Paid Family Leave Pays in the Long Run

The United States is an outlier among OECD nations in having short and unpaid national family leave policies. The 1993 Family and Medical Leave Act provides for 12 weeks of unpaid leave following the birth of a child or to deal with a family member’s serious health condition but applies to fewer than 50 percent of American workers due to exemptions for employer size. President Obama proposed pilot funding for paid family leave (PFL) programs in 2011, while Senator Kirsten Gillibrand and Representative Rosa DeLauro proposed a national paid family leave plan in 2013 that failed to make its way through Congress. In the absence of federal action, many states including California, New Jersey, and Washington (not yet funded) have moved ahead on their own to implement PFL schemes.

In their December 2013 study, Charles Baum and Christopher Ruhm examine California’s experience to see how PFL affects mothers’ labor force participation and post-pregnancy wages. California was the first state to implement PFL in July 2004. The California law allows for six weeks of PFL with a 55 percent wage replacement rate for both fathers and mothers. This is in addition to an existing temporary disability insurance program that provides mothers with six weeks of PFL around childbirth. Importantly, neither program includes job protection, though they do cover almost all workers in the state.

The authors speculate that PFL would likely cause women to delay return to work after childbirth but might lead to longer term attachment to the labor market and thus higher wages if it allowed women to remain with their current employer rather than quitting. The authors use National Longitudinal Survey of Youth survey data that follows a cohort of 9,000 who were 12 to 16 years old in 1997 with interviews in each succeeding year. This data includes exact timing of both childbirth and leave taking down to the week, so the researchers can examine whether the law has a causal effect on leave taking or future employment outcomes.

The authors compare relative changes in labor participation outcomes of mothers and fathers who had children after the implementation of PFL with California mothers before 2004 and parents from other states. The study uses 15 states with similar trends in leave taking before 2004 as a control group.

PFL was associated with mothers taking additional leave in California. The authors estimated that PFL increased the proportion of mothers on leave by 15 percentage points in the first six weeks after childbirth and between 18 and 30 percentage points in the following seven weeks. The authors argue that PFL directly increased leave taking since most mothers already had access to temporary disability insurance for the first six weeks after childbirth. Post-PFL California mothers were four to five percent less likely to return from paid leave in any given week up to 14 weeks post childbirth and took an average of 10.2 weeks of leave compared to 7.8 weeks for non-PFL states. PFL also increased father’s leave taking by six to ten percentage points, though fathers were still very unlikely to be on leave by the child’s third week.

Despite increasing leave duration and frequency, PFL in California is actually associated with an increased probability of employment nine months to a year after childbirth of up to five percent. Benefits continue to accrue even after the first year. Through comparison with the control states, the authors estimate that mothers with access to PFL averaged seven more weeks of work and four more hours of work per week in the second year after birth. Hourly wages may have increased by up to five percent.

The authors suggest that PFL might raise wages and hours worked by giving mothers the ability to stay at their original job without quitting. Increased uptake of the program may lead to even more dramatic results, as most workers were unaware of the program in 2010. This paper’s results imply that PFL can actually improve a mother’s future work prospects in addition to other social and health benefits for the family. However, further research might be needed to assess the impact of the additional payroll taxes that fund the program and employers’ concerns about long leave taking on the hiring of female employees.

As more states implement PFL and congressional representatives push for federal legislation, this study lends support to the notion that helping mothers take leave after childbirth improves their labor market outcomes.

Feature Photo: cc/(Subhra Pratim Das)