Deferred motherhood penalty: Simulation studies of women's future pensions in defined contribution schemes
Deferred motherhood penalty: Simulation studies of women's future pensions in defined contribution schemes

Summary/Abstract: The paper discusses the results of a simulation study of the motherhood penalty that leads to lower pensions for women in defined contribution pension systems. The study uses a hybrid simulation model that combines forecasting demographic changes with modeling pension capital accumulation. The models were built using numerical simulation methods, i.e. discrete event simulation and system dynamics, and then fed with real data from 2000 to 2023. The demographic model forecasts the size of age-gender cohorts over a multi-decade horizon, allowing us to forecast the size of the working-age population which, in turn, is the basis for estimating the amount of pension contribution premiums. The annual amount of premiums written determines the values of indexes of pension capital accumulated in individual pension accounts. The simulation model monitors various women's careers from the time they start working at age 25 until retirement. The simulation experiments are designed to study the causes of the motherhood penalty and determine the amount of the penalty under different scenarios of a woman's career. The results show that the pension of a woman deciding to have one child will be lower than that of a childless woman by about 25%. For a woman raising two children, the difference drops to about 40%.

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