in South Korea: Focusing on Firm Size and Employment Status

The purpose of this study is to analyze the impact of children on wages in the segmented labor market in Korea. It is known that women experience a wage penalty while men earn a wage premium due to having and raising children. Previous studies confirmed that the impact of children on wages could be influenced by various factors.

However, most studies have focused on a single labor market structure, failing to consider the variations across different segments. Given Korea’s highly segmented labor market—divided into primary and secondary market—the child-effect on wages varies depending on the location of the wage earner in the labor market. This study applies fixed effects model using data from 2007 to 2021 of the Korean Labor and Income Panel Study to examine whether the motherhood penalty and fatherhood premium are affected by firm size and employment type.

The finding indicates that the child-effect is significantly shaped by labor market segmentation. Regarding the child-effect by firm size, women working in small firms experience a larger motherhood penalty compared to those in large firms. Conversely, men working for small firms earn a fatherhood premium. In terms of employment status, women experience a larger motherhood penalty when they are non-regular workers than regular workers, and men earn a larger fatherhood premium when they are non-regular workers.

The results show that women experience a larger motherhood penalty and men earn a larger fatherhood premium in the secondary labor market than in the primary labor market. The results suggest that labor market inequality and gender inequality are intertwined in the secondary labor market. Particularly, mothers in the secondary labor market, face double jeopardy, which would exacerbate the inequality structure of the labor market.