Paid Leave May Lower Women’s Fertility, Employment, And Wages

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The results of a study released this week on the long-term effects of California’s Paid Family Leave Act indicate the leftist policy may leave mothers in a less favorable position than they were in before the policy was enacted.

The California PFLA, enacted in 2004, provides 60-70 percent of a worker’s wages for up to six weeks to care for newborns within the first year of life or newly adopted minors within the first year of adoption, or to care for a seriously ill relative. It’s been touted as a necessary support for working mothers particularly, recognizing the critical bonding period between a mother and a new child. Republicans have used the same justification for supporting federal paid leave proposals.

But researchers from the Universities of Michigan and Utah, Middlebury College, and the U.S. Department of the Treasury have revealed that two decades of “pro-family” policy have benefited working mothers little, and in fact may be depressing both their wages and employment. Martha Bailey, Tanya Byker, Elena Patel, and Shanthi Ramnath evaluated Internal Revenue Service tax data from the third quarter of 2004, just after PFLA went into effect.

The study design cleverly avoids some of the shortcomings of previous analyses of PFLA’s effect, such as small sample sizes and the imprecision of comparisons to women using somewhat different paid leave policies in other states. Researchers were able to evaluate a large sample size of working mothers in California in incredible detail, observing more than 153,000 women giving birth, including more than 74,000 women giving birth for the first time, in California.

This group, women who gave birth in the third quarter of 2004 (directly after the policy was enacted), was “statistically indistinguishable” from comparison groups as far as “observed demographic or labor-force characteristics” such as employment or wages.

Look at the Data

Bailey et al. were able to study 15 years of data (2001-2015) for these individual women in California — not just wage earnings, but employment and employer transitions. By looking at IRS administrative tax data from women who gave birth in Q3, they were able to determine more precisely exactly how many women took advantage of the policy immediately after it was enacted: just more than a quarter of working moms (26 percent) and just under a fifth (18 percent) of all mothers. Higher earners were more likely to use paid leave at 37 percent, compared to 19 percent for the lowest earners, with the average wage earnings of all mothers in question being $27,518.

The results did not reflect well on PFLA despite its good intentions. Within the first five years after birth, the boost in employment was not “greater than 1.8 percentage points,” and fell to 0.9 percentage points six to 11 years after childbirth. The study includes a separate examination of first-time mothers, however, since, as the authors observed, “women learn how to manage motherhood when they have their first child, developing both benchmarks (e.g., when to go back to work, how long to nurse) as well as childcare and work routines.” That analysis tells a different story, showing a short-run (one to five years) statistically significant 2.1 percent drop in employment and a 4.1 percent drop in the long run (six to 11 years).

As far as wages are concerned, Bailey et al. found “little evidence” of a boost for new mothers’ earnings. Wages actually decreased by a statistically significant “5.1 percent per year in the short run ($1,613 in 2016 dollars) and 7.9 percent in the long run ($2,522).”

While mothers may have been less concerned about short-term finances while attaching to their babies, they were not attaching themselves to their employers, as proponents had predicted. They were no more likely to stay with their pre-birth employer than women who didn’t access the paid family leave, in the short or long run.

Wages, Employment, and Fertility Rate are Decreasing

Although the authors acknowledge their findings line up with previous research suggesting paid family leave increases time spent breastfeeding and time spent with children after work, they maintain that the decreases in wages and employment for working mothers “appear to be due to the implementation of the 2004 California Paid Leave Act itself.” The “robust” results indicate this is a matter of causation and cannot be pinned on some other factor.

Among other interesting findings, the researchers found, “Unmarried mothers taking up paid leave are 8 percent less likely to be working in the long term,” noting the impact was nearly twice as large for unmarried as for married mothers.

The authors also note that PFLA appeared to lower fertility rates of working mothers over the next decade: “2 percent for all mothers … and 5 percent for new mothers.” This is thought to be due to the increase in child “quality,” indicated by things studied previously such as time spent reading to children and the frequency of breakfasts enjoyed together, which lowers the “shadow price” of child quantity.

Although quality time with children is obviously desirable, lawmakers in all states should take note of paid leave’s impact on fertility rates, given that the U.S. fertility rate is currently below replacement rate. Other government benefits such as Social Security rely on a large workforce to pay for them. A shrinking workforce means fewer people available to fund current beneficiaries. Somewhat ironically, perhaps, government funding at the beginning of life may harm government funding toward the end of life.

The Paid Family Leave Act Harms Those It Aims To Help

Legislators and voters alike should also recognize the other potential effect of PFLA and how new California laws seek to undermine working women’s ability to adjust to motherhood in ways that better accommodate the drastically different — and demanding — lifestyle of parenthood. The authors’ analysis of “alternative income sources” indicated that self-employment income, nearly a 50 percent increase of such in the long term, made up for some of the decline in annual wages, “suggesting that paid leave encourages women to transition to more flexible working arrangements.”

California’s recent attack on independent contractors (a.k.a. the “gig economy”) with Assembly Bill 5, based on an artificially narrow definition of what a contractor should be, is exactly the kind of law that hits mothers hardest because parenthood requires a good deal of work flexibility, with or without paid family leave. One of the most controversial aspects of the new law is an arbitrary restriction of freelance writing submissions to 35 per year, per employer.

Freelance writing is very suitable for educated mothers with a knack for writing, particularly because it has few obligations (such as coming in to an office), and can be done at any time of day and with frequent interruptions. It’s a way for mothers to cash in on their skill to cushion the family budget, or replace a significant portion of it, without turning their children over to someone else’s care.

Both Assembly Bill 5 and the Paid Family Leave Act are examples of well-intentioned policies that negatively affect the very groups they aim to help. Good intentions such as protecting workers from exploitation or ensuring parents can bond with children don’t translate to good consequences if they ignore what citizens want — to be able to set their own hours, rates, and clients — and what women want: to raise their own children and be the primary caretaker with ample opportunity to flexibly contribute their skills in the workforce. In fact, they are likely to do just the opposite.





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