Introduction
The United States is the only member of the Organization for Economic Cooperation and Development (OECD), or more economically advanced countries of the world, to not provide any federally mandated paid parental leave.1 Paid parental leave is defined as fully or partially compensated time away from work due to the birth and care of a new child. 33 of the 34 OECD members have paid leave for mothers while 32 have paid leave for fathers.1 There have been numerous studies and research showing that paid parental leave is beneficial to parents, infants, as well as the employers, and therefore to the overall economy. In this paper we explore how paid parental leave ultimately impacts the bottom line and why the United States should implement a paid parental leave policy.
A Brief History of the Workplace
For centuries, the societal role of women was most often that of a mother and homemaker. Babies need constant care to survive, and parents were usually required to divide the labor of raising their children. Since biology made it so that mothers were responsible for birthing and feeding babies, women often stayed home while men provided outside of the home.
Times however have changed. Economic circumstances have necessitated many families to become two parent income households, which was enabled by the increased ability to outsource childcare. Women have been entering the workforce by storm for decades now, increasing their influence in every field. Currently, US women earn more than half of bachelor’s degrees (57.3%), master’s degrees (59.4%), and doctorate degrees (53.3%)2 and women are close to half (46.9%) of the total US labor force.3
However, the norms of workplace culture have not changed at the same pace as the composition of the workforce. The ability to focus on health and wellbeing during a critical period of life with a guarantee of some type of income has significant health and therefore economic benefits for all involved parties. Many studies performed in numerous countries have shown paid maternal leave improves health, economic, and gender inequality outcomes.1 Furthermore, a growing number of studies have also demonstrated the same importance in paternal leave.1 We will explore these outcomes in the following sections.
Paid Parental Leave and the Newborn
Studies have shown that parental leave is a critical part of the postnatal experience for moms and babies4 where increases in paid parental leave were consistently associated with better infant and child health, particularly in terms of lower infant mortality rates.5 One such cause is preterm births. Having leave before birth can reduce stress, whether physical, mental, or financial, which is a risk factor for preterm birth.6 Paid parental leave after a birth is also important as parental presence in the neonatal intensive care unit aids preterm infants’ developmental trajectories.7
Even for healthy infants, the bonding time that occurs in the first few weeks after birth is crucial for infant growth. One of the most important facets of maternal and infant health is breastfeeding. Many studies have shown that exclusive breastfeeding for six months has many benefits for both mom and baby. Breastfeeding decreases risk of ear infections, respiratory infections, and gastrointestinal infections – the most common reasons for doctors’ visits.8,9 However, 75% of women are using infant formula in some capacity by the time their baby is six months old.10 While there are numerous reasons for utilizing formula, the return to work is certainly prohibitive for breastfeeding. Paid leave facilitates initiation and continuation of breastfeeding, and therefore reduction in health consequences for both mother and child. This ultimately equals reduced financial burden and less health expenditures for both parents and insurance. Paid parental leave gives parents the financial freedom and flexibility to focus on breastfeeding after the major medical event of giving birth.
Paid Parental Leave and the Parents
In addition to improving infant outcomes, breastfeeding has a multitude of benefits for mothers; it can reduce postpartum blood loss and reduce the risk for postpartum depression, type-2 diabetes, rheumatoid arthritis, cardiovascular disease, breast cancer, and ovarian cancer.8 Studies have shown an increase in exclusive and overall breastfeeding rates with access to maternity leave.11,12
Whether or not a mother chooses to breastfeed, recovery from birth is an essential part of maternal health and is often overlooked in the postpartum time period. Having a baby affects not only a woman’s physical health but also mental health, and both could be greatly improved in the United States. Shockingly, most women are not seen by a clinician surrounding their own health until they attend their only OB/GYN follow-up visit six weeks after giving birth, which is not enough. Due to the rise in maternal morbidity and mortality during and after birth, the American College of Obstetricians and Gynecologists (ACOG) recommends that postpartum care should be an ongoing process, rather than a single encounter.13 Again studies have shown that maternal leave has been associated with improved self-reported measures of physical and mental health.14
Paid parental leave would allow time for recovery, without pressure to rush to return work and fear of a lost job, reducing risk of negative outcomes and concomitant economic impact.
