Offering less generous paid family leave, compared to European standards, can have unintended and negative consequences on women’s work and wages while also benefiting maternal and family wellbeing.
Offering less generous paid family leave, compared to European standards, can have unintended and negative consequences on women’s work and wages while also benefiting maternal and family wellbeing.
In a recent study that uses large-scale, administrative tax data from the Internal Revenue Service (IRS), the authors evaluate the effects of California’s 2004 Paid Family Leave Act (PFLA) on women’s careers. PFLA increased the total amount of partially or fully paid leave provided to parents in California to 16 weeks. The average duration of partially paid leave in OECD countries—excluding the U.S.—is 57 weeks.
Ultimately, the authors find little evidence that PFLA increased women’s employment, wage earnings, or attachment to employers in either the short term or the long term. In many cases, especially for first-time mothers, the policy had the opposite effect, widening gender gaps in pay and employment and casting doubt on a policy often declared critical to leveling the playing field for women at work.
Importantly, however, the authors also find that California’s PFLA had other, non-economic benefits for maternal and family wellbeing. In crafting paid family leave policies moving forward, the authors suggest policymakers take a holistic approach and aim to craft policies that provide both economic and non-economic benefits to women and their families.
Reductions in women’s employment and wages
The authors use tax data from 2001 through 2015 to follow women after hundreds of thousands of births. In 2004 alone, when PFLA first passed, the authors’ sample consisted of over 153,000 observations of women with any birth and over 74,000 women delivering their first child in California.
When looking at all mothers, the authors find PFLA resulted in employment rates that were on average 0.2 percentage points lower than expected five to 11 years after birth. Their estimates suggest that women who had access to paid leave experienced post-birth employment rates and annual wages that were no higher than their counterparts without access to the policy, both in the short- and long-term.
But the effects were much more negative for first-time mothers who, therefore, had access to paid leave after each consecutive child. For new mothers, taking up PFLA reduced employment by 7% and lowered annual wages by 8% six to ten years after giving birth. Interestingly, the authors’ analysis of alternative income sources in the tax data indicate that some of the decline in annual wages is offset by increases in self-employment income, suggesting that paid leave encourages women to transition to more flexible working arrangements.
While many predicted that California’s PFLA would encourage mothers to remain at their same employer after birth, the authors instead found that women taking up paid leave were no more likely to remain with their pre-birth employer.
Finally, the authors note that paid leave did not result in parents specializing more, with men working more for pay and women working more in the home with children. Instead, the annual wages of spouses of women taking up paid leave were slightly (but insignificantly) lower in both the short and long term, not higher.
Non-economic benefits for families and children
Despite the negative impact on women’s employment and wages, the authors find that California’s PFLA may have had other benefits for families and children.
Specifically, they find that greater access to paid leave reduced the number of children
born while increasing investments in children. The authors note that this finding squares well with evidence in past research that paid leave increased the duration of breastfeeding, time spent with children after mothers return to work, involvement by fathers, and better parental mental health and children’s outcomes.
Policy takeaways
Taken together, findings from the analysis suggests that offering less generous paid leave policies, relative to European standards, may have the unintended effect of reducing labor-market equality between men and women.
That said, effects on wages and employment are only one dimension to consider, and the authors’ research suggests that paid family leave to any degree does have other positive effects on women’s wellbeing and the wellbeing of their children and families.
When crafting paid family leave policies, the authors suggest policymakers take a holistic approach. While it should absolutely be a goal to craft policies that reduce gender wage gaps and help women stay in the workforce, policymakers should also consider how paid family leave can produce better outcomes for families, more generally.
About the authors at the University of Utah
Elena Patel is an Assistant Professor in the Finance Department at the David Eccles School of Business and the Marriner S. Eccles Institute for Economics and Quantitative Analysis at the University of Utah.