Economic Impact

Employers providing paid family leave report that it’s both good for their workers and good for their businesses: Morale is higher, productivity increases, and the company is better able to attract talent and engage and retain employees. A 2017 Ernst and Young survey found more than 90 percent of companies with paid family leave policies reported either a positive or neutral effect on morale, profitability, and productivity.

Research shows that disadvantaged workers are less likely to afford to take unpaid family leave. Paid family leaves of adequate duration, however, have been found to help close the gender pay gap, reduce family reliance on public assistance, and boost women’s return to work.

• Women in the Workforce: Women’s labor force participation has been dropping steadily since 2000, and one study found that a lack of paid leave and family-supportive policies are important reasons why. Policies to support gender parity in the U.S. workforce could add up to $4.3 trillion to the economy by 2025. One study found that women who take paid leave are 93 percent more likely to be in the workforce 9 to 12 months after a child’s birth than women who take no leave, and another that mothers who took paid family leave increased their work hours, and likely their wages, by 10 to 17 percent one to three years later. Duration of leave matters. Like a bell curve, paid leaves that are too short push women out of the workforce. Yet when leaves are too long, women can have a hard time getting back in, according to one study in the Czech Republic, where paid maternity and parental leavecan last until a child’s third birthday. While there’s some debate, research finds that the optimal duration of paid leave for women’s return to work without severe penalty is nine months to one year.
• Productivity: Workplaces with family-supportive policies are more productive. One survey of more than 2,000 U.K. workplaces found that those with parental leave policies are 60 percent more likely to report above-average financial performance than companies without such policies. For workplaces with paternity leave policies, it’s 93 percent, compared to those without it. One study of OECD countries found that unpaid leave is only linked to higher productivity when paid maternity leave is short or not available, as in the United States. If the U.S. were to adopt a paid maternity leave policy at the average OECD level of 15 weeks, the researchers predicted a productivity increase of 1.1 percent over time. Studies of the California, New Jersey, and Rhode Island state paid family leave systems found a majority of companies reporting positive or neutral effects on productivity.
• Employee retention: When Google extended its paid leave from 12 weeks to 18 weeks, attrition among young mothers dropped by 50 percent. When Accenture extended its paid maternity leave from 8 weeks to 16 weeks, attrition among mothers dropped by 40 percent. And when Aetna expanded its maternity leave, the share of women returning to work jumped from 77 to 91 percent. Higher retention benefits hold true for low-wage workers as well.