Paid parental leave is not only beneficial in the overall health and happiness of mothers and their children, but it economically benefits families as well. Childcare costs can be an immense financial burden especially since newborns require such individualized care. In fact, low quality infant care is associated with poor developmental outcomes.16 Paid leave would allow parents to provide quality care at the time when costs are most expensive. Furthermore, paid paternal leave has been shown to also improve breastfeeding rates through more equitable distribution of tasks.17 With the financial security of an income postpartum, parents are able to ease anxieties over a strained budget when a new family member joins in.
Paid Parental Leave and the Workforce
Although women are consistently showing up in the workforce, the numbers decrease significantly after having children. Organizations struggle to retain women once they enter motherhood with 43% of women ending up leaving their careers.18 A national study performed by Bright Horizons showed 50% of new moms who return to work switch to a lower-paying job at a family-friendly employer.19 In a country where women are the majority of degree earners and almost half of the workforce, why is retention in demanding jobs so difficult? Unfortunately, women are often still viewed as the primary childcare provider and face the choice of prioritizing motherhood versus career, whereas men are not restricted by biology in the same way.
Retaining women in the workforce helps maintain and expand our economy. Research has shown that organizations with women in management outperform industry averages on several fronts, including profitability.20 To maintain our competitive advantage, it is imperative to retain women in the workforce to allow us to have a thriving economy bringing jobs and prosperity to more American families. One of the most successful ways to keep women in the workforce has been shown to be paid parental leave. As an example, when Google increased paid maternity leave, the rate at which new mothers quit dropped by 50%.21 Additional studies have shown maternal paid leave is positively correlated with maternal rate of return to the workforce, maternal share of household income, and future income and prevention of “motherhood penalty”.
While maternity leave is more common, paid paternity leave can also impact outcomes. Paternity leave impacts maternal and infant health by allowing greater participation. Some studies also suggest paternity leave can reduce the amount of maternity leave and allow women an earlier return to work and greater opportunity for experience and increased income.22 However, it seems gender stereotypes in the US and OECD countries have negatively impacted men’s utilization rate of paternity leave.23,24
Paid parental leave allows time for recovery, without pressure to rush to return work and fear of a lost job, reducing risk of negative outcomes and concomitant economic impact.
Paid parental leave creates equity by giving both parents an opportunity to share responsibilities for childcare as well as work. What is seen as the norm in all other developed countries, is still a hurdle that must be jumped in the United States.1
Paid Parental Leave and Employers
Besides paid parental leave’s positive impact on workers, companies can benefit from it as well. Postpartum health issues impact an organization’s bottom line costs and employee productivity. In particular, postpartum health issues result in costs to employers due to longer term health issues stemming from mismanaged care during the postnatal period. Furthermore, employers face costs from having to recruit, hire, and train new employees for women that end up leaving their role after having a baby.
In addition to the benefitting companies, paid parental leave benefits the general economy and workforce through workforce stability and attachment. When parents first return to work postpartum, there is often a decrease in pay and hours. This harms the family economically, and as well as the company who is now paying more for less productivity. When parents are able to take a longer leave of absence, their family situation is often more stable and will lead to the probability of returning to work in a full time position at the same company without a decrease in pay.25 This workforce stability also affects the general economic market since parents would be more able to spend regularly with a stable income while on leave. Workforce attachment is predominantly relevant to women, as aforementioned organizations have difficulty getting women to return to their careers after childbirth since many opt for a more family-oriented career in order to have more time off. The lack of financial support after childbirth results in companies needing to fill vacated positions and an increase in women’s unemployment rates. Turnover costs for losing women after childbirth range from 10-30% of the average employee’s salary and up to 213% of senior level employee’s salary.26 The reduction in women in the workforce has a negative impact on all parties.
