America is notorious for its less-than-generous approach to maternity leave. The U.S. is one of just two countries from a recent 185-country study where new mothers aren’t guaranteed paid leave (Papua New Guinea is the other holdout). Without a national maternity leave mandate, most American women get little in the way of paid time off after the birth of a child, which has some pretty significant consequences both for individuals and the economy as a whole.
Right now, just 12% of U.S. workers in private industry receive paid family leave (PFL) benefits that allow them to take time off after giving birth or to care for a sick family member without giving up a paycheck. In the absence of formal maternity or family leave policies, the vast majority of women make do with a combination of sick days, vacation time, and unpaid leave so they can spend some time at home after having a baby.
It’s not that Americans don’t want paid maternity leave. A 2013 YouGov poll found that 61% of people thought companies should be required to offer it as a benefit. A few companies and state governments have taken note. California, New Jersey, and Rhode Island now offer paid family leave programs that are funded through payroll tax deductions. Some companies have implemented or expanded paid parental leave benefits in recent years, often citing better employee retention as a reason. Google doubled the rate at which mothers stayed with the company when it increased its paid maternity leave benefit from 12 to 18 weeks, according to a report in Fast Company.
Yet despite improvement in access to paid maternity leave for some women, change has been slow to come for most. One obstacle is the economic argument against providing paid time off specifically for new mothers, with opponents arguing that it’s simply too expensive to offer such a benefit, and that if they were required to do so, they would have to cut jobs or simply not hire women of child-bearing age.
Does maternity leave actually hurt women?
“Mandated paid family leave makes it more expensive to hire workers, particularly women. That makes employers less willing to hire women, especially those with limited education or skills who typically do the kind of work it’s easy to find someone else to do,” argued a 2009 editorial in Newsweek.
There’s something to this anti-leave argument. A few studies have found that very long maternity leaves may prevent or discourage women from eventually returning to work. And business owners are certainly wary of the increased costs that could come with mandated maternity leave, such as having to hire temps to cover absent workers or the administrative costs associated with implementing new policies. Nonetheless, a growing body of evidence suggests that expanding access to paid maternity leave won’t spell disaster either for businesses or for women’s future economic prospects.
“Companies perceive that the costs are going to be high and they’re going to lose employees, and that’s where the resistance comes from,” Thomas Vartanian, the co-author of a Rutgers University study on the economic impact of PFL policies, told the Chicago Tribune. “But the facts show otherwise.”
The Rutgers study found that women who took paid leave were actually more likely to be working one year after giving birth than those women who didn’t take paid time off. Not only that, but there’s a good chance that many of those women returned to the jobs they had before giving birth. That, in turn, can significantly reduce costs for employers, who don’t have to take on the expense of hiring and training new employees when women temporarily leave their jobs after having kids.
Higher workforce participation for women isn’t the only benefit of paid maternity leave. It may also translate into savings for taxpayers. The same Rutgers study found that women who took paid leave were roughly 40% less likely to receive public assistance and food stamp benefits in the year after their child was born. Those who did receive benefits needed less help, receiving $413 less in benefits than those who didn’t take paid leave. Men who took paid leave after their child was born were also less likely to be on public assistance, the Rutgers study found.
The real effect of paid maternity leave
When trying to gauge the potential economic impact of mandatory paid maternity leave, it’s helpful to look at California, which in 2004 became the first state to implement a PFL program. While business interests lobbied hard against the law, most reported no ill effects after the program had been put into place. A survey of California employers by the Center for Economic Policy and Research found that 91% said offering paid family leave had either no effect or a positive effect on profitability or performance. Nearly 87% said the program didn’t increase their costs, and almost 9% said it actually helped them save money.
California’s paid family leave program is also good for workers. Women who took advantage of paid leave worked more hours and enjoyed higher incomes than those who did not, a study found. Individual workers don’t have to pay a lot to enjoy these benefits, either. In California, each worker pays about $30 a year; in New Jersey, which has a PFL program modeled on California’s, contributions are capped at $29 per year.
Concerns that taking maternity leave leads to lower overall earnings for women seem overblown as well. A study analyzing the economics of parental leave in Europe concluded that maternity leaves of less than six months had no effect on how much women earned. Staying out of the workforce for more than six months was tied with lower wages for women, however. Still, the study concluded that “there is little indication that substantial costs would be incurred, in the U.S., if the period of parental leave were modestly extended or if payment were provided.”
There’s also evidence that access to parental leave, either paid or unpaid, can have a positive effect on the health of both babies and mothers, potentially reducing medical costs down the line. A White House report cites lower infant mortality, higher birth weights, shorter hospital stays for children, and increased rates of breastfeeding as benefits of more robust leave policies. The long-term advantages can be significant as well. A Norwegian study found that children whose mothers stayed home after their birth were more likely to finish high school and had higher earnings at age 30.
More generous maternity leave policies may also make it easier for women to breastfeed for longer periods, which is associated with a wide range of health benefits. Breastfeeding also has a lower out-of-pocket cost than bottle-feeding, which can cost $54 to $198 per month, according to the American Pregnancy Association. Yet moms who choose to breastfeed now also pay a price, with one study finding that nursing moms earned less than other mothers, perhaps because they were working fewer hours. It’s possible that if women were able to take more time off of work after having a child they’d also be more likely to breastfeed for longer periods of time, as the authors of a 2011 study concluded. That could lead to smarter kids who earn more money later in life.
Overall, the evidence suggests that being able to take paid maternity leave increases the chances that a woman will return to work after having kids without having a negative effect on how much she earns. The costs of these policies aren’t as high as many employers fear, especially when they’re funded by deductions from employee paychecks. And the long-term benefits appear to be substantial, in the form of healthier babies. The government benefits as well, since women are more financially independent and less likely to need to rely on public assistance to get by.
Economist Christopher Ruhm, a leading expert on paid leave, summed it up in a 2008 interview: “If we’re interested in greater social insurance, to help families, to balance these competing needs without imposing excessive costs on employers, the current U.S. model is a pretty expensive way to provide it.”