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Giving Compass' Take:
• Washington Center for Equitable Growth found that California's 2004 Paid Family Leave Act did not have the intended effects.
• Could a variation of this legislation be more effective? What policies can effectively reduce the gender employment gap?
• Learn about paid leave and economic growth.
Contrary to predictions that paid leave policies increase attachment to pre-birth employers (and, thus, help women retain valuable firm-specific human capital), women who had access to paid leave were no more likely to remain with their pre-birth employer than women without paid leave access, both in the short and long run. Our results are robust and often made stronger by (1) including individual mother fixed effects, which account for both observed and unobserved timein variant characteristics; (2) using other states to adjust the comparison group; and (3) adjusting for time-varying selection on observed or unobserved characteristics.
In short, these estimated effects appear to be due to the implementation of the 2004 California Paid Leave Act itself. Complementary analyses explore several mechanisms for these findings. First, we find little evidence that the 2004 California Paid Family Leave Act increased household specialization in the short or long term, as measured by husband’s earnings. Second, we find long-term reductions in employment and annual wages for new mothers who were married and unmarried, although the effects are larger for unmarried women. Finally, there is little evidence of differences by age at first birth (before versus after age 30) or for women in different pre-birth wage quartiles.
In short, the negative employment and wage effects appear for many different groups. In terms of mechanisms, the tax data and additional analysis with the Survey of Income and Program Participation show that greater access to paid leave reduced the number of children born but tended to increase investments in children-consistent with standard economic quantity-quality models (Becker and Lewis 1973). This finding squares well with evidence that paid leave increased the duration of breastfeeding (Pac et al. 2019), time spent with children after mothers return to work (Trajkovski 2019), father involvement (Bartel et al. 2016, Baum and Ruhm 2016), and better parental mental health and children’s outcomes beyond those outcomes measured in the tax data (Baker and Milligan 2008, Liu and Skans 2010, Washbrook et al. 2011, Avendaño et al. 2015, Rossin-Slater 2017, Bullinger 2019).
The lack of U.S. paid leave policy is often cited as a cause of the gender gap. This analysis, however, suggests that even less generous paid leave policies (relative to European standards) may have the unintended effect of reducing labor-market equality between the sexes. Because our research design differences out any general equilibrium changes in employer behavior in hiring and firing women (i.e., statistical discrimination), these findings understate the potentially larger (negative) labor-market consequences of the California Paid Leave Act increasing statistical discrimination. Notwithstanding, California’s 2004 Paid Family Leave Act may have benefitted families and children—even if it did not reduce the gender gap in wages or pay.