The Current State of Paid Parental Leave in the United States
As stated in the beginning, the United States is one of the few economically developed countries that does not have a paid parental leave policy. Paid parental leave is discretionary in the private sector and more prevalent in large companies, professional or technology roles, high-paying occupations, and full time workers. As of a March 2019 survey by the Bureau of Labor Statistics only 18% of private-industry employees had access to paid family leave (i.e., parental leave and family caregiving leave).27
46% of employees did not take unpaid leave because they could not afford to do so.
In 1993, the federal government enacted a law called The Family Medical Leave Act (FMLA) with the goal of requiring companies to offer 12 weeks of unpaid leave for new parents, without the risk of losing their positions.28However, there are many qualifications for both employer and employee in order to be eligible. According to a 2012 FMLA survey, 46% did not take unpaid leave because they could not afford to do so.29 Ultimately, only the most financially stable families are able to take advantage of this, which may in fact increase socioeconomic disparities. Furthermore, while paid leave outcomes can be linked to improved health and economic outcomes, national studies have shown no association between those same benefits and unpaid leave.
A few states have created paid family and medical leave insurance legislation and a few have passed but not yet been implemented or are in phased implementation. But the majority of the United States lacks paid parental leave. Some preliminary findings from California’s Paid Family Leave Program, passed in 2002, showed some positive health outcomes but the 55% wage replacement was still too low for most to afford to take.30 There have also been newly proposed legislation that has not yet been passed. The Family and Medical Insurance Leave Act (FAMILY) includes up to 12 weeks of up to 66% partially paid leave.31 On the other hand, the Paid Family Leave Pilot Extension Act seeks to increase employer tax credit as an incentive to provide paid family leave.32
Conclusion
While the case for paid parental leave is clear, how it can be implemented in the United States is still uncertain. Using OECD countries, as there has been robust studies of the paid parental leave policies and they are relatively economically similar to the US, a few key trends can be identified and may serve as a starting point to formulate an effective parental leave policy for the US. Policies are largely funded through social security and public funds.1 The option of employer contributions vs. government funding did not change GDP growth, labor participation, or unemployment rates.1 The majority of policies did not have minimum tenure requirements, did not discriminate based on company size, and included the self-employed. Almost all policies included job protection.1 The primary earner may not take leave if the benefits are not comparable to the lost income.1 At least 6 months and at least 80% wage replacement are necessary for poverty and gender equality.1 This rate is economically feasible and yields high participation, low unemployment, and economic growth.1
A national plan for paid leave is a necessity.
Paid parental leave leads to better health outcomes for mother and child, reduction in medical and childcare costs, higher workforce retention and stability, decreased employer expenses, and overall economic benefits. To level the playing field and give all parents equal opportunity to bond with their children and be successful in their careers, a national plan for paid leave is a necessity. A parent’s decision during this critical time in life should not be influenced by loss of income or setbacks in their career. As a step further for equality, it can not leave anyone behind. Parental leave must include mothers, fathers, adoptive parents, and same sex couples. Bringing a new child into a family in any capacity is a major life change, and parents should be given the space and financial support to establish their new lives.
Here’s a link for a pdf version of this whitepaper
References
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30Bartel A., Baum C.L., Rossin-Slater M., Ruhm C.J., Waldfogel J. California’s Paid Family Leave Law: Lessons from the First Decade. U.S. Department of Labor; San Jose, CA, USA: 2014. p. 17
31FAMILY Act, S. S. 463, 116 Cong. (2019). https://www.congress.gov/bill/116th-congress/senate-bill/463/text
32 Paid Family Leave Pilot Extension Act, S. S. 1628, 116th Cong. (2019). https://www.congress.gov/bill/116th-congress/senate-bill/1628
