- California's 2004 paid leave law increased the duration of the average leave period by 5 weeks, but it reduced new mothers’ employment and wages over the long run. And it reduced fertility, too. Tweet This
- If we want to make life easier for new parents and their infants, maybe we should just give them money and let them spend it how they want. Tweet This
Advocates of government-funded parental leave have always had an awkward tension at the center of their case. One of their biggest talking points is that it’s good for kids if parents stay home in the earliest months of life. Another is that it’s socially beneficial for moms to re-enter the work force immediately thereafter.
This philosophy—that parents at home are good, but only up to a specific point that the experts have conveniently pinpointed for you—is why so many paid-leave policies take the paternalistic form of making everyone pay extra taxes for their entire working lives in exchange for the opportunity to take a set period of time off when they have a kid. Allegedly, paid leave will simultaneously keep parents at home for a bit and increase mothers’ labor-force participation in the long run by helping them stay with their pre-birth employers.
You can agree with this kind of social engineering or not. But a new paper from University of Michigan economist Martha J. Bailey and three coauthors says that California’s 2004 paid-leave law—which provided an extra six weeks of paid leave at 55% of one's pay, above and beyond the six weeks of post-birth leave that were already available through the state’s temporary-disability program—simply backfired on the getting-moms-back-to-work front. It increased the duration of the average leave period by five weeks, but it reduced new mothers’ employment and wages over the long run. And, for good measure, it reduced fertility, too.
The study uses one of the best possible data sources: administrative records from the IRS and Social Security Administration, as opposed to publicly-available surveys from the Census Bureau, which are far smaller, can suffer from misreporting, and don’t allow researchers to follow the same people year after year. And it uses a compelling design: a natural experiment comparing moms who gave birth just after the policy went into effect with moms who gave birth a bit before. Though moms who gave birth before the change could still technically benefit from the law by taking leave later in their children’s infancy, “take-up” of the new policy shot up by 18 percentage points—26 for working moms in particular—among those who gave birth after the policy change.
The authors find scant evidence that the policy increased employment. Some of their results are statistically insignificant, but they can rule out substantial boosts. And for new mothers—who had access to paid leave from the time they had their very first child—taking paid leave “reduced employment by 7 percent and lowered annual wages by 8 percent six to ten years after giving birth.” As the authors pointedly note, these mothers "could expect to receive around $1,833 in wage replacement for one year but approximately $25,681 lower earnings over the next decade, for a net 10-year loss of $24,000." (Their emphasis.)
Further, while many hoped that paid leave would help mothers stay with their current employers instead of finding new jobs when they returned to the workforce, this behavior didn’t increase, either. Some mothers apparently transitioned to more flexible work arrangements or cut back their hours. And interestingly, it doesn’t seem to be the case that women helped their husbands’ careers by taking care of the kids, because husband earnings did not measurably increase—and in fact, the reductions in employment and earnings were greater for unmarried women.
Since women worked less after taking leave, one might think they would be in a position to have more children with less disruption to their careers. But no: The number of kids women had declined by 2% in general and by 5% for new mothers. If there’s a silver lining to the findings, it’s that (according to a supplemental analysis the authors conducted with the Survey of Income and Program Participation) mothers did spend more time with the kids they had.
How to make sense of all this? In theory, both employer discrimination and mothers’ own choices could be at work.
It’s possible that taking paid leave causes women to miss opportunities at work, either because they’re off when the opportunity hits, or because their bosses unfairly interpret a lengthy parental leave as a signal that a mother isn’t serious about her job. However, the authors point out that “the labor-market returns to a few weeks of additional experience [are] minimal in most professions,” in contrast to the big and long-lasting effects they find—and that a discrimination-only theory has a hard time explaining why first-time mothers would take a bigger hit than other moms when they take leave. (On that, though, maybe employers react differently to second and third kids than they do to a formerly childless and carefree employee becoming “weighed down” in this way, in the latter case paying a lot more attention to signals of how the mom is going to strike a new work-life balance.)
The other explanation is that the policy "may lead to different parenting and work behaviors on the part of parents.” In this narrative, moms basically got in the habit of investing more in their kids and shifted their focus away from work. Fertility decline might be an ironic effect of this: When each kid comes with a higher expected investment of time, future kids are more costly.
I’m not sure the paper satisfactorily explains the why of its results. But with solid data and research design, it demonstrates that California's paid-leave expansion did not keep women who took advantage of paid leave in the workforce.
Advocates of paid leave can argue, of course, that paid leave is good for families—even if it reduces work and fertility; it did increase time spent with kids, after all. (Far be it from me to criticize anyone for cutting back on work for that purpose!) We might also hope that the results will be different in other states.
But we also might ask why policymakers would continue to structure a benefit this way if, in the most populous state in the U.S., it created the opposite of the incentives they were aiming for. If we want to make life easier for new parents and their infants, maybe we should just give them money and let them spend it how they want—whether that’s to finance paid leave or something else.
Robert VerBruggen is an Institute for Family Studies research fellow and a policy writer for National Review Online.