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FEB 18, 2020

The economic imperative of enacting paid family leave across the United States

The economic imperative of enacting paid family leave across the United States

Abstract

This essay is part of Vision 2020: Evidence for a stronger economy (opens in a new tab), a compilation of 21 essays presenting innovative, evidence-based, and concrete ideas to shape the 2020 policy debate. The authors in the new book include preeminent economists, political scientists, and sociologists who use cutting-edge research methods to answer some of the thorniest economic questions facing policymakers today. 

To read more about the Vision 2020 book and download the full collection of essays, click here.

Overview

Many workers across the United States have caregiving responsibilities. The majority of mothers and fathers of infants and small children work in the labor force, and the aging of the baby boomer population implies that many workers have parents and other older relatives who may require care. Paid family leave policies are designed to help employees balance the competing needs of work and family by allowing them to take time off from work with partial wage replacement to care for newborn or newly adopted children or ill family members.

Yet the United States remains one of only a few countries in the world (opens in a new tab) without any national paid family leave policy and the only high-income country without one.137 Only 17 percent of U.S. private-sector workers have access to paid family leave through their employers (opens in a new tab), and this access is highly unequal—meaning that low-income workers have much less access than their higher-income counterparts.138 Federal law requires 12 weeks of job-protected unpaid leave under the 1993 Family and Medical Leave Act, but stringent eligibility requirements mean that less than two-thirds of the U.S. workforce is eligible. Not surprisingly, the majority of working parents report that their work-family balance is a significant challenge (opens in a new tab).139

Paid family leave is receiving significant attention in the political discourse. At the end of 2019, Congress and the Executive Branch reached agreement to extend six weeks of parental paid leave for a newly born or adopted child to the federal workforce. During the 2016 election, for the first time in U.S. history, both Democratic and Republican presidential candidates included paid leave proposals in their campaign platforms. Advocates credit paid family leave with encouraging career continuity and advancement for women and improving child and family health and well-being. There is also growing interest in encouraging men to take leave, in an effort to promote gender equality both at home and in the labor market. Yet some business groups and other opponents of paid family leave argue that it could impose substantial costs on employers. Paid time away from work could lower employees’ attachment to their jobs, and even lead to discrimination against women (who are more likely than men to take leave).

In this essay, we first examine paid family leave programs at the state and local level, which are helping to set the stage for a federal paid leave program. We then describe the current research on the impacts of paid family leave on workers, children, and employers, with an eye toward understanding the economic costs and benefits of a potential federal program and the key policy levers to consider. We also briefly discuss how paid family leave may relate to the growth in economic inequality in America and whether a federal policy could help curb this trend.

Paid family leave policies can cover both bonding with a new child and caring for other relatives, but in this essay, we will focus the discussion on the effects of bonding leave. This restriction stems from a lack of research on the impacts of nonbonding leave and the fact that bonding leaves currently make up the vast majority of all claims in states with paid family leave programs.140

Conclusion

As other states and the nation as a whole consider paid family leave legislation, it is critically important to understand the costs and benefits of existing programs and identify key policy features. The current research yields five key take-aways.

First, both mothers and fathers respond to the introduction of paid family leave programs through higher leave-taking rates and longer leave duration, but barriers to take-up remain, especially among low-wage workers in small firms. Job protection and high wage-replacement rates for workers at the bottom of the wage distribution may be important for encouraging more widespread take-up.

Second, relatively short leave entitlements can improve job continuity for women and increase their employment rates several years after childbirth. Paid leaves longer than 1 year, however, could have adverse consequences for mothers’ long-term career opportunities.

Third, the current paid leave programs at the state and local level in the United States have positive impacts on child health and development, as well as maternal well-being. Thus, while there is no research identifying the “optimal” duration of leave precisely, it appears that programs of up to six months in length are likely to generate benefits for families without significant costs to women’s careers.

Fourth, the current evidence shows minimal negative impacts of existing state programs on employers, suggesting that paid family leave programs afford benefits to workers and their families at little to no cost to the employers. These benefits may be especially important for the least advantaged families, in which workers are the least likely to have access to any employer-provided paid leave.

Finally, a growing body of evidence underscores that rising economic inequality and persistent intergenerational transmission of low socioeconomic status in the United States are (opens in a new tab) perpetuated (opens in a new tab) through (opens in a new tab) disparities (opens in a new tab) in early childhood circumstances.162 The current research suggests that a federal paid family leave policy could level the playing field for children from all backgrounds and help curb the growth in inequality and boost long-term U.S. economic growth and stability.

—Maya Rossin-Slater is an assistant professor of health policy in the Department of Medicine at Stanford University School of Medicine. Jenna Stearns is an assistant professor of economics at the University of California, Davis.

Back to Vision 2020 full essay list (opens in a new tab).

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