The motherhood wage penalty is today probably the largest obstacle to progress in gender equality at work. Using matched employer-employee data from Norway (1980–97), a country with public policies that promote combining family and career, we investigate (a) whether the penalty arises from differential pay by employers or from sorting of employees on occupations and establishments, and (b) changes in the penalties over time in a period with major changes in family policies. The findings are as follows. (1) There are major wage penalties to motherhood, but these declined strongly over the 18–year period, likely caused by changes in family policies and in how families operate. (2) The penalty to motherhood is mostly due to sorting on occupations and occupation-establishment units. By 1995–97, mothers and nonmothers working in the same occupation-establishment unit were paid same wages. (3) Women who become mothers are wage wise positively selected, but the premia are wiped out by the negative effects of actual motherhood. (4) For wage growth, there were premia to motherhood in 1980–89, but none by 1990–97. In conclusion, the motherhood penalty is not due to employers paying mothers lower wages and its size appears sensitive to changes in family policies, with large reductions in penalties over time.

We investigate whether the male marital and parenthood premia arise due to differential pay by employers or from differential sorting of employees on occupations and establishments. We investigate these premia in Norway using matched employee-employer data in the period 1980–97, a country where public policy has made it easier to combine family and career, with the clearest first-order impact on women, but with possibly attendant increased pressures on men to be more active in the family sphere. We find that the effect of marriage, and to a lesser extent of children, occurs mostly through sorting on occupations and occupation-establishment units. The role of differential pay from employers is marginal in explaining the marital and parenthood premia. We also find that about 50–75% of the martial premium is due to selection. The men who eventually marry and/or have children sort into the higher paying occupations and occupation-establishment units even prior to marriage and parenthood. There are no marital premia on wage growth within establishments, but marital premia on promotions. Part of the marital wage premium is thus due to higher promotion rates for married men.

The processes that occur in the family are today probably the largest obstacle to continued progress in gender equality in the workplace. Gender differences in wages between single men and women are consistently found to be considerably smaller than among men and women who are married or have children. This study examines how family processes affect gender differences on wages using longitudinal matched employee-employer data from Norway, 1980-1997. We find that over this period the large wage penalty initially associated with marriage and children for women decreases substantially, so that by 1997 women who do the same work for the same employer earn similar wages, regardless of marital status or motherhood. This is not true among men, where the small wage premia for marriage and fatherhood remain relatively constant across this period. Thus, while gender differences at the beginning of this period were primarily due to women being penalized for marriage and motherhood, by the end of this period, family processes create gender differences in wages primarily through the premia for men. These results suggest that Norwegian family policies have been largely successful at ameliorating the wage penalties for women, so that the role of family on gender differences in wages is now primarily due to the male premia. We explore how these processes play out in wage growth and promotions, and conclude by discussing the policy implications of these findings for Norway and the United States.