I've been meaning to write this post for the longest time. One of the very first posts on my own blog concerned paid family leave, and though at the time, I promised to get back to it, I never did. But this recent interview (via Mark Thoma) with Christopher Ruhm, an economist who's done some of the best research on paid family leave, gives me as good an excuse as any to plunge back into the subject.
If you're interested in this subject, I do urge you to go back and read the earlier post. According to a recent study done by Harvard and McGill universities, 169 of the 173 countries studied offer some form of guaranteed paid maternity or parental leave. Alas, the U.S. is one of those four countries which does not offer the benefit, putting us in the economy of such stellar economies as Lesotho, Papua New Guinea, and Swaziland.
Some states, however, have maternity leave mandates; in addition, the states of California and Washington offer paid family leave. Barack Obama has promised to expand the unpaid Family and Medical Leave Act so that it covers more workers, and also to offer funding to states to encourage them to adopt paid family leave programs.
A common misperception is that employers bear the full cost of paid leave, but this is not the case. In California, for example, the benefit is paid by the State Disability Insurance program, through a payroll tax on employees. Ruhm explains:
The other really important point when considering parental leavepolicies is that we often tend to think about putting mandates onemployers. Of course, we have one with the Family and Medical LeaveAct, which requires many employers to provide a period of unpaid leave.And when people talk about instituting paid family leave, it's almostalways discussed in the context of the employers bearing the full costof providing it.
It's worth noting that if you look at other nations, particularlyEuropean countries, that is almost never the way it's arranged. Invirtually all European countries, the cost is borne by the government.Now, it may be paid for through some kind of payroll tax that supportssocial welfare programs of all kinds, not just paid parental leavebenefits. But the cost of offering the paid leave is not directlyimposed on employers. You can think of it as sort of an insurancepolicy and the cost is being spread widely. Now that doesn't mean asystem like that is costless to employers. For instance, it may causesome degree of disruption to your business.
Now on to what economic theory has to say about paid family leave policies. The following analysis summarizes the discussions by Ruhm (1997) and Blau, Ferber, and Winkler (2005) of this issue